The Armstrong Report: Outlook 2023

Reginald A.T. Armstrong • The Armstrong Report

Happy New Year, and welcome to 2023! What will this year hold for the economy and markets, you ask? Obviously, I don’t know — but I’ll give it a stab with my best guess below.


I believe we are in or heading into a recession. One of my biggest concerns, however, is that most economists and investment types also believe we are headed for a recession. Usually, when everyone believes one thing, something else happens. We know that we had a technical recession in the first half of 2022. We know we were growing in the second half (Atlanta Fed, as of December 20th, predicts a 2.7% Gross Domestic Product for the quarter that just ended). So why would I think there is a recession on the way? First, the Conference Board’s Index of Leading Economic Indicators as of December 22nd has dropped for nine straight months and has been in recession territory for a third of that time. Second, the yield curve has recently been more inverted (short-term interest rates higher than long-term rates) than at any time since 1982. Since 1986 every inversion has predicted a recession. There are many other reasons, but I don’t have the space to list them. The bottom line: a recession is not a given, but it is likely.


So, a recession is likely, but the market is already down almost 20% from its peak of about a year ago. That’s longer than the average bear market; doesn’t that mean we are almost done? Maybe. But, then again, the 1973-74, 2000-2002, and 2007-2009 bear markets all were down between 19% and 20% in their first year, only to eventually go down a full 44%, 48%, and 57%, respectively. While the stock market is no longer “frothy,” it is still expensive. It almost certainly has not priced in a drop in earnings caused by recession. Bonds, on the other hand, after a horrible year, are likely to do well in a year where fear of interest rate hikes fades to plain fear.


In 2022 we celebrated our 25th anniversary as a business, Leslie celebrated 20 years with the firm, and we had our first official retiree when Rhonda left us to enjoy being a grandmother. We continue to be truly blessed by your trust, especially in these rocky times. We will continue to hone our skills, hire great people, and strive to exceed your expectations. As your financial partner, we are here for you.

Have a fantastic New Year!

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