Americans have been feeling grumpy lately, with pessimism levels reaching a peak, according to reports from Gallup and the University of Michigan. However, despite the general worry and gloom, 2023 is shaping up to be a strong year for financial, economic, and money issues. The economic mood has shifted from Scrooge-like to Santa Claus-like over the past months, with improving indicators across the board.
At the end of 2022, interest rates were on the rise, inflation was up at a 6.5% annual pace, and the stock market was down 19%. Since then, interest rates have stabilized, inflation has decreased, and stocks are rallying. The improving economic backdrop is a stark contrast to previous worries of an imminent recession.
The earlier pessimism was fueled by interest rate hikes, but despite that, GDP has seen three quarters of consecutive increases. Inflation has dropped to 3.2% from its peak of 9.1% in June 2022, bringing it closer to the Federal Reserve’s 2% target. This indicates the likelihood of lower interest rates in the future.
Furthermore, the stock market has experienced a rebound, and corporate earnings are expected to improve following three consecutive quarters of profit declines. Aggregate earnings for S&P 500 companies are up 1.5% compared to the third quarter of 2022, signaling the potential for another extended upward trend.
Meanwhile, the federal debt outlook also provides a glimmer of optimism, despite ongoing discussions about adding more debt through a new tax package. Legislative and executive actions have reduced projected debt by $1.3 trillion, although the total federal debt remains high at around $33 trillion.
Although there are still many financial worries such as high personal debt levels and living paycheck to paycheck, the potential for dropping interest rates and controlled inflation could provide a reason for optimism in 2024. The economy and stock market show signs of revival as 2023 comes to a close, despite ongoing concerns.
