Recent financial news has been sunnier compared to that of previous months, yet is it time to don a pair of sunglasses and breathe a sigh of relief that the U.S. economy is out of the woods? Or does 2023 offer another wait-see situation? That depends on the type of person you are, is your glass normally half full or half empty?
Goldman Sachs chief U.S. equity strategist David Kostin believes that “even avoiding recession, earnings are unlikely to grow substantially in 2023″. Meanwhile he and other pros were taken by surprise by the rallying of the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite at the beginning of the month. Reason being, the Federal Reserve affects the market anytime they raise or lower rates. On February 1st the Board of Governors announced another ¼ percentage point increase in the primary credit rate bringing it to 4.75%. This increase should have affected the market negatively and that’s why the pros were caught off guard when the market improved.
This juxtaposition of market growth with increased interest rates could be a result of the communication from the Federal Reserve to Wall Street and American citizens. They promised small increases over time to tackle the threat of a recession, and they have been true to their word. It could also mean large companies are better prepared for the expected rate increases, and consumers are versed in weathering the storm of higher prices at the stores and pumps yet still spending money. Investors.com published an article predicting profit booms for 11 big companies in 2023 as well as growth in numerous sectors. With all of this in mind, shades are definitely optional.