July 12, 2023

Quarterly Outlook Q3 2023: Recession Predictions Linger

Although there have been some signs of progress, our quarterly outlook explores why it has been so difficult to slow inflation.

Main Takeaway

Although many economists have predicted a recession for 2023, the economy is proving resilient. Several factors are keeping the economy in expansion mode — the strong labor market, strong corporate and consumer balance sheets and the stabilizing housing market — despite significant headwinds. The Federal Reserve paused its rate hike in June as inflation continued to show signs of steady decline, yet it remains well above the central bank’s 2% target.

Top Risks

While the trajectory of inflation remains the top story for the economy, one risk that has taken over the spotlight in recent months is the stability of the office sector. With occupancy rates hovering at about 50% on average, this segment of commercial real estate is under considerable stress. In response to the heightened risks, as well as spillover from the banking turmoil in March, banks have tightened credit standards, making lending less available and more expensive.

Sources of Stability

Fiscal policy is still stimulative. Many corporations extended the maturity of their loans during the low-rate environment of the pandemic, making them less vulnerable to higher interest rates. Households still have significant savings built up to support spending. Since the pandemic, consumers have ramped up spending on services while cutting spending on goods. However, the services sector is now the sole driver of growth for U.S. business activity.

Quarterly Outlook PDF Download

For our latest perspectives on markets and economic conditions, view our Quarterly Outlook for Q3 2023.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Certain information is based upon third party data, which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article.

© 2023 Buckingham Wealth Partners. Buckingham Strategic Wealth, LLC, & Buckingham Strategic Partners, LLC (Collectively, Buckingham Wealth Partners). R-23-5851

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