Worcester Business Journal

www.wbjournal.com • Worcester Business Journal • 2 023 Economic Forecast 23 385 South Street, Shrewsbury, MA 01545 | T: (508) 842-0539 | F: (508) 842-0571 | www.ProvoWealth.com ECONOMIC FORECAST FOR INVESTING FACTORS TO CONSIDER: ROADMAP TO INVESTING IN 2023 CASH: Cash is back. Consider using cash where suitable like 4% plus, 1 to 5 year CD's, laddered. Also diversify CDs in the big Investment Banks (too big to fail) no more than $250,000 per company, per person, per account to maximize FDIC Insurance. Money markets are now yielding over 3% but remember they can lose value under extremely unusual circumstances and are not FDIC insured. Look for Money markets yielding north of 3% (as of the writing of this forecast) that have values starting with a B and have 30% plus liquidity per week. Please note that cash alternatives do still carry various risks, such as market or credit risk, and may lose value. BONDS: As bad as 2022 was for bonds due to massive federal reserve interest rate hikes, a reversal of those hikes is expected by most economists mid-summer could cause a bond market rally in the second half of the year. (See 1994 and 1995 bond market). Consider shorter to intermediate term bonds in the first half of the year and intermediate to long- term bonds in the second half. A must is simply reading the Fed's minutes and comments about current and future hikes. The Fed has a history of over hiking and then reversing quickly to aid the economy. Monetary policy could reduce inflation as well causing the Fed to stop hiking sooner, however, the political environment today is MIA. Missing in Action! Bonds are subject to market and interest rate risk if old prior to maturity. Bond values vary and will decline as interest rates rise. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. High yield/junk bonds – grade BB or below – are not investment grade securities and have higher risks than those graded BBB and above. STOCKS: Valuations are no longer expensive. Prices have corrected to reflect the current economic environment. It's called the efficient market hypothesis. Bears will say don't fight the Fed if they continue to raise rates especially as 2023 progresses. They will argue to look out for a prolonged recession that gets worse. The bulls will argue that consumer spending is strong, lowered earnings expectations are being met or exceeding and we have hit bottom. Eighty-Six Billion dollars, according to the Wall Street Journal, as of Monday, November 23rd has entered the stock market during this extremely poor year. This reflects a long-term mindset to investing which is a positive sign for 2023. Inflation has declined very little, but if it continues to decline, and the Fed hints of slowing or stopping rates, this could be the start of the next bull market. As with all investing, stocks investing has risk including loss of principal, and the prices of small cap stocks are generally more volatile than large cap stocks. LAST THOUGHTS: Leading economic indicators continue to struggle. Growth is moderating which has been the goal of the Fed. If you slow growth by decreasing borrowing, then you lower inflation. A slow down causes layoffs, which again lowers inflation. Inflation is a tax on those who can least afford it… the working class, it doesn't affect millionaires. The Fed has no monetary policy to aid them in reducing inflation thus, they are going it alone. This is very concerning for short-term investing. It begs the question and doubt, is the market really priced short term for what is about to happen? What pitfalls are facing us in the next 3 to 6 months that we may be expecting or not expecting? At some point in 2023 statistically and historically, the odds are in favor of markets hitting a bottom and recovering with the fervor of past bull markets. Are you a long-term investor? Timing of the market is extremely difficult. Think long-term with your stock allocations and consider adding more to stocks, the worse it performs. CHRISTOPHER P. PROVO, RFC, CRPC PRESIDENT & CEO

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