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Published on: 09/08/2023

Economic Forecast For The Rest of 2023

The economic forecast for the rest of 2023, a year which has thus far been a constantly shifting and complex arena, offers both challenges and opportunities for discerning investors, business owners, and families alike. With factors ranging from geopolitical tensions to technological advancements, it is imperative for high-net-worth individuals to remain abreast of these changes to capitalize on and protect their financial health.

If you ask the Federal Reserve, the U.S. economic outlook is looking cautiously optimistic. However, if you look at forward-lagging indicators, they’re showing that things aren’t as strong as they should be. So, what does this mean regarding the economic forecast for the rest of 2023? Is a recession coming in 2023 or 2024? What can investors do to prepare?

Let’s take a closer look at these competing perspectives, delve into the potential signals of an impending recession, and explore effective strategies investors can employ to safeguard their financial future.

U.S. economy forecast and the Fed’s next move

Recently, it seems that the Fed has been giving Americans the all-clear in terms of a recession for 2023. For a while we were experiencing a fairly accommodative Fed, which is a stark contrast to the hawkish approach the Fed is now taking towards inflation, without giving as much support to the markets. Lately, their actions have been directly tied to things like recessionary pressure and inflation with the goal of establishing some stability among prices and employment.

However, this approach is feared to cause stagnation long-term as higher interest rates can often cause liquidity to dry up. Higher costs and lower liquidity tend to have a domino effect on the U.S. economic outlook causing consumer spending to dip, thus leading to a decrease in corporate earnings, and eventually, a possible recession.

Hear from Avidian president and partner, Michael Smith, as he and senior portfolio manager, Kevin Lenox, take a deeper dive into the current financial market and state their assumptions for what the Fed will do next!

So, is a recession coming in 2023 or 2024?

Given the current economic environment, analysts are split on whether or not a recession is coming in 2023. Recessions typically follow long periods of growth, and with the U.S. economy showing recovering indicators for a while now, it stands to reason that we’re due for one soon enough.

For now, many analysts don’t believe that a 2023 recession is on the horizon but we may see a moderate recession in 2024. This is because we are starting to see auto delinquency payments escalate, mortgage delinquencies increase, and an increase in consumer credit card debt at a time when interest rates are continuously pushing higher and higher. As mentioned, this dries up liquidity and can eventually lead to recessionary pressure. 

Therefore, investors should be mindful of any potential signs or indicators of an impending recession and take proactive steps to protect their financial security if such events occur. That way, instead of worrying about surviving a recession if one hits, investors can find confidence in knowing that they’re well-positioned enough to make the most of it.

Continue reading: Are we facing a recession?

What is the inflation forecast for 2023 and 2024?

Inflation is one of the more difficult economic indicators to predict, and in terms of the long-term outlook for 2023 and 2024, it’s a bit murkier. However, we can look at some of the recent data to get a sense of where inflation might be headed. 

Recent consumer price indexes (CPIs) report that the U.S. economy is currently experiencing inflationary pressure due to a combination of increasing energy prices and rising wage growth. As a result, the Federal Reserve has had to adjust its monetary policy with higher interest rates in order to combat this situation.

Therefore, according to recent projections, it’s safe to assume that the inflation forecast for 2023 and 2024 will drop to around 2.3%, but could also spike higher if certain macroeconomic indicators such as energy prices or unemployment rates start to increase.

Keep in mind that if inflationary pressure does increase, the key to knowing how to survive inflation is preparing your asset allocation now.

What is the best investment to beat inflation?

Inflation, while often a sign of economic prosperity, can be difficult for unprepared investors. Therefore, one way to try to beat inflation is to invest in inflation-resistant assets that historically have been shown to increase in value faster than inflation rates rise.

Investing in fixed-income investments* such as bonds and certificates of deposits (CDs), as well as alternative investments such as commodities, can help when it comes to beating inflation — particularly for those with shorter time horizons like pre-retirees and retirees.

*Continue reading: What are fixed-income investments?

Recently, bonds have been a hot topic of discussion as they have been getting a 5% yield that can beat inflation. But are bonds worth investing in long-term? Let’s take a look. Historically, bonds have been a great way to beat inflation as they tend to increase in value with inflation and offer fixed payments for the lifetime of the bond. Additionally, because bonds tend to come with lower risk compared to stocks, it’s possible to earn a steady return on investment that can outpace inflation over time.

The key is to pay attention to the economic indicators and tailor your investment strategy accordingly. It’s also important to diversify across different asset classes in order to spread out risk.

Concerned your current allocation strategy won’t be able to withstand recessionary pressure in the rest of 2023? Let’s talk.

Depending on who you ask, the U.S. economy forecast for the remainder of the year will either look cautiously optimistic or bearish. Either way, investors should be mindful of the signals of a possible recession and take proactive steps to ensure their financial future is safeguarded.

Whether you’re concerned about your portfolio performance in a bullish vs bearish market or want to get a better handle on inflation-resistant investments, Avidian Wealth Solutions can help. Our experienced team of financial advisors is here to provide tailored strategies that can help put a plan in place that works to help you minimize risk while maximizing returns and securing your future — regardless of what comes our way.

Schedule a conversation with us today and let’s talk about how we can help you work to protect your investment portfolio despite economic pressure.

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