“Companies suffering from worker shortages have little fat to trim,” notes the Economist. And job openings remain relatively high – a factor that has helped keep the “shadow” U.S. On Friday, the Labor Department revealed that unemployment had fallen to 3.5%, a strong signal of economic health. Signs are also emerging that America will escape a prolonged recession in 2023. Prediction 2: The Dow Jones Hobbles Back Above 33,000 But naysayers of the Fed aren’t giving Jerome Powell or the White House enough credit - with both monetary and fiscal policy temporarily working in the same direction, 2023 will be the year inflation gets back under control. A severe housing shortage should keep real estate tight. Cutbacks in OPEC+ production threaten to keep oil prices aloft. Several structural issues will remain through 2023. The White House has briefly put the practicalities of inflation ahead of ideology for now. And high gas prices have been met with increased drilling permits and attempted Middle East diplomacy rather than the energy subsidies the U.K. Last week, President Joe Biden quietly scaled back significant portions of student debt relief. government has avoided the temptation of unleashing fiscal stimulus. The Manheim used vehicle value index is now down 13% from the start of the year, while housing transactions have slowed. And on the consumer side, prices of big-ticket items are also showing weakness. Henry Hub gas prices – a key indicator of industrial production – dropped from their $8.81 record in August to $7.88 in September. In 2023, a recession will help bring inflation back under control.ĭemand for goods is already slipping. The pattern was only broken in 2020 when massive fiscal stimulus offset the severe downturn caused by pandemic-induced lockdowns. In every recession until the 2020 Covid-19 pandemic, economic slowdowns have been linked with softening demand and lower prices. That’s oddly good news for inflation hawks. They now predict a 96% likelihood of a U.S. Rising rates will likely trigger a recession this year, according to data models by the Conference Board, a non-partisan think tank. Prediction 1: An Aggressive Fed Gets Inflation Under Control And fortunately, 2023 is shaping up to become a year where predictable macroeconomic forces are back in the driver’s seat. No amount of macroeconomic insight is helpful to investors unless it helps us understand what we should do next. Nevertheless, picking stocks and predicting markets go hand in hand. It’s the difference between predicting the average tide for a day (i.e., economic cycles) or the size of each wave (i.e., individual stocks). Unlike the economic tides that rise and fall, individual companies can surge to dominance… 2 stock pick for 2022 doubled within two months, while my No. Meanwhile, predicting the movement of individual stocks is a far more challenging task. Cryptocurrencies, bonds and other rate-sensitive assets tend to follow suit. In other words, most developed economies follow a boom-bust cycle as predictable as tides going in and out. Unemployment out of control? Vote-hungry legislators will be pushing stimulus bills before you can finish this sentence. High inflation? You can be sure central banks will raise interest rates to slow the pace. That’s because some economic cycles are straightforward to forecast. Bitcoin ( BTC-USD) is still down 35% from that call. 27īy December, I would urge investors to sell their meme coins and then get out of crypto the following May. And last Friday, he made his intentions clear: ‘I do think it’s time to taper.’ – Moonshot Investor, Oct. No one rings a bell at the top of the market… America, however, does have someone who looks like a bell-ringer: Fed Chair Jerome Powell. In October 2021, I gave a stark warning to investors.
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