Broker Check
The R Word

The R Word

December 04, 2023

As 2023 started economists and media outlets were predicting a recession.  It seemed like a textbook recession case right out of Econ 101.  The year prior, 2022, humbled even the best investors and a declining stock market typically precedes a recession. Economists call these pre-recession events leading indicators. The Tech industry started laying people off which is another leading indicator. Consumer sentiment was headed down because usually people put off big purchases when the R word is floating around. And let’s not forget the yield curve: the media has written and reported with great excitement this year about an inverted yield curve. In plain English it means that short term bonds pay higher interest rates than longer term bonds, but of course ‘inverted yield curve’ makes it sound more impressive.

It was clear through the year that the Federal Reserve would continue to raise interest rates in an effort to help control inflation. This action of raising rates makes borrowing money more expensive, meaning companies might start tightening the proverbial corporate belt.  If the economy goes in cycles, then what goes up must come down.  I also think we are still attributing a multitude of woes to the Pandemic, so throw that into the mix.

The most striking thing is that the year is coming to a close and we did not experience a recession. The Federal Reserve did in fact raise rates 11 times since March of 2022. Interest rates followed suit and the 10-year treasury danced around the 5% mark.* Inflation stayed persistent, mortgage rates soared, and the equity markets got confused. Amongst all the negativity the American consumer kept spending money, corporations reported profits and 3rd quarter GPD posted 5.2% growth rate.** There is still a possibility that we could have a mild recession but when I think back over the American Economy this year the R word that comes to mind is Resilience. It is remarkable when you look at it from a textbook perspective. When clients turn on the news and are faced with the the economic fear du jour, I tell them to look horizontally. Are people around you spending money, buying cars, etc.? The American workforce is constantly innovating, cutting costs and generally figuring out what products and services the consumer will buy. The word Resilience by definition is the ability to recover from challenges which is exactly what 2023 economics looked like. So bring on a Santa Claus rally and a hopeful 2024 because in life and in economics even the best predictions do not come with a crystal ball.


CRN-6134058-120123

* https://bit.ly/3GuiBiq

**https://bit.ly/3RrBVD6

Charlotte Geletka is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker-dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Silver Penny Financial Planning is a marketing name for registered representatives of Lincoln Financial Advisors Corp. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.