During the third quarter, long-term interest rates rose sharply, and geopolitical risks increased, causing investors to rethink their forecasts for economic growth in 2024. Higher interest rates and the reemergence of economic and geopolitical risks caused stocks to fall from August through late October.
As we wrote in our 2023 First Quarter Outlook, our base case was that strong consumer spending would support the economy for the first half of the year, but conditions would become more challenging as the year progressed as pandemic savings dwindled, and higher rates began to crimp lending and growth. While the economy has indeed been incredibly resilient so far in 2023, most indicators that we track indicate we are late in an economic cycle with an elevated risk of an economic contraction during the next several quarters.
As we assess the economic outlook, we want to reinforce that the equity markets and the economy do NOT always move in unison. Our committee looks at many variables that help the firm make investing decisions for our clients. We hope you enjoy reading about some of the data we are tracking in our Outlook and our opinion as to what those data points portend for the economy, and most importantly, your investments.