2023 Outlook: Was a Pound of Medicine Worth an Ounce of Cure?

<p>2023 Outlook: Was a Pound of Medicine Worth an Ounce of Cure?</p>

See how our leading experts are interpreting the news, trends and opportunities that this year is already bringing. In our 2023 market outlook, Key Investment Center delves into the latest research and insights to help you navigate turbulent global markets, interest rates, inflation and wealth management so you can make informed decisions and grow your portfolio.

 Explore the key takeaways and download our full report in PDF.

As humans, we are wired to extrapolate the future based on the recent past. History has shown, however, that being overly reliant on the past can lead to sub-optimal results, or worse. Mark Twain is believed to have famously cautioned: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Philosopher Nassim Taleb referred to this as “The Turkey Problem”1 — the notion that we often mistake the continued absence of harm as evidence that there will be no harm. With these concepts top of mind, we warily begin our 2023 Outlook by briefly looking backward on 2022, a year defined by the heaving hammer the Federal Reserve has applied to slow inflation down.

So, where does that leave us looking ahead to the rest of 2023 amid heightened geopolitical uncertainty, tightening financial conditions and worries over a recession in the year ahead?

2023 Outlook Key Takeaways: 

  • The biggest influence on financial markets in 2022 has been a heavy hammer that the Federal Reserve applied to slow inflation down (i.e., a “pound of medicine”). When looking at certain closely watched indicators, the Fed’s actions have only had a modest effect to date (“an ounce of cure”).
  • Looking deeper and peering ahead, however, some economic pain has been inflicted and the inflation fever appears to be gradually breaking.
  • Yet, other aspects of inflation are proving to be “stickier”; thus while it will decline, inflation will not likely fall to pre-COVID levels for some time.
  • Interest rates, therefore, may be "higher for longer," and investors may encounter declining earnings, which could spark more volatility. Stay selective, emphasize quality and remain fully diversified.​

The bottom line for 2023: The Fed will likely keep interest rates higher for longer. Hence, we believe a pause is likely, but a pivot is not. In the short run, we believe that the volatility experienced in 2022 will likely persist in 2023; thus our base case for 2023 envisions flattish returns for broad US equity markets once again.

Download the full report in PDF.

The Key Wealth Institute is a team of highly experienced professionals from across wealth management, dedicated to delivering commentary and financial advice. From strategies to manage your wealth to the latest political and industry news, the Key Wealth Institute provides proactive insights to help grow your wealth.


Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable.

The Key Wealth Institute is comprised of a collection of financial professionals representing Key entities including Key Private Bank, KeyBank Institutional Advisors, and Key Investment Services.

Any opinions, projections, or recommendations contained herein are subject to change without notice and are not intended as individual investment advice.

This material is presented for informational purposes only and should not be construed as individual tax or financial advice.

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