Market Outlook

Q1, 2023: Money Like Water

Growth, Inflation & Policy

As of January 3, 2023


  • Despite inflation starting to slowly tick lower over the last quarter, the probability of the U.S. heading into a recession in the next 12 months has become almost certain. Bloomberg’s recession probability model has correctly predicted a recession within 12-months every time the series has hit 100% (it’s current reading).
  • Going into 2023, GDP growth in the United States is expected to be muted for the first half of the year. This adds to the consensus that the U.S. will enter a mild recession this year.


  • In December, the Manufacturing PMI registered at 48.6, thus marking the first contraction in the sector following 30 consecutive months of expansion. Any PMI reading below 50 points signals contraction in the sector.
  • Despite this, employment in the manufacturing sector is still showing signs of growth, increasing to 51.4 and rising above the contraction line for the first time since September.
  • The ISM Services PMI also registered just under 50 in December, marking an overall contraction in the economy. This 6.9-point drop from the November reading was largely driven by a decline in New Orders.
  • With both the ISM Manufacturing and the ISM Services Indexes registering below 50 points, it signals that these sectors are now in contraction. This will be the first time since 1981 that the Federal Reserve continues to hike interest rates into a contraction.

For additional market insights, download our complete market outlook report.

This material is provided to advisors by Mount Yale Investment Advisors, LLC and contains market commentary from third-party sources it believes to be reliable. However, Mount Yale has not independently verified or otherwise investigated such information and makes no guarantee as to its accuracy or completeness.  In the event any of the assumptions used herein prove not to be true, results may vary substantially. All investments entail risks. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested indirectly.  The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor.  It is not intended to be a client-specific suitability or best interest analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities.

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