Wealth management leaders in the closing months of 2022 weren’t holding back about momentum lost and the hard times ahead. A new year and encouraging updates from the Federal Reserve appear to be changing tunes, but firms say they’re still in no rush to put serious skin in the game.
Brad Larsen, managing director and market executive for Bank of America Private Bank in Los Angeles, said that out-of-control inflation and persistent rising interest rates, among other symptoms of oncoming recession, have most investors piling out of stocks in favor of stockpiling. But amid the doom and gloom is evidence that the recession might not last as long or be as severe as the waning months of 2022 would have had you believe, Larsen said.
He said signs point to “a shallow recession” with a slight decline in GDP by year’s end.
“Unemployment is just so low right now, and the general population still has a lot of money in savings after dealing with the pandemic,” said Larsen. “That’s keeping the consumer going, and considering the user economy is 70% consumer-based it’s what is keeping everything afloat.”
Larsen estimated the Fed would continue to raise interest rates through March – increasing by 25 basis points to a range of 5% to 5.25%. That’s in the ballpark of other estimates from other major banks and in line with the Fed’s own projections.
“Then, a pause. Once the Fed pauses, that’s when we’ll start to restart the upswing. We just have to get through March and into April. Until then, there’s not a lot of things you’ll want to do, because it is going to be bumpy,” said Larsen.
Dip buying
Combined with a recovery in the global supply chain and an easing on price pressures for goods, an interest rate halt would go a long way toward boosting confidence in the market. As investors aggregate their cash, Larsen said they’ll want to keep an eye out post-March for dip-buying opportunities that likely won’t last long.
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