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Markets & Economic Update for December 2022: Very Modest Growth Forecast as Year Ends

December 8, 2022
David Lundgren, CFA®
David Lundgren, CFA®

Each month, senior leaders of Hancock Whitney's Asset Management team discuss the latest news and events that impact markets and the economy.


This month: Many analysts project very modest growth for Q4, followed by a flat economy in the first half of 2023. But the jury is still out on whether we are dealing with stagflation or a mild recession.


Watch and listen to the webinar:


Key Takeaways:

  • The Bloomberg Survey of Economists on expected Q/Q AR Real GDP in 4Q22 is now projecting very modest growth ( < 1%) and followed by a flat economy in the 1st half of next year. So more of the same, and the jury is still out on whether we are dealing with stagflation or a mild recession.

  • After months of stubbornly high inflation, investors were finally rewarded with a positive surprise in the October CPI update released in November. The widely watched Y/Y CPI broke through the 8% barrier that had frustrated markets for months, dropping a half percent to 7.7%. The equity markets responded enthusiastically and interest rates fell across the yield curve leading to positive returns across all major asset classes in November.

  • The better than expected Consumer Price Index (CPI) report released a tidal wave of optimism into the bond markets that sent investors into a buying frenzy. Interest rates plunged while bond prices rocketed higher in a swift repricing of market rate expectations. Most high quality bond indices were up 2-3% for the month.

  • Enthusiasm about a possible peak in inflation and the related implications for monetary policy were significant factors in a very good November for stocks. The S&P surged 5.6% but trailed International stocks by a wide margin. Developed and Emerging market stock indices were both up over 10% for November.

  • With one more race for House seat still not called, Republicans are expected to have a 222-213 majority, the same thin margin that Democrats had after the 2020 midterm elections. Democrats still maintain control of the Senate for the next Congress. A divided Congress will likely complicate forward movement on legislation, and Republicans will be well-positioned to thwart significant policy initiatives coming from the White House and to negotiate concessions in critical legislation.

  • The bankruptcy filing of FTX, a Bahamas-based cryptocurrency exchange, has had a wide impact on cryptocurrency markets. Prior to its collapse, FTX was the third-largest cryptocurrency exchange by volume and had over one million users.


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