“One cup of coffee at a time.” I often call one of my parents while I drive to work each morning. Usually, my dad will say, “how’s your day going so far” and I will frequently say, “I’m one cup of coffee in, so it’s good so far.” We are only a month and a half into the year, but the early weeks of the 2023 stock market have been good so far.
Inflation continues to be high but steadily decreasing, and the Federal Reserve is expected to end rate hikes by spring. I still expect a mild and short-duration recession before the middle of this year, but the U.S. economy is holding up well and will roll through it. Because of these reasons, investors are starting to move from their defensive holdings and looking for market opportunities, even though we will still have some potential choppiness in the market.
One area of concern I’m watching is higher than usual spending of cash savings by Americans. The high inflation has caused Americans to spend about half of their extra savings, and many have begun using credit cards again. Most Americans are begrudgingly taking inflation in stride, but some are struggling more than others. This spending down of savings is worth watching to see how it affects retail sales and the economy’s overall health.
Overall, there is a reason for optimism for markets in 2023. If the Fed pauses rate hikes soon, as expected, the stock market could continue rebounding with continued help from falling inflation, good valuations, and stable interest rates. Of course, it won’t be smooth because market volatility is a near certainty, but I believe we will see more positive stock and bond markets this year than in 2022.
I read a statistic this week that said Americans, on average, drink 26.5 gallons of beer per year. I don’t drink beer, but my daily 3-4 cups of coffee put me at an average of 68 gallons of coffee a year. That seems like a lot, but it may be necessary if I want my days to start “good so far.”
Have a blessed week!
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Dr. Richard Baker, AIF® is the founder of and an executive wealth advisor at Fervent Wealth Management
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
