Experts Agree 2023 Likely to Bring Slowdown. But Will It Be a Soft Landing or a Crash?
Experts gathered on Zoom to talk inflation, interest rates, the stock market, housing and other factors that could impact consumer behavior.
The experts agree, 2022 was a strange year for the economy.
GDP was up while unemployment hovered close to 3%. Nevertheless, Wall Street had its worst year since 2008 and inflation pumped up prices. At the start of the new year, the Fed walks a tightrope as they attempt to cool the economy without smothering it.
A panel of economic experts led by moderator Tony Mecia, editor of The Charlotte Ledger, discussed the upcoming year during an hour-long Zoom webinar. They all agreed that a slowdown is on the way.
But is the economy in for a soft landing, or will it crash? That was the real question.
This year's experts:
- Eric Freedman, Chief Investment Officer, U.S. Bank Asset Management Group
- Siobhan O’Keefe, Assistant Professor of Economics, Davidson College
- Matt Phillips, Markets Correspondent, Axios
- Jennifer Streaks, Senior Personal Finance Reporter, Insider
The event was moderated by Tony Mecia, Editor of The Charlotte Ledger.
'On The Edge of a Knife'
Eric Freedman, chief investment officer for U.S. Bank Asset Management, said the combination of rising interest rates and the cycle of consumer spending is already causing the red-hot economy to cool.
“We do think we’ll have a slowdown that will ultimately be termed a recession,” Freedman said, “But we’re less concerned about how deep it gets than how long it will stay with us.
“If we use the analogy of a treadmill, the treadmill is probably at a five or six right now. And we think we’ll get down to a three or four and stay that way a little longer."
Siobhan O’Keefe, assistant professor of economics at Davidson, says the economy is “on the edge of a knife.” A small slowdown is all it may take to get inflation under control.
But it’s also possible that the recent interest rate increases have not yet stymied swelling prices.
“The labor market has continued to be more robust than expected,” she said. “The pessimistic part of me says this may force the Fed to raise interest rates more and they may go too far, and that may cause a deeper, more traumatic recession than anyone would like.”
Housing Market Will Drive Economy
One major indicator all of the panelists are watching is housing.
Jennifer Streaks, senior personal finance reporter for Insider, expects the uncertainty of the upcoming year will cause consumers to put off big purchases–like new houses.
“When the housing market starts to suffer, it indicates that every other sector is going to start suffering at some point,” she said. “It’s a harbinger for what’s coming down the road.”
Matt Phillips, markets correspondent for Axios, pointed to declining rents that may portend a turnaround for the stock market, which was battered in 2022.
“Rents have been falling consistently over the last few months,” Phillips said. “That takes a while to feed into the official government numbers but if rents continue to decline, that would help decrease inflation and help the stock market.”
Inflation Still A Question Mark
Phillips also pointed out that inflation already seems to be heading the right way.
“We peaked at 9% in June and we’re down to 7% right now. That’s not insignificant,” he said. “It’s still crazy compared to where we’ve been over the past 30 years but if it continues to come down, that may be a reason for optimism in the stock market.”
Inflation may be trending in the right direction, but all panelists agreed that the Fed is far from finished with interest rate hikes. That’s big macroeconomic news, of course, but both Phillips and Streaks pointed out that consumers should do one thing above all: save money.
“Basically, the Fed is giving a signal to people that now is the time to save,” Phillips said, pointing to rising interest rates in savings accounts and certificates of deposit.
Streaks urged consumers to prune their spending and set up automatic drafts to make sure they save regardless of the economic climate.
“The most important thing you can do,” she said, “is make saving a habit.”
Additional Coverage
The Charlotte Ledger, Where is the economy headed in 2023? A panel discussion
Published
- January 5, 2023