Our fiduciary advisory team at PlanVest Financial is monitoring several key areas that pose headwinds to the US and global economic growth going into 2023. Some of the key items we are watching include:
- Federal Reserve Policy: How successful will the Federal Reserve be in guiding monetary policy to combat high inflation? The Federal Reserve has already raised rates by about 3% so far this year. At least two additional interest rate hikes (anticipated to total 1.00% to 1.25%) are expected this year with more expected in 2023. Interest rates had been close to 0% in recent years. Rising rates result in slowing the economy, as borrowing becomes more expensive for companies, consumers, and mortgages. The Federal Reserve is raising interest rates to slow economic growth in an attempt to reduce inflation.
- General Recession Risks: Other ongoing pandemic-related supply chain issues are still being felt. As of the end of Q2, the US has arguably been in a recession (as traditionally measured by two consecutive quarters of negative GDP). Some analysts are anticipating a recession in the back half of 2023.
- Rising Geopolitical Tensions: In addition to the above factors, we are monitoring geopolitical uncertainty for potential risks which may impact global economic growth:
- The ongoing war in Ukraine and the effects this conflict is causing worldwide.
- Recession (at least by China’s standards) of Asia’s biggest economy induced by Covid-19 lockdowns, problems in their real estate sector, and the slowing world economy.
- China’s central bank moves to stop the Yuan’s slide by asking state-owned banks to be prepared to support its currency in offshore markets.
- Liz Truss, the new Prime Minister of Great Britain unveiled tax and spending plans to help rescue the economy which is being rejected by investors and law makers.
- Several major central banks around the globe are also pursuing interest rate hikes to combat inflation and strengthen the currency.
- Cuts in oil production by OPEC-Plus by two million barrels of oil per day in a bid to maintain or further raise prices, while the United States and Europe try to cut off Moscow’s revenue from oil and natural gas sales.
We are PlanVest Financial, Inc – a Fiduciary Registered Investment Advisory firm dedicated to serving you. We hope this brief commentary has been informative for you.
Please let us know if you would like to have a chat regarding your concerns about current economic conditions, and your future/retirement goals, or if you want to discuss having a Financial Plan prepared for you. We are always ready to help you navigate through tumultuous times. We offer a no-cost initial consultation.
All the best,
The PlanVest Financial Team
Sources:
https://tradingeconomics.com/china/currency
https://www.schwab.com/learn/story/quarterly-market-outlook
https://www.cnn.com/2022/09/09/economy/uk-economy-queen-mourning/index.htmlhttps://www.tdainstitutional.com/content/dam/institutional/resources/macro-monday/macro-monday.pdf
https://www.nytimes.com/2022/10/05/business/opec-russia-oil-output.html