© 2024 M&T Bank and its affiliates and subsidiaries. All rights reserved.
Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation including, but not limited to, Manufacturers & Traders Trust Company (M&T Bank), Wilmington Trust Company (WTC) operating in Delaware only, Wilmington Trust, N.A. (WTNA), Wilmington Trust Investment Advisors, Inc. (WTIA), Wilmington Funds Management Corporation (WFMC), Wilmington Trust Asset Management, LLC (WTAM), and Wilmington Trust Investment Management, LLC (WTIM). Such services include trustee, custodial, agency, investment management, and other services. International corporate and institutional services are offered through M&T Bank Corporation’s international subsidiaries. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank. Member, FDIC. 
M&T Bank Corporation’s European subsidiaries (Wilmington Trust (UK) Limited, Wilmington Trust (London) Limited, Wilmington Trust SP Services (London) Limited, Wilmington Trust SP Services (Dublin) Limited, Wilmington Trust SP Services (Frankfurt) GmbH and Wilmington Trust SAS) provide international corporate and institutional services.
WTIA, WFMC, WTAM, and WTIM are investment advisors registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply any level of skill or training. Additional Information about WTIA, WFMC, WTAM, and WTIM is also available on the SEC's website at adviserinfo.sec.gov. 
Private Banking is the marketing name for an offering of M&T Bank deposit and loan products and services.
M&T Bank  Equal Housing Lender. Bank NMLS #381076. Member FDIC. 
Investment and Insurance Products   • Are NOT Deposits  • Are NOT FDIC Insured  • Are NOT Insured By Any Federal Government Agency  • Have NO Bank Guarantee  • May Go Down In Value  
Investing involves risks and you may incur a profit or a loss. Past performance cannot guarantee future results. This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any security or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. There is no assurance that any investment, financial or estate planning strategy will be successful.

It often seems as if the market has a mind of its own—acting as a singular trader and pricing in new information instead of simply reflecting the consensus of millions of investors. Today’s heightened degree of uncertainty has the market confused, unable to make up “its mind” on whether the bottom is in and a new bull market is about to take hold or if there is further pain ahead. Extended indeterminacy over the speed of disinflation and its follow-on impacts on the economy—Whether increasingly higher fed funds rates will crash the consumer and the economy—are likely to leave U.S. equites range bound for at least the balance of this year. In our view, we are likely to see a shallow recession in 2023 followed by a tepid recovery, one that will nonetheless usher in a new growth cycle for stocks.

The Fed’s [brake] pedal to the metal

The Federal Reserve’s (Fed) rate-hike campaign this year has been so aggressive it has left all corners of the market reeling. For perspective on just how much the market has had to adjust its expectations for Fed policy, consider that one year ago, the fed funds rate was as low as it could go at 0–0.25%, CPI came in at 6.2% year over year (y/y), and the market was expecting one to two hikes (25 basis points, or bps, each) from the Fed in 2022. Fast forward to today, and despite the Fed implementing the equivalent of fifteen 25bps rate hikes, inflation is still 8.2% y/y. The market expects the Fed to keep going, and the Fed has confirmed as much.

In the first nine months of this year, the Fed has hiked twice as fast as the next most aggressive rate-hike cycle in history. For now, there is no more dual mandate (stable prices and full employment); there is only the goal of bringing the rate of inflation back in line with the Fed’s 2% target. This will not be easy, as price pressures have rotated from goods to services, and rent inflation (together with other home price categories makeup approximately one-third of the Consumer Price Index, or CPI) is likely to remain sticky. Encouragingly, inflation looks to have peaked, and leading indicators of inflation are all pointing in the same direction: down. For example, among the more positive signals is the ISM Services Prices Paid Index, which has historically tracked CPI quite well and is pointing to a steep deceleration in the overall level of inflation. This is what is meant by disinflation, namely prices rising but less aggressively than in the past.  In light of recent data, and as detailed below, we no longer expect inflation to slow quickly enough to avoid at least a mild recession.

Please see important disclosures at the end of the article.

Disclosures:

    • © 2024 M&T Bank and its affiliates and subsidiaries. All rights reserved.
    • Wilmington Trust is a registered service mark used in connection with various fiduciary and non-fiduciary services offered by certain subsidiaries of M&T Bank Corporation including, but not limited to, Manufacturers & Traders Trust Company (M&T Bank), Wilmington Trust Company (WTC) operating in Delaware only, Wilmington Trust, N.A. (WTNA), Wilmington Trust Investment Advisors, Inc. (WTIA), Wilmington Funds Management Corporation (WFMC), Wilmington Trust Asset Management, LLC (WTAM), and Wilmington Trust Investment Management, LLC (WTIM). Such services include trustee, custodial, agency, investment management, and other services. International corporate and institutional services are offered through M&T Bank Corporation’s international subsidiaries. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank. Member, FDIC. 
    • M&T Bank Corporation’s European subsidiaries (Wilmington Trust (UK) Limited, Wilmington Trust (London) Limited, Wilmington Trust SP Services (London) Limited, Wilmington Trust SP Services (Dublin) Limited, Wilmington Trust SP Services (Frankfurt) GmbH and Wilmington Trust SAS) provide international corporate and institutional services.
    • WTIA, WFMC, WTAM, and WTIM are investment advisors registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply any level of skill or training. Additional Information about WTIA, WFMC, WTAM, and WTIM is also available on the SEC's website at adviserinfo.sec.gov. 
    • Private Banking is the marketing name for an offering of M&T Bank deposit and loan products and services.
    • M&T Bank  Equal Housing Lender. Bank NMLS #381076. Member FDIC. 
    • Investment and Insurance Products   • Are NOT Deposits  • Are NOT FDIC Insured  • Are NOT Insured By Any Federal Government Agency  • Have NO Bank Guarantee  • May Go Down In Value  
    • Investing involves risks and you may incur a profit or a loss. Past performance cannot guarantee future results. This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any security or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. There is no assurance that any investment, financial or estate planning strategy will be successful.

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