Recession, Recovery, or Both?

Jan 22

The markets are starting to feel like Groundhog Day. Almost every month, it’s a cadence of employment numbers, CPI, Fed  — market reacts.

With inflation starting to trend down, even if only slightly, optimism has been making a comeback. That means moving our analogy to another charming rodent. It seems like the Fed is playing whack-a-mole with coordinated statements designed to tamp down expectations for a rate cut anytime soon. The Fed wants to keep asset prices lower to aid in slowing the economy and help it get inflation under control.

Looming over all this is the threat of recession as 2022’s rate hikes are felt in the economy. The potential for more hikes – even smaller ones – may be necessary to keep inflation trending down but may also preclude a soft landing.

What is the likely impact on the market? Will we see a recovery in asset prices in 2023? Or... ...