Equities Are Searching for Clarity

Market volatility and the Federal Reserve's efforts to reduce inflation will continue to garner attention.

To read the full article, see the Investment Strategy Quarterly publication linked below.

Key takeaways:

  • We believe that inflation will be moderate over the next year which will allow the Federal Reserve (Fed) to back off, but investor focus is likely to shift toward the damage done to the economy.
  • Volatility is likely to continue for now, and the bottoming process and recovery may be elongated.
  • Don’t lose sight of the bull market opportunity that will occur on the other side of the current weak trend. We expect a mild recession in 2023, but equities will bottom well ahead of the economy and corporate earnings.
  • We use ~4,400 as our base case S&P 500 target.

2023 will be heavily influenced by three questions: to what degree will inflation moderate, how will central bank policy progress, and how much demand-driven pressure will the Fed need to inflict on the economy in order to bring infla­tion down?