Market Outlook

Q4, 2023: Drained

Growth, Inflation & Policy

As of October 23, 2023

Economic Activity

  • The Conference Board’s Leading Economic Index (LEI) has been negative for 18 consecutive months and continues to signal a looming recession and subsequent slowdown in economic activity. However, estimates for the severity of the recession eased over the quarter, with the Conference Board forecasting a short and shallow recession.
  • Other economic indicators paint a mixed picture. While still in contractionary territory, the ISM Manufacturing PMI ticked up to 49 in September, indicating that the slump in manufacturing activity may have bottomed. ISM Services remains resilient, but often tends to lag Manufacturing, particularly into periods of economic slowdown.

U.S Inflation

  • U.S. inflation is likely to remain sticky for a while. Due to base effects, the so-called ‘easy’ inflation prints are now behind us, and it will become increasingly harder for the Federal Reserve to bring inflation back down to 2.0%, as evidenced by the uptick in monthly inflation prints over the quarter.
  • But there is good news. If easing in year-over-year rent prices continue, there should be a gradual but consistent flow-through of housing disinflation to headline CPI
  • Energy prices, which have been a sharp disinflationary tailwind for most of the year, are starting to rebound. However, energy represents only 6.0% of the CPI basket, a smaller portion than housing and is thus likely to have less influence than housing in whether inflation continues to tick upwards.

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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