For months now, it looks as if all we have encountered are unfavourable headlines. However after we reduce by way of the noise and take a look at the information, 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 12 months? 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 robust, shoppers and companies stayed assured, and the financial system grew. Did it develop extra slowly than final 12 months? Positive. Nonetheless, all market indices had been up, company earnings beat expectations, and monetary situations remained regular.

And what about inflation? It managed to drag 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 Might to recommend a pause could also be so as. None of this might have occurred had progress remained ultimately 12 months’s degree. That slower progress ought to assist help the markets and financial system within the second half of the 12 months.

The Highway Forward

Whereas the debt ceiling was resolved with no disaster, the banking system stays below stress. The U.S. relationship with China is rocky, and the battle in Ukraine continues. Now we have 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 might pause. And the worldwide scenario, whereas worrying, is not any extra worrying now than it has been for the previous 12 months or so. Mixed with robust job progress and shopper confidence, we get an financial system that appears very like it did firstly of the 12 months. And that financial system proceeded to outperform. With low expectations, it could nicely 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, obtainable now.

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Chopping By way of the Noise

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