It’s Not the Best of Times, But Not the Worst Either

by Colleen Gillespie, CTFA, AIF®

Happy New Year! We hope the holidays were filled with many wonderful moments for you and your family.

The title of this article may sound very familiar to you Dickens fans, but is literally how Dr. David Kelly, Chief Global Strategist at JP Morgan Asset Management started his quarterly webinar this week. He’s one of my go-to resources as we put together our investment thesis every six months before we rebalance portfolios.

Before we get into our current musings on investment strategies, Congress attached something pretty significant to the government spending bill, signed by President Biden on December 30. Secure 2.0, as it is commonly referred is loaded with several important changes to retirement savings and distributions. Vicki Jovanovic has created a quick graphic with six significant changes, so please look at that in this e-newsletter. We’re also including a pretty good synopsis provided by Fidelity Investments this issue, including more details on the new legislation (https://www.fidelity.com/learning-center/personal-finance/secure-act-2). How Secure 2.0 may impact you will be a case-by-case scenario, so please call us to discuss your personal situation.

What’s in store for 2023?

We anticipate the first half of 2023 will be much like 2022 with continued volatility, rising interest rates- albeit smaller increases, and market moves on any positive news it receives. One outlier is the impact the spread of COVID in China will have on the U.S. supply chain again since China has reversed their zero COVID policy. We’re still seeing jobs added, but wage growth has flattened, one of the signs the Federal Reserve is looking for before slowing interest rate increases. JP Morgan Asset Management provided the chart below that shows which living expenses were most impacted by inflation the last year. The graph shows that except for shelter and entertainment (restaurants, travel), most areas came down by the end of the year on a year-over-year basis. We should continue to see this trend throughout 2023, but unless something unusual happens, not to the Federal Reserve’s inflation goal of 2% from the 7.1% in November.

Not All Bad News

Recession??

The jury is out on whether the US economy will fall into a recession, but consensus is that if there’s a recession this year or next, it will be a mild one. What we’ve heard from our research is that 2023 will be a year of slow to stalled economic growth, but inflation should wane if the labor market continues to shrink and consumer spending drops.

The good news as shown by the chart below provided by Capital Group is that “if history is a guide, stocks usually rebound six months before a recession ends.” As one analyst we listened to said this week – “2023 is a year of transition, with 2024 a year of growth.”

In the end, what is most important to us is keeping our eye on the prize of helping you meet your financial goals. In preparation for completing our semi-annual rebalance of your portfolio in the next two weeks, please let us know if you’ll need any additional cash this year, and please don’t hesitate to let us know if you have any questions or concerns as we navigate this new year together.