The U.S. economy has a high risk of entering e recession, according to the chief economist of Bank of America, Michael Gapen. 2023 may be a challenging year for the nation. But what economic factors are at play in this challenging scenario the US will face?
Economic and Market Outlook for 2023 from Bank of America Global Research
2022 was the 7th worst year for US stocks in the past century (-20%).
A recession is expected in 2023.
As best put by Peter Lynch:
“This one is different,” is the doomsayer’s litany, and, in fact, every recession is different, but that doesn’t mean it’s going to ruin us. pic.twitter.com/i8bfgxfLg1
— App Economy Insights (@EconomyApp) December 30, 2022
Two massive shocks, one related to inflation and the other to interest rates, rocked the world economy and markets in 2022. One anticipated shock—recession—remains for 2023. In light of this, economists and strategists at Bank of America Global Research announced their predictions for 2023, stating that it would likely be a year of two halves. The United States, Euro Area, and the United Kingdom are all anticipated to have recessions in 2019; the rest of the globe is anticipated to continue to deteriorate, with China standing out. While the first half of the year will likely impact corporate profitability and economic growth due to the recession shock, China’s reopening will provide some relief.
Michael Gapen’s Remark on Difficulties the U.S. is going to Face in 2023
Michael Gapen acknowledged that perhaps the economy might appear and behave worse as CBS’ Margaret Brennan asked to predict it this year on Face the Nation. He remarked that he believes the likelihood of a downturn is significant, although it could not be a severe and extended one. However, the economy has rebounded relatively quickly from COVID and has been accompanied by significant inflation. Additionally, the Federal Reserve is attempting to slow down inflation and the economy’s pace. Gapen added that the year-over-year annual inflation should keep declining as it did late last year, although it would take some time to bear the impact. The U.S. economy is most possibly past its maximum volatility.
Bank of America Chief Economist Michael Gapen on recession odds in 2023: “We may be able to avoid it…but I do think 2023 could be a difficult year for the U.S.” pic.twitter.com/weMCdaJfPT
— Face The Nation (@FaceTheNation) January 1, 2023
Historically, there has been a correlation between that and a recession in the U.S. labor market and economy. It has not been baked in. There is no guarantee. Gapen also stated that a downturn does not necessarily have to be devastating. It does not have to last very long. In his opinion, all we need to do is ease the strain on an economy that has recovered from the epidemic while also bringing excessive inflation. In the past, he consistently managed to hike rates while containing inflation without causing the economy to enter a downturn. They managed to do it around the middle of the 1990s. Simply put, getting it is exceedingly complex and occasionally requires more fortune than ability.
Many people believe that the American central bank is causing the current crisis to lower inflation, even though doing so will cause millions of people to lose their jobs, properties, and pensions, primarily based on share prices. The most recent data points demonstrate how common America’s economic position is drastically deteriorating. As wages rapidly erode due to inflation, a challenging 2023 may be a trying year for several Americans.
Key Macro Forecasts for such Economic Factors and Markets for 2023 Include
- Midway through 2023, markets turn “risk on.”
- The U.S., Euro Area, and the U.K. are all but sure to have a recession.
- S. rates remain high, although a drop is anticipated by the end of 2023.
- Although China reopens, there may be some hiccups until later in 2023.
- Following a choppy start to 2023, emerging economies should generate high returns.
- Cyclical and secular causes are anticipated to enhance metals in 2023 following a historically poor year for industrial metals in 2022, and copper rebounds by almost 20%.
- Oil prices will continue to rise.
- Even during a recession, the maintenance and reliability of Capex are robust.
- Due to the riches, American consumers have some price relief, but they also become less ready to spend.
