For months now, it looks like all we have encountered are destructive headlines. However once we reduce by way of the noise and have a look at the information, the story for the primary half of 2023 was easy: the markets and financial system did higher than many anticipated them to.
Will the identical maintain for the second half of the yr? We have a look forward in our Midyear Outlook.
Expectations Vs. Actuality
Regardless of dangers—just like the potential U.S. default on its debt—and worries about an impending recession, hiring remained sturdy, customers and companies stayed assured, and the financial system grew. Did it develop extra slowly than final yr? Certain. Nonetheless, all market indices have been up, company earnings beat expectations, and monetary circumstances remained regular.
And what about inflation? It managed to drag again, as did longer-term rates of interest. After elevating short-term charges at one of many quickest paces in many years, the Federal Reserve (Fed) adjusted its language in Could to recommend a pause could also be so as. None of this could have occurred had progress remained eventually yr’s degree. That slower progress ought to assist assist the markets and financial system within the second half of the yr.
The Highway Forward
Whereas the debt ceiling was resolved and not using a disaster, the banking system stays underneath stress. The U.S. relationship with China is rocky, and the struggle in Ukraine continues. Now we have almost as many dangers now as we did in January. Add in slower progress, and there is much less cushion for the financial system and markets to fall again on.
The dangers are actual, however so are the positives. Inflation is down. The Fed could pause. And the worldwide state of affairs, whereas worrying, isn’t any extra worrying now than it has been for the previous yr or so. Mixed with sturdy job progress and shopper confidence, we get an financial system that appears very like it did at first of the yr. And that financial system proceeded to outperform. With low expectations, it might properly achieve this once more.
For extra on our expectations for the U.S. financial system and the fairness and stuck revenue markets, learn our 2023 Midyear Market and Financial Outlook, obtainable now.
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Reducing By way of the Noise
The headlines inform one story. However does the information inform one other? Obtain our Midyear Outlook to seek out out.
