2023 Predictions

2023 Predictions

January 31, 2023


A bit late, but here are our predictions for 2023.  We’ll check back in periodically to review where we were wrong, where we were right, and some nuance to what is happening during the year:

  • The US economy will experience a recession this year. We believe it will be a mild recession, but we are concerned about tenacious inflation.    

 

  • The S&P 500 will finish down 2% (3,760) on December 31, 2023.

 

  • The 10-year Treasury yield will be at 4.00% on December 31, 2022. At the end of 2022 the 10-year sat at 3.88%.  We think there will be a flight to treasuries as the recession takes grip.  However, we also believe inflation will be stickier than markets are predicting. 

 

  • The Fed will raise the overnight rates to 5% in 2023 and hold. It appears the Fed is looking at a 0.25% rate increase at the first meeting.  We believe inflation is persistent and will require the Fed to continue to raise rates, perhaps with a pause to evaluate the economy. 

 

  • Inflation will be transitory, if your definition of transitory is a long time. Inflation is here to stay through 2023.

 

  • The Russia/Ukraine issue will NOT slowly go away. This has evolved into a fight for the survival of two dying countries.  Ukraine simply does not have the population to hold Russia off.  However, the rest of the world has seen it fit to arm the Ukraine to the point to hopefully halt a Russian advance.  This will continue to be a war of attrition, bleeding off the youth of a once mighty empire.

 

  • Home prices in the US will experience a 5-10% decline in prices. There is not a repeat of the housing crash of 2006-11; inventory is still low, pricing is close to replacement value of the home, and homeowners are reluctant to sell while locked into low rates.

 

  •  Electric vehicles will experience a pullback in demand.  It may not reflect in the numbers of units sold, but there is too much noise in the system regarding:  The pollution created in manufacturing the vehicles.  The de facto slavery that permeates the cobalt mining industry.  The lack of electrical infrastructure to support a large fleet of electric vehicles.

 

  • China will experience social unrest. Another dying empire.  There has already been capitulation over COVID lockdowns.  As food becomes less available due to the Russia/Ukraine war, look for increased vocalization/unhappiness from the masses.

 

  • Bitcoin will continue to drop in price. Too much competition (including governmental), too much volatility, too much taxation, too much pollution (energy costs).  It feels like a race to a value of zero.