My favorite thing about predictions is just that, they are predictions. They are never 100% accurate and they are fun to do. I also enjoy checking how accurate (or inaccurate) they tend to be. So, after last year’s attempt at my first predictions, I’m going to do a mid-year prediction to see how I fare this time.
Without further ado here goes nothing:
Why waste time right? Let’s hit what is on everyone’s mind: the big I-word. Now I promised one of my favorite people I’d give him a shoutout in one of my blogs. This guy has been saying inflation is on its way since the year of the flood. Well, you know what they say? Even a broken clock is right twice a day. Well Mr. B nice to have you back and here is my inflation prediction. I believe that by year-end, inflation, measured by CPI, will be 6% year over year or lower. I do believe the Fed’s policy will start to take hold sooner than later, and we should see some consistent downward trends.
I believe we are close to if not already at the bottom. It seems to me, that the big market shock with inflation and recessionary concerns are already priced in. Barring any major setbacks that aren’t already priced in, I believe the worst is behind us. That isn’t to say there won’t be plenty of choppiness in front of us, but my gut and tea leaves suggest brighter skies ahead.
Speaking of the stock market, I believe we’ll see a second-half rebound, and mostly a 4th quarter rebound, to be honest. I don’t think we will see a full recoup of losses this year, however, I think we will start to make a serious dent. I’m calling for the S&P to end the year at around 4,150. Keeping things relative still means a down year, however, start to claw our way out of this down year.
So when- When will the stock market fully bounce back? You heard it here first folks, end of 2023 we will fully rebound, in my opinion. Take that to the bank!
Perhaps the most interesting story this year to me is the bond market. It is rare, as in it has never happened, to see the U.S. stock market and Bond market down in the same calendar year. I believe this year bucks the trend and we realize a double negative year. That said, I’m very bullish on the bond market for the remainder of this year and beyond, so I’m calling for Barclays’s Agg to only be down 4% by year-end.
Possibly the biggest disappointment this year (besides my summer diet) – I believe Nasdaq will continue to struggle for the remainder of this year. That said, I believe 2023 will be a gangbuster year for the Nasdaq roaring back with vengeance. I’m calling for closer than 15,000 by end of 2023.
One of the big things we are keeping our eyes on is unemployment figures. We are still hovering at record low levels in the 3.6% range. I believe we will remain 4% or under by year-end. I think the job market is strong and despite the Fed’s best efforts to slow the economy, jobs will be plentiful.
This little sucker is like my ex-girlfriend (won’t say which one), a bit all over the place. It makes predicting where the 30yr will be by year-end very tricky. Good thing for you, not too tricky for this Nostradamus! I’m calling a 5.625% avg mortgage rate on 12/31. Put that in your pipe and smoke it mortgage rates.
Speaking of rates – where will the Fed land at year-end? For context, we are currently at a 1.5% Fed funds rate. We expect a .75% rate increase at the next meeting and at least .5% in subsequent meetings. I’m calling for a 3.25% Fed rate by year-end.
The big R-word is on everyone’s mind. While some indicators are more optimistic, there are some measures within markets that are putting greater than an 80% probability we will hit a recession. Most investors believe that two consecutive quarters of negative GDP means an automatic recession by definition, but in reality, the National Bureau of Economic Research decides if all criteria are met. Given the Fed’s current mission, which is to slow the economy to tame inflation, slowing economic growth should be fully expected. Even if we see negative GDP growth, the question will be whether other indicators such as unemployment, which I already mentioned is very strong, deteriorate enough to get it labeled as a recession. That said I’m calling for a mild recession, a vast majority of which I believe is already priced into markets.
What’s your prediction?
I love getting chastised so bring it on folks. We will see where the year ends, but you can clearly see a trend here in my thinking. I feel although we have seen the worst first half in the markets in 50 years, the second half will see things start to right-size. It won’t happen overnight, and certainly won’t be an even recovery. That said, I am very optimistic about what the future holds and feel you should be too.
Hope you found this thought-provoking and know we are always here to help regardless of what the future holds. As always stay wealthy, healthy, and happy.
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