Market Update | December 19, 2022

Two weeks ago, we wrote, “Last week [was] choppy for stocks. Crosscurrents about interest rate outlooks seem to be batting the market around.” The same basis remains true now. Add into the mix the market’s renewed focus about the next recession.

Stocks had an impressive jump higher last Monday and Tuesday on a softer inflation reading. Bullish market participants grasped as tightly as they could onto the 7.1% November Consumer Price Index announcement, which was a welcome decline from the 7.7% of October. However, the enthusiasm faded the later three days of last week. The bears took back control. The bears’ focus became the likely recession to occur in early 2023. The S&P 500 stock index’s close on Friday, December 16 was its lowest close since early November.

The Wall Street Journal stated on Saturday, “Business surveys have pointed to a significant slowdown in the global economy for many months, but that is only now showing up clearly in the economic data collected by governments. U.S. retail spending and manufacturing weakened in November, both signs of a slowing economy.”

While a looming recession is most analysts’ consensus outlook, most of them project it to be milder than the last two recessions (2007-2009 and 2020). In fact, those two episodes delivered the worst GDP decline of any recession since 1945. We have grown “accustomed” to bad recessions.

However mild it might be and whenever it might happen, we will walk through the next recession together. Our investment management process is designed with full economic cycles in mind, including recessions. Let us know if you have questions or concerns pertaining to your personal financial plan.

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