- Average Hourly Earnings rose 0.6% MoM in November notably above the consensus forecast of 0.3% – elevated wage pressures could lead the FED to raise rates to higher levels than investors anticipate (above 5%).
- New York (NY) FED recession probability model in 2023 stood at 38% at the end of November – every time the NY FED recession probability model was above 30% historically a recession followed with data going back to 1961.
- If odds of a recession increase in 2023 the odds of a hit to corporate earnings follow. Earnings are still forecasted to grow by 5% in 2023 at the end of November.
- Technically for the S&P 500 to break the downward trend, which started in January 2022 it will have to clear 4,200–4,300 and perhaps more importantly has to stay above those levels.
- On the international front we had China removing some of its COVID restrictions. This resulted in the Hang Seng surging over 20% in November. Such volatile moves highlight the importance of the 70/30 international diversification we favor.
We may very well be in for another volatile year in 2023, but we also believe that we are entering a period that could prove quite favorable for investors with long term time horizons who can approach volatility as something to take advantage of rather than feared. Market timing is impossible in our opinion, but we still believe that investors should try and take advantage of bargains if/when they appear to whatever extend possible. To do so, advanced planning is required. Spending some time to come to terms with volatility as a “price” to be paid for long term gains will be important, and discussing liquidity needs with your advisor can help ensure you have a plan in place should be in fact enter a recession in 2023 .
While no one knows for sure what next year will bring, we remind investors that successful outcomes over the next 18 months will first require a proper mindset. Investing will be harder, but your entire investment team will continue to be here for you to help navigate the new year.
Past performance is no guarantee of future results. Please note that individual situations can vary. All investing involves risk including loss of principal. No strategy assures success or protects against loss. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
These risks are often heightened for investments in emerging markets.