On Air with Altair: 4Q 2022 Market Review Video

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These days, it may seem investors are experiencing déjà vu. The Federal Reserve remains on center stage, playing the biggest role in determining how financial markets perform, just as in each of the past three years. And that will likely continue to be the case throughout 2023. The good news is the Fed’s actions mostly depend on inflation, which is trending down from last year’s peak. And the steep cycle of interest-rate hikes appears almost done. We believe the Fed will hold rates steady for a lengthy period, with no rate cuts this year, even with a meaningful drop in inflation by year-end.


The global economy faces another tough year with inflation still high in much of the world. In the U.S., we see mixed and weakening data. While corporate earnings are deteriorating, the labor market and American consumers remain strikingly resilient despite high inflation and higher interest rates. Subsequently, the economy is on a clear path to avoid a severe recession – perhaps a recession altogether. Although the odds of a mild recession in the next 12 to 18 months remain uncomfortably high, the economy’s ability to withstand the Fed’s punches and remain – not just standing, but growing – after months of rate increases, reinforces our belief that no recession is likely.


Now that inflation has been slowing in the U.S. and elsewhere, there are legitimate prospects for global markets to regain their balance and erase at least some of last year’s painful losses. The first half of 2023 will test markets as the economy slows and the Fed decides how restrictive its policy should be. However, we believe the stock market is well-positioned for a better year if the Fed stops its increases before risking more than a mild recession. Bonds already have stabilized after their worst year ever. And last year’s bond-market debacle has allowed for a reset with higher, more attractive yields across all maturities.


We think 2023 will be a positive year for markets. As always, there are multiple risks – including a weakened global economy, Russia’s continuing war in Ukraine, and political brinkmanship over the U.S. debt ceiling. But we believe the worst of interest-rate hikes and inflation are behind us and that the economy can endure this slowdown without a severe recession.

You can find our full commentary on Altair’s website. Thanks for watching.


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