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Forecasting the Economy

At every strategy session in 2022 the economy led discussions. It is a major factor and a moving target. The uncertainties are higher stakes than I've seen over the past decade and they range from geopolitical to supply chain to political.

Right now the opinions from prominent and trusted sources have a huge range as we look at 2023.

For instance, the respected Wharton professor Jeremy Siegel makes the cast that the Fed has probably already killed inflation and needs to reverse the interest rate hikes. Meanwhile Dalio’s hedge fund is buckling in for a big stock slide.

China has undergone a concentration of power with Xi Jin Ping. Huge swaths of the population are locked down in “zeo-Covid” isolation. Beijing, Guangzhou, Xinjiang province where there have been riots by those who’ve been locked down for months. China is not using mRNA vaccines and there are fears of a massive surge in the disease as the government tries to end restrictions.

European nations are anticipating high energy costs and shortages and are already contributing fiscal support. Energy conservation is the rage, blunting Russia’s threats to limit energy supplies.

Ukraine is in extremis with power shut down for the entire nation. Dramatic night-time satellite photos confirm the unlighted area north of the Black Sea. But the population remains defiant. Over the winter it’s possible that the Ukraine forces emerge with over three times the weapons and ammunition than those they possessed as Russia invaded.

Back in the US consumers are still spending, boosting the economic engine. The job market continues to tighten. This bodes fairly well for the economy to the end of the year.

This does not mean that the US will dodge a recession. But with a major share of world economies doing better than expected the likelihood is that the US and EU hit a short-lived recession into 2023 but emerge into growth late in the year.

The best piece of news looking forward regards inflation. Signs point to a peak of the record run-up in prices. Major economies and developing nations are seeing the phenomenon.

Moody's Mark Zandi forecasted the beginning of the end. 3% drop in food and energy prices over the next six months according to Capital Economics.

November 25 Black Friday sales in the US set a new record. The US consumer continues to spend.

Photo by Towfiqu barbhuiya on Unsplash
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