Wall Street analysts are entering 2023 with less confidence than 2022 after the Federal Reserve and investors severely overestimated the long-term health of the stock market this year, The Wall Street Journal reported Monday.
While executives and economists generally anticipated that markets were unlikely to experience significant upside or downside swings in 2022, there is significant debate going forward in 2023 over whether the US or layoffs, according to to the WSJ. As of this writing, the Dow Jones Industrial Average is the best performing of the three major stock indexes, having declined about 9.25% year-to-date after recovering from a late-September slide. bear marketwhile the S&P 500 and Nasdaq Composite are down more than 19% and 33% respectively, according to to Google Finance.
“We all approach next year with a certain level of humility,” Christopher Smart, chief global strategist and director of the Barings Investment Institute, told the WSJ. Smart characterized global events such as Russia’s invasion of Ukraine and China’s stubborn insistence on its zero-COVID policy as “unlikely” economic spoilers, even if analysts knew they were a possibility going into 2022.
Still in April, the administration officials infamously took the position that inflation, which would soar to 40 year highs above 9% in June, it was “transitory”. In December 2021, Treasury Secretary Jannet Yellen argued that the term was inaccurate after Fed Chairman Jerome Powell claimed that inflation was not a near-term problem. according to to the New York Times.
Investors have generally become more bullish on inflation, with 90% of fund managers anticipating prices to decline by the end of 2023, while those expecting the economy to grow weaker in 2023 dropped to 69%. in December, compared to 73% in November. Bloomberg reported, citing a Bank of America survey. Powell, on the other hand, repeatedly noted in a December 14 press release conference that the Fed is still looking for more evidence before it can confidently assess that inflation is falling. (RELATED: The Fed’s Preferred Inflation Index Cooled in November, but Core Prices Remain Stubbornly Elevated)
Today we learned that incomes go up and inflation goes down. Welcome respite as our economy has been growing.
Another reason for optimism as we head into the holidays and into the new year. https://t.co/WzCpCNvjI5
— President Biden (@POTUS) December 23, 2022
Although the main inflation metrics, including the Producer Price Index (IPP) and Consumer’s price index (CPI), have fallen from their respective peaks in March and June, both measures remain above 7%, well above the pre-pandemic CPI norm of less than 2.5%, according to to the Federal Reserve Bank of Minneapolis. The Fed’s preferred gauge, the “core” personal consumption expenditure (PCE) price index, which measures inflation but discounts more volatile food and energy prices, has held at or above 4, 7% from November 2021. according to to data on file with the Bureau of Economic Analysis.
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