The Path Toward Stability

The LPL Research team provides in-depth analyses, insights, and perspectives on the second half of 2023.

At LPL Research, our 2023 investing outlook started with a theme of returning to normalcy. Considering 2022’s market volatility and the aftereffects of the pandemic, the idea of finding balance was certainly a welcomed change. It’s a theme we could all embrace six months ago and what we will continue to rally around through year-end.

That’s not to say that 2023 hasn’t come with its own set of challenges. We saw two regional banks fail in rapid-fire succession in March—and another closed its doors in May. Collectively representing over $530 billion in assets, the trio ranks as the second, third, and fourth largest bank failures to date.

We also held our breath as a last minute deal to raise the debt limit came together as the clock ticked closer to default. Despite the market gyrations these events caused and a banking sector still on tenterhooks, the overall financial system seems stable. Counterbalancing the challenges, some bright spots include:

• Inflation is under 5% at home, significantly lower than its 8.3% level this time last year
• The fed funds rate is approaching its apex as the Federal Reserve grapples with the unknown impacts yet to emerge from its aggressive tightening cycle
• Global inflation has ticked down from its 8.7% high in 2022, and is following a slow descent to a projected 6.5% for 2023