We break down timely topics, centered on the major economic events around the world and their impacts to financial markets, in order to help you simplify client conversations around important investing decisions.
What does Q4's GDP report tell us about the state of our economy as 2022 came to an end? What impact has the Fed's rate hikes had on GDP? How does this report impact our outlook of the economy and financial markets—and the potential for a recession?
The COVID-19 pandemic has been highly disruptive for the U.S. economy with effects that could linger for years. We break down some short and long-term trends around the pandemic and inflation here.
The large declines in retail sales in December and November signals that consumer spending lost a lot of steam despite some cooling in inflation as we ended 2022. We see further downside in 2023 as we expect the labor market will start to weaken significantly, which will depress personal income growth. On the housing front, existing home sales fell for an eleventh straight month as prospective homebuyers continue to contend with low inventory and high mortgage rates.
High prices and concerns about a recession are weighing on the minds of many consumers. How has this impacted consumer spending? What is our outlook for consumer activity?
The U.S. economy is in the late cycle period with the Fed responding to rapid inflation with a sharp tightening of financial conditions to slow domestic demand. Key leading indicators (including the yield curve) point to elevated recession risks over the next year, especially with the Fed projected to raise rates further in coming months.
Encouragingly consumer price inflation continued to cool in December. The easing of inflation should provide reason and room for the Fed to slow the size of the policy rate hikes to 25 basis points starting at the next FOMC policy meeting on January 31 – February 1. In other economic news, the NFIB small business survey showed decreasing optimism among small business owners, many of whom have a negative outlook on the economy and expected sales for 2023.
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