Forecasts for the end of 2022: expectations and reality - lack of a severe recession, but caution on the stock market

The forecasts for the end of 2022: expectations and reality 

At the end of last year, the forecasts were bleak. Economists and economists were sure that 2023 would bring a massive and severe recession. Six months later, however, the situation appears less serious. Although there were weak recessionary tendencies in Germany and the Eurozone, overall the global markets, particularly the important US market, were spared from a severe recession.

“Soft landing” instead of a severe recession 

80% of economists are now relatively certain that we will no longer see a severe recession. Instead, a so-called “soft landing” is expected. The reasons for this are varied, including a US labor market that has held up better than expected and clever central bank policy. The US Federal Reserve has convinced the market that it would respond by cutting interest rates if necessary. Now everyone is looking ahead to the first expected interest rate cut in March 2024.

The lack of a recession and the stock market 

It is important to understand that a lack of recession does not mean a strong stock market. The stock market has already partially priced in the recovery. Lars Erichsen therefore warns not to turn all traffic lights to green prematurely. Even if the threat of a severe recession appears to have been averted, the stock market remains a field that should be approached with caution.

At the end of 2022, the forecasts for 2023 were bleak, but the reality now looks less serious. A severe recession is becoming increasingly unlikely; instead, a “soft landing” is expected. This is due, among other things, to the better state of the labor market in the USA compared to expectations. In addition, clever central bank policy plays a major role. The US Federal Reserve has convinced the market that it would respond by cutting interest rates in an emergency. The first expected rate cut is expected in March 2024.

However, the lack of a recession does not necessarily have a positive impact on the stock market. This has already partially priced in the recovery and there is a risk of excessive expectations. Financial experts like Lars Erichsen therefore advise caution and not to turn all traffic lights to green prematurely.