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LPL's 2023 Market Outlook

LPL's 2023 Market Outlook

December 27, 2022

LPL Just published their market outlook for 2023.  There was some interesting items in there. We look at a good number of these outlooks from various financial firms this time of year to let us know what the experts are thinking and to help prepare our clients' expectations for the coming year.  Here are some of the high points from the outlook.  I encourage you to read the whole thing if you're interested.  In addition to this piece, our website is updated with a weekly market commentary, a monthly portfolio update from the global portfolio team, and a mid-year outlook that is update in the summer.  

I decided to highlight my favorite part of the outlook. LPL laid out 3 scenarios for the economy and gave each a probability weighting. They then looked at each area of the economy and laid out how each scenario would play out if it came to fruition.  Rather than making a huge bet on "This is what will happen", they gave a rational overview of the possibilities so that the reader can be prepared for more than one outcome.  Here are my 3 highlights and some graphics from the outlook: 

#1 75% chance of at least a mild recession 

This isn't overly surprising. We've been hearing talk of a recession for a long time. Some of that was political heading into the midterm elections, but it's no surprise that inflation and interest rates have an effect on the economy.  On the bright side, many people, LPL included, seem to be calling for a "mild" recession, more of a reaction to all of the abnormalities of the COVID economy than anything structurally wrong. 

#2 Fixed-Income outcomes for those scenarios

This is a bit technical, but it touches on inflation and some of the interest rate consequences of these various outcomes.  For reference, the 10 year treasury is at 3.69% as I type this today.  These are the important rates that drive so much of the economy (mortgage rates, bank account interest, etc.)

#3 Great Opportunities in the Bond Market

This is a great look at something we're hearing all over.  This is a great opportunity for bonds moving forward.  We're coming off of one of the worst bond markets in history. Now, there's an opportunity for higher yields and capital appreciation...something we haven't been able to say about bonds in a long time.

As always, we recommend your plan driving your investment decisions and sticking to that.  Market outlooks like these help for some context as to what is happening in the world and how to set your expectations for the economy and the market(s) moving forward. 

Thanks for reading.