Key Events: Banks are worried, but the stock market isn’t
Several large banks reported earnings this week; modest revenue growth and a subdued economic outlook, along with increased reserves for loan losses were all worse than analysts expected.
Meanwhile, the consumer got good news – prices rose at their slowest pace of 2022, although Fed officials stuck to their guns, reaffirming continued rate hikes.
Market Review: A strong start to the year.
The new year has brought strong returns for the first couple of weeks. The S&P 500 finished the week up 2.7%, bringing it to 4.2% YTD. Most markets joined the new year’s party; small caps and international stocks outperformed the US again, and bonds turned in positive returns as well.
Outlook: Disconnect between the market and the Fed remains
While there remains a disconnect between investors and the Fed regarding the path of interest rates, it is more in terms of timing than anything else. The Fed anticipates lowering rates in 2024 but the market thinks it will happen in 2023. This potential disappointment may bring about more volatility as the market reacts to every piece of data and Federal Reserve Governor speech.
We thought we would give you a game of “2023 outlook bingo.” Visual Capitalist scoured articles, reports, podcasts, and interviews for 2023 predictions and have provided the below chart. Note the center prediction: “Global recession risk is high”. We won’t make any predictions except to say that when everyone thinks something will happen (the ‘for certain’ 2023 recession), its already priced in.
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