Prominent banks and asset managers are throwing cold water on expectations that the U.S. economy will escape a recession in 2023
Some of Wall Street’s biggest names are throwing cold water on expectations that the U.S. economy will escape a recession in 2023, as hopes of a so-called Goldilocks scenario of easing inflation and resilient growth propels stocks higher.
The warnings contrast with signs of optimism in markets. The S&P 500 has jumped more than 3% so far in 2023, fueled in part by bets that inflation will continue to slow, allowing the Fed to soon pull back from the rate increases that shook markets last year. The tech-heavy Nasdaq 100 is up some 6%. While recessions are called in hindsight, investors have said that still-robust job growth makes it unlikely that one has already started.
Policymakers have projected their key policy rate would top out at between 5.00% and 5.25% this year. Market pricing indicates investors are taking a more dovish view, with the rate peaking below 5% around mid-June before falling in the second half of the year. Those rebounds inevitably crumbled, leaving the S&P 500 with a 19.4% annual loss, its worst since 2008. The most recent rally has lifted the S&P 500 more than 11% from its October lows.
Neuberger Berman sees the S&P 500 dropping to as low as 3,000 this year - a decline of nearly 25% from its current level - as rebounding inflation forces the Fed to become more aggressive.
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