A Midyear Outlook on the Economy

– presented by Debbie Boisselle, Vice President Investments

We recently sat down with Debbie Boisselle, VP Investments for Citizens Wealth Management Group, to discuss her take on where the economy is now and how it looks for the rest of 2023. She pointed out how volatile the market and the economy have been due to inflation, and subsequently, increased interest rates. Boisselle feels this will begin to calm down into 4th quarter, evening out the markets despite what she feels will be a “short, mild recession.”

Boisselle states, “We’re pretty much fully employed in the U.S.,” as the unemployment rate is consistently at around 3.7%. This is much lower than the global rate of 5.1%. She does caution with increased rates, smaller businesses have begun to slow hiring.

Housing has been a challenge with low inventories of existing homes, an increased cost of materials for building homes and higher mortgage interest rates. She foresees an increase in the building of multi-family units to combat this. Once more availability of these units exists, the cost of rent will slowly decrease as well making it more affordable for people to begin moving again.

“Spending has steadily returned to pre-pandemic levels, and that’s good for the economy,” states Boisselle. However, increased oil and food prices are definitely affecting family budgets, so inflation may be here to stay for a little while. “I just don’t see it getting down to the Fed’s target of 2% any time soon,” says Boisselle.

Regarding equities, Boisselle feels there will be modest gains going forward. “Up to this point, the NASDAQ gains have mostly been attributed to the ‘Magnificent 7’, large companies. More companies will begin to increase their equity as well, providing better returns across a more diversified field of options.” Historically, 85% of the time, the rate of return on the S&P 500 is 15% or more. Boisselle feels this will remain the case, especially as we head into mid-term elections. The bond market becomes more attractive as the rate of return is currently around 4%, similar to a stock with an annualized return of 4%, but with less risk. “This is the end of a Bear Market, and typically you’ll see up to a 19% return on portfolios within 12 months of that type of cycle.”

Boisselle expects to see 1 more interest rate hike from the Fed, and doesn’t expect to see a lowering of those rates for some time. This means duration becomes important as you’re considering purchasing bonds. She suggests looking at 2 years vs. a 6-month duration to get the best return. She thinks savings account rates will remain higher, which is good for emergency funds, although they are beginning to see bank lending standards tighten.

“The US Dollar is still the strongest currency worldwide,” states Boisselle. “So US stocks, particularly large CAP companies are a good investment.” She also suggests investing internationally in companies based in Europe and other stable nations. She does not recommend looking at emerging markets or foreign bonds. As always, she feels it’s important to have some diversification in a portfolio, including some type of precious metal, as well as preferred and mortgage-backed securities.

“Overall,” says Boisselle, “we think the rest of the year will be positive.” To hear Debbie’s thoughts, view her video on our YouTube channel, youtube.com/cnbohio. Learn more about Citizens Wealth Management Group and all they have to offer at cwmgohio.com.