To better guide your investing decisions, I recommend reading our new August Stock Market Outlook Report.<\/a><\/strong> Today, this briefing is exclusively available to Mitch on the Market readers.<\/p>\n\n\n\n This report contains some of our key forecasts to consider such as:<\/p>\n\n\n\n \u00b7 Top-down S&P500 yearend 2023 and 2024 targets If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<\/p>\n\n\n\n Download Our Just-Released August 2023 Stock Market Outlook Report2<\/strong><\/a><\/p>\n\n\n\n Looking at the graphic below, readers can see that before 1980, economic expansions were relatively short-lived (except for the 1960s). After 1981, expansions have gotten considerably longer, with the previous four lasting an average of 8.6 years. If a recession were to occur in the second half of 2023 \u2013 as many economists were and are projecting \u2013 then it would be less than half as long as the post-1981 average.<\/p>\n\n\n\n Source: National Bureau of Economic Research3<\/em><\/strong><\/p>\n\n\n\n One of the key reasons expansions have become longer since the early 1980s is that inflation has not been much of an issue over the last few decades. In cycles prior to 1980, the Fed would work to choke-off economic expansions because of their objective to choke-off inflation, with the most relevant example of course being Fed Chairman Paul Volcker\u2019s engineered recession in the early 1980s.<\/p>\n\n\n\n Just a few months ago, the narrative was that Jerome Powell\u2019s Fed would need to follow in Volcker\u2019s footsteps. But the thinking is starting to shift as inflation comes down meaningfully without much hint of strain in the broad U.S. economy. Consumer spending grew by a modest but still positive 1.6% in Q2, and business investment ticked nicely higher. The jobs market also continues to produce abundant openings and solid wages, which is the opposite of what we would see in a pending downturn. In Fed Chairman Powell\u2019s words, \u201cWe\u2019ve seen so far the beginnings of disinflation without any real costs in the labor market,\u201d and \u201cthat\u2019s a really good thing.\u201d<\/p>\n\n\n\n The Fed\u2019s Preferred Measure of Inflation Fell Below 4%<\/p>\n\n\n\n Source: Federal Reserve Bank of St. Louis4<\/em><\/strong><\/p>\n\n\n\n While Job Openings Remain Abundant<\/p>\n\n\n\n Source: Federal Reserve Bank of St. Louis5<\/em><\/strong><\/p>\n\n\n\n The case for a hard landing (i.e., recession) is that the Fed today needs to do what it used to do prior to 1980, which is to engineer a recession to bring inflation down. But it looks increasingly like the Fed does not have to do that after all, which could make the current expansion look more like the previous four.<\/p>\n\n\n\n Bottom Line for Investors<\/p>\n\n\n\n When the Fed successfully raised rates in 1984 and 1994 without triggering an economic recession, the labor market was not nearly as tight as it is today. In other words, the Fed was not worried back then about wage pressures driving inflation like they are now. This might be aptly categorized as the \u201cx-factor\u201d that could influence the Fed to go too far in raising rates.<\/p>\n\n\n\n I\u2019ve argued before, however, that there are several supply-side factors that could arguably neutralize any wage-price pressures, like falling producer prices, the removal of stress from global supply chains, falling shelter costs, and the plummeting of M2 money supply which tend to lead to inflation. If these other supply-side drivers effectively offset the effect of wages that are running higher than the Fed wants, then I think it\u2019s entirely possible that the Fed will firmly conclude a recession is not needed to get inflation back down to the target. And that could give the current expansion a lot more runway from here.<\/p>\n\n\n\n In the meantime, to help guide your investing decisions, I\u2019m offering our exclusive, Just-Released August 2023 Stock Market Outlook Report.<\/strong><\/a> This report will give investors a deeper insight into:<\/p>\n\n\n\n \u00b7 Top-down S&P500 yearend 2023 and 2024 targets If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<\/p>\n\n\n\n
\u00b7 Zack\u2019s view on equity markets
\u00b7 Setting U.S. returns expectations for 2023
\u00b7 Zacks Rank S&P500 sector picks
\u00b7 Zacks rank industry tables
\u00b7 And more\u2026<\/p>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/08\/pic1-1.png\")
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\u00b7 Zack\u2019s view on equity markets
\u00b7 Setting U.S. returns expectations for 2023
\u00b7 Zacks Rank S&P500 sector picks
\u00b7 Zacks rank industry tables
\u00b7 And more\u2026<\/p>\n\n\n\n