MOLINE, Ill. — On Monday, Jan. 2, Mark Grywacheski with the Quad Cities Investment Group joined WQAD's David Bohlman to discuss the stock market and inflation outlook for 2023.
Here's a recap of 2022's stock market:
2023 Economic Outlook
Friday was the last trading day for 2022 as investors were more than happy to put a brutally tough year behind them. For the year, the S&P 500 fell 19.4%, the NASDAQ lost 33.1% while the Dow Jones Industrial declined by 8.8%. It was the worst performance for the US stock market since 2008.
Bohlman: As we formally kick-off the New Year, what will you be focusing on or tracking for how 2023 might turn out?
Grywacheski: Without question it’s inflation. We need to understand the expansive impact that very high inflation creates. To get this inflation under control, the Federal Reserve needs to raise interest rates. But higher interest rates make it more expensive to buy things on credit. This means consumers will buy fewer goods and services. This means businesses will spend less on buildings, factories, equipment and technology. All that will act as a tremendous weight on the US economy and eventually the labor market.
Bohlman: Inflation has declined from its high of 9.1% to its current rate of 7.1%. What are your thoughts on inflation this year?
Grywacheski: There’s a lot of people saying that we’ll get a rapid decline in inflation this year. Unfortunately, I disagree with that assessment. The ultimate goal is to see a return to a 2% target rate of inflation. Yes, we’re seeing some improvement in the labor shortage and supply chain issues which helped add to inflation. But we still have a massive amount of money that’s been added to the economy. And that’s why I think inflation will remain historically high and above that 2% target rate for well into 2024.
Bohlman: Obviously there’s a lot of concern about the future outlook for the economy. How do you think the economy will fair in 2023?
Grywacheski: The overwhelming consensus on Wall Street is that the economy will dip back into recession in 2023, most likely in the 2nd half of the year. There is debate on whether it will be a mild recession or much more severe. The reason for this prediction goes back to the impact these rising interest rates will have on consumers, businesses and, ultimately, the economy. We’re already starting to see more and more economic data start to show signs of a weakening economy.
Bohlman: In a recent survey (conducted by Personal Capital), the #1 financial resolution for Americans in 2023 is to build an emergency fund. What advice do you have to help people achieve that goal?
Grywacheski: This resolution would be my top recommendation given the projected downturn in the economy and labor market we’re expecting this year.
- Really evaluate any big-ticket purchase. Is it absolutely necessary or can it be pushed off a couple of years until we get through this expected rough patch.
- Cash management. Really keep track of your expenses. Go through your utility bills, credit card statements and keep track of your cash purchases. You’d be surprised on where your money goes and how much you’re spending on certain items each month. This will allow you to better manage or potentially cut back on some of your expenses to save money.
Quad Cities Investment Group is a Registered Investment Adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Quad Cities Investment Group and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Quad Cities Investment Group unless a client service agreement is in place.
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