Market Data

2022 proved one of the more challenging years in recent history for investors, with economic uncertainty prolonged by high inflation, subsequent interest rate hikes, equity market volatility, geopolitical tensions, supply chain disruptions, and Russia’s ongoing war in Ukraine, all amidst the backdrop of a global post-pandemic recovery. While many experts believe inflation has peaked and will be lower in 2023, it’s likely not low enough to ward off the Fed, and signals, in part, a weakening economy. Hence the continued debate among major banks about the outlook of a recession, which, if unavoidable, is generally predicted to be shallow, mild, and short-lived. As noted by Northern Trust, “High-frequency readings of consumer spending and business investment are still showing growth, and the current risk of a downturn is low...the window to a soft landing remains open.” On a global level, markets are seeing some positive shifts with China’s recent removal of covid restrictions, which should provide a boost to the Chinese and global economy through 2023, and European markets appear off to a strong start.

The third quarter of this year has been marked by continued economic uncertainty, with national challenges related to equity market volatility and inflation, and global concerns over Russia’s invasion of Ukraine, supply chain issues, the slowdown in China, and potential Covid resurgences. September’s newly released Inflation Report, revealing the consumer-price index accelerated to a new four-decade high, did little to quell concerns, instead it solidified Fed plans to continue raising rates at the most aggressive pace since the early 1980s (WSJ). However, some still maintain that a serious U.S. recession may be avoidable, as was echoed in a report by Northern Trust: “We continue to expect any recession to be relatively shallow as we don’t see structural excesses evident in today’s U.S. economy. Household and corporate balance sheets appear healthy, bank lending standards have remained strong, and there has already been quite a bit of speculative excess wrung out of risk-asset markets.”

As anticipated in our previous report, the Palm Beach real estate market demonstrated an overall positive performance in the second quarter. While fears of a recession loom, recent economic activity looks unlike any other “pre-recession” on record. Although economic output fell in the first quarter, the job market remained strong through the first half of the year, and demand for workers is still abundant. Volatility in equity markets is unlikely to ease until central banks feel inflation is under control, which often simultaneously signals recession. And if a recession is inevitable, most economists predict it will be shallow, short-lived, and not in the near-term, a “bend-but-don’t-break” scenario, that will ultimately assist the Fed in managing inflation (JP Morgan).

As prognosticated in our last report, the Q1 2022 Palm Beach real estate market continued its overall positive trajectory. JPMorgan CEO Jamie Dimon recently predicted a relatively strong and growing U.S. economy for the rest of the year, but warned that Russia’s invasion of Ukraine, inflation, and anticipated Fed strategies introduce risks of volatility and economic slowing.