Investors put the economy on recession watch when the Fed started its “higher in a hurry” push with short-term interest rates in mid-2022. After the 10-year/2-year Treasury curve inverted in July 2022, it was “all aboard” the recession bandwagon. Then the business community followed suit, with CEOs hunkering down and preparing companies for a slowdown in the economy. But in the past few weeks, CEOs seem to have changed their tune. In fact, only 12 percent mentioned the word “recession” in the Q4 2022 calls with investors. (See chart.) |
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So what changed? A few things. Fed Chair Jerome Powell sounds a bit more dovish with his recent comments. After a good Q4, the financial markets have been improving in 2023. And the ongoing strength in the jobs market has more people believing the economy may be headed for a soft landing. When CEOs are confident, they prepare their companies for an expansion phase of the business cycle. New companies are started, Innovation gets funded, and breakthrough changes become possible. I hope the early 2023 enthusiasm builds momentum as the months progress. I know that my optimism grows as I see CEOs confidently pushing ahead. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. |