December stocks dropped over investor concerns for an upcoming recession and the Fed’s resolve to tame inflation even if rising interest rates trigger recession. Large company stock indices closed the month down an average of -3%. The Nasdaq was down over -8% and the bond average was down -1%.
The recent drop in stocks seems to have already priced in a possible recession. If the economy does slide, stock prices are already part way there. Stock markets will also anticipate growth in the economy and rise before the economy does. Some factors that may avoid recession include keeping people employed. Labor markets are tight, so replacing employees is expensive and employed people spend, supporting the economy. When inflation comes under control, the Fed will be able to lower interest rates, also stimulating growth in the economy. So a recession is not inevitable, is avoidable, and 2023 may be smoother than it looks at the moment.
Happy New Year wishes. Upside down weather keeps everyday life challenging for us and the rest of nature. Robins have returned as usual to tank up on holly berries before heading south for real. Sparrows chirp cheerfully in bunches, all hatched over the summer to the same committed parents. They too must long for signs of spring, celebrating any warm spell with their chatter. We can try that too. Cheers!
