My mom always had to tell me, “we aren’t opening any presents early.” Christmas Eve as a child was tough because I didn’t like to wait. I was the “can’t we just open one present tonight” kid. Marketwise, things are about to change for the better, but we have to wait a little while for it.
The market in 2022 was about dealing with the repercussions of the Federal Reserve (Fed) attack on inflation. I think 2023 will be about setting ourselves up for the stabilizing of the economy and markets. I don’t believe all our problems are over, but I feel we are on our way to more solid ground.
The Fed has been one of the biggest factors for investors in the last ten years but not nearly as much as they were in 2022. The Fed raised interest rates in a historic fashion in 2022 to aggressively fight inflation. In 2023, I expect inflation to come under control enough that the Fed stops raising rates. So, investors in the new year will need to focus on how to benefit from the Fed policy shift.
The U.S. could go into recession in the spring or summer of 2023; if it does, it probably won’t be as severe as the 2008 recession. Thankfully the stock market and economic recessions don’t always dance in sync. There are a lot of variables, but the main thing we need to remember is that we aren’t day traders. We are long-term investors adjusting our portfolios looking out two to three years.
I expect stocks to rise when the Fed stops raising rates. I believe this because stocks have historically risen at the end of a rate hiking cycle. I don’t think we will have to wait long. I look for this in the first three months of 2023.
When the market is bumpy, it is hard to stay the course. Don’t get caught up in the emotions of the headlines and the market negativity out there. Instead, stick to your financial plan and stay focused on your goals.
I still struggle with waiting, but the best things in life are usually worth the wait. Waiting for the Fed to change its ways will also be worth the wait. Better days are ahead in 2023.
Have a blessed week!
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By 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.