By Brett Gottlieb
After the last few years, we all entered 2023 with a mixture of hope and anxious exhaustion. There were signs that the market was evolving from the shaky ground of the past three years and gaining upward momentum. Now that we find ourselves midway through 2023, it’s time to look back and analyze how the economy and the markets have done and what they could tell us about the next six months.
So far in 2023, the performance of the financial markets has been measured, yet positive. While the Dow Jones remains effectively flat, mirroring its position from this time last year, the S&P 500 has seen a modest rise, up 8.6% for the year to date. The Vanguard Total Stock Market Index Fund, providing a broad snapshot of the entire U.S. market, aligns closely with the S&P 500, reflecting an 8.2% increase. The tech-centric NASDAQ has shone brighter, growing a noteworthy 23% this year.
However, adopting a longer-term perspective paints a slightly different picture. Over the course of the past year, all these indices are essentially unchanged from their positions this time in 2022, suggesting a degree of stability in the midst of fluctuating market conditions.
Underlying these market movements, the U.S. GDP maintains positive, yet isn’t high enough to be called robust. Meanwhile, the Federal Reserve continues its trend of gradually raising interest rates. Despite this seemingly stable backdrop, it remains uncertain how these various forces will influence the stock market’s performance in the second half of 2023.
The U.S. employment scene shows steady progress with an unemployment rate of 3.4%. Despite this promising figure, representing 5.7 million active job seekers, there are complexities beneath the surface. While unexpected job losses and short-term unemployment have decreased, the numbers of long-term unemployed and part-time workers desiring full-time roles remain a concern. Also notable is the rise in people outside the labor force but eager to work, up to 5.3 million.
The U.S. economy has shown signs of rebound in Q1 2023 with an annualized GDP growth of 1.3%, slightly exceeding the initial estimates and market predictions of 1.1%. Consumer spending growth outperformed expectations, rising to 3.8% despite ongoing high inflation.
This growth, while not overly impressive, still stands in contrast to 2022, which saw two negative GDP quarters. It is also expected to continue, with forecasts predicting a growth rate of 1.5% by the end of the second quarter.
The Federal Reserve has raised its key interest rate to the highest level in 16 years to combat high inflation. However, this streak of 10 hikes could be nearing its end as the Fed assesses their impact on economic growth and inflation. Despite these increases, inflation remains above the Fed’s 2% target, currently sitting at 5%, far lower than its peak of 9.1% in 2022. Finally, the rising costs of goods and services, as well as tighter lending requirements and higher interest rates, could hamper the economy in the second half of 2023 as well as 2024.
Global growth is projected to decline from 3.4% in 2022 to 2.8% in 2023, the lowest medium-term forecast in decades, largely due to the tight policies needed to curb inflation, deteriorating financial conditions, and geopolitical tensions. Inflation is expected to decline from 8.7% to 7% between 2022 and 2023, but the return to ideal inflation rates is not expected before 2025. Despite the cautious outlook, the MSCI All Country World Index is up over 7.5% so far this year.
There are so many different factors you must understand to get a clear idea about the state of the economy. But understanding where the markets have been over the past six months and where they might go next is vital to both your short-term and long-term financial plan. It’s not always easy to see how the big market shifts might affect your wealth, but no matter what stage of life you are in, clarity is key to making wise financial decisions. This is why we encourage everyone to talk with a trusted financial advisor who can take all the information from the markets and help apply it to your unique situation.
At Comprehensive Advisor, our goal is to help you discover, evaluate, and plan for your future. We use our in-depth knowledge of the markets to reveal steps you can take toward the life you want to live. The midway point of the year is the perfect time to meet with a trusted advisor. If you’re ready to take that step, email us at info@ComprehensiveAdvisor.com or call (760) 813-2125.
Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.
Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.
Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc., generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 1861377- 6/23
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