2023 Midyear Outlook

Read the full report here.

Here are the highlights from this edition of Midyear Outlook 2023:

Even amid a strong labor market, small businesses plan to slow expansion plans as the Federal Reserve (Fed) maintains steadfast on price pressures.  This could, in turn, cause the economy to soften.

We expect inflation to ease as supply chains conditions have improved.  Labor markets have been strong as companies have struggled to find qualified workers. 

Post-pandemic purchasing dynamics could soon move to pre-pandemic levels where services, not goods, may be the major focus for consumers. 

Given present central bank’s focus on price pressures and the risks of recession, stock market indicators are pointing toward better returns.  This is a reason why it can be important for clients to maintain a long-term posture with equities. 

When looking at the equity risk premium from a valuation perspective, which compares the earnings yield for equities (earnings divided by price) to the yields on bonds (we use the 10-year Treasury), bonds appear more attractive than equities.  Presently, the equity risk premium is sitting at its long-term average. 

We expect earnings to be around 213 for the S&P 500 Index this year.  Second quarter earnings reports are going to be announced shortly, and this estimate could be subject to change amid disinflationary conditions.