Summary
- Inflation is likely to continue moderating, particularly if consumers exhaust excess savings later in the year.
- Labor markets are not as strong as they may appear and are likely to weaken further as corporate profits come under pressure.
- Equity markets do not appear to be pricing in a significant decline in profits, creating downside risk later in the year.
- Bond markets are anticipating rate cuts but not financial distress. Labor markets will likely need to weaken substantially before the Fed pivots, regardless of inflation.
For further details see:
2023 Market Outlook: Inflation Likely To Continue Moderating