For months now, it looks like all we have encountered are destructive headlines. However after we reduce via the noise and have a look at the info, the story for the primary half of 2023 was easy: the markets and financial system did higher than many anticipated them to.

Will the identical maintain for the second half of the yr? We have a look forward in our Midyear Outlook.

Expectations Vs. Actuality

Regardless of dangers—just like the potential U.S. default on its debt—and worries about an impending recession, hiring remained sturdy, customers and companies stayed assured, and the financial system grew. Did it develop extra slowly than final yr? Certain. Nonetheless, all market indices had been up, company earnings beat expectations, and monetary circumstances remained regular.

And what about inflation? It managed to tug again, as did longer-term rates of interest. After elevating short-term charges at one of many quickest paces in a long time, the Federal Reserve (Fed) adjusted its language in Could to counsel a pause could also be so as. None of this is able to have occurred had progress remained eventually yr’s degree. That slower progress ought to assist assist the markets and financial system within the second half of the yr.

The Highway Forward

Whereas the debt ceiling was resolved with out a disaster, the banking system stays beneath stress. The U.S. relationship with China is rocky, and the struggle in Ukraine continues. We have now practically as many dangers now as we did in January. Add in slower progress, and there is much less cushion for the financial system and markets to fall again on.

The dangers are actual, however so are the positives. Inflation is down. The Fed could pause. And the worldwide state of affairs, whereas worrying, is not any extra worrying now than it has been for the previous yr or so. Mixed with sturdy job progress and client confidence, we get an financial system that appears very similar to it did at the start of the yr. And that financial system proceeded to outperform. With low expectations, it might properly achieve this once more.

For extra on our expectations for the U.S. financial system and the fairness and glued revenue markets, learn our 2023 Midyear Market and Financial Outlook, out there now.

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Chopping By means of the Noise

The headlines inform one story. However does the info inform one other? Obtain our Midyear Outlook to seek out out.