As inflation cooled considerably in October and November 2022, the Federal Reserve slightly eased its monetary policy tightening by raising its benchmark interest rate by 50 basis points in December. However…
the Fed officials indicated plans to keep raising rates through 2023, with no reductions until 2024, and expect the “terminal rate” at 5.1%.
Lingering inflation, higher interest rates, energy market disruptions, and supply chain setbacks have made several economists and market participants fearful that the U.S. is headed for a recession this year. The International Monetary Fund (IMF) projects global growth to be at 2.7% this year, slowing from 3.2% in 2022. In addition, Kristalina Georgieva, IMF chief, warned that one-third of the world economy is expected to be in recession in 2023.
Greg McBride, the chief financial analyst at Bankrate, said, “Two-in-three economists are forecasting a recession in 2023, yet corporate earnings estimates haven’t come down to reflect that.” He added, “If the economy continues to slow and quarterly earnings calls in January reveal a dour outlook for the year, corporate earnings estimates will be marked down, and the market could have a renewed tumble.”
With the Federal Reserve set to continue raising interest rates and the U.S. economy likely to tip into a much-expected recession, investors are sitting on a lot of uncertainty. The market could remain volatile in the near term.
Given this backdrop, investors could invest in fundamentally strong stocks, PepsiCo, Inc. (PEP),…
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