Hey folks,
As we’re all acutely aware, the economy has been a rollercoaster ride lately. One day we see encouraging signs, the next it’s worries ahead.
As your financial advisor, I want to help make sense of the constant ups and downs. In this post, I’ll summarize recent research on economic growth, inflation, monetary policy, and investing so we can make informed wealth management decisions amidst the uncertainty.
Economic Growth Outlook
First up – projections for economic growth. The analyses I’ve reviewed suggest that developed countries may enter a recession next year [1]. For 2023 US GDP specifically, estimates range from -2% to +4%, with around 0% growth most likely [2].
That’s more pessimistic than the consensus forecast of 1.2% [3]. The cautious view comes from research linking inflation and economic demand. However, inflation easing faster than expected could provide upside potential.
Inflation Projections
On inflation, although it has dropped since late 2022 highs, projections show it remaining stubbornly elevated in the near term, especially in Europe and the UK as rising wages take hold [4].
The near-term inflation outlook is noticeably higher than current market pricing for both the US and Europe based on analyses pointing to only a gradual cooling of price pressures ahead [5].
Monetary Policy Expectations
Given inflation forecasts still exceeding central bank targets, research suggests monetary policy will remain restrictive, with a few more interest rate hikes than markets currently anticipate, before turning more accommodative once inflation breaks faster post-recession [6].
This highlights the delicate balancing act faced by policymakers in the period ahead as they try to stabilize growth and inflation.
Investment and Wealth Management Implications
Connecting the economic analyses to our investing and financial planning decisions, it may be a good idea to favor caution and income generation across assets before looking to moderately increase equity exposure once risks recede somewhat. Please let me know if you would like to discuss specific tactical adjustments suitable for your investment portfolio and financial plan.
The key takeaway – risks clearly remain elevated but we can rely on robust data analysis to help guide our wealth management and financial advising strategies. I will continue sharing key insights from the latest economic research to provide helpful perspectives across time horizons. As always, please reach out with any questions!
Sincerely,
Tom Polowy, MS
Financial Advisor, Registered Representative
Mobile: (860) 945-4383
Fax: (860) 789-0004
Mailing Address: 71 Raymond Rd., West Hartford, CT 06107
Email: tom.polowy@ifgrr.com
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.No investment strategy can guarantee a profit or protect against loss.
[1] Vantage Point Report, BNY Mellon Perspectives, September 2022 [2] Federal Reserve Bank of Atlanta GDPNow model, September 2022 [3] Reuters Poll of Economists, August 2022
[4] Bank of England Quarterly Bulletin, Q3 2022 [5] US Bureau of Labor Statistics, Jun-Aug 2022 [6] Morgan Stanley Research, September 2022