The linked article from Wells Fargo Economics predicts a mild recession in 2023 caused by the Fed raising interst rates. They predict the fed funds rate will rise to 4.5%, which is higher than other predictions, including the Fed’s dot plot.
They look for the FOMC to start cutting rates at the end of 2023 as inflation cools off and the unemployment rate rises. But financial markets will begin to anticipate Fed easing well before it actually occurs. Consequently, longer-term interest rates, including mortgage rates, should start to move lower in early to mid-2023. Easing of financial market conditions should sow the seeds of the next recovery.
This article contains precise forecasts of mortgage and Treasury rates. They think the rates will peak in the first quarter of 2023. They think corporate profits after tax will be mildly negative between the third quarter of 2022 and the third quarter of 2023. The do not predict a return to profit growth in 2023.
The linked article from Wells Fargo Economics predicts a mild recession in 2023 caused by the Fed raising interest rates. They predict the fed funds rate will rise to 4.5%, which is higher than other predictions, including the Fed’s dot plot.
The dot plot changes constantly. If gasoline prices stay at $5 or so, and gas prices stay above $7.50, I expect a recession to begin in Q1/Q2 2023. My thesis is that consumers can [barely] handle the extra $2/gal for gasoline (comes to about 1.5-1.8% of total consumer spending). But that consumers can’t handle both the bump in gasoline and the bump in gas (I can’t find exact numbers yet, but it could be another 1.6-2% of total consumer spending) at the same time. And since driving back and forth to work is required, and heating the home is required, consumers will cut spending elsewhere which will likely precipitate in recession. I further say that even if overall consumer spending remains numerically the same, or even a bit higher, BUT if an extra 4% or so is going towards energy, it ought to still be considered a recession.