Financial Forecasting the for the Future of 2023 With Economics and Tarot
On the one hand, financial forecasting for 2023 seems rather easy. On the other hand, an unstable global market and environmental negligence make things complicated.
This time of year, economists are invited to podiums to offer their prognostications for the coming year. Sometimes it’s a perverse holiday ritual. Not wanting to stuff stockings with coal for the holidays, we tend to look for optimism even if we’ve spotted the Grinch. My favorite retired economist and predecessor with this column, Tucker Hart Adams, tells me she’s glad not to be in the financial forecasting business these days.
On the one hand, financial forecasting for 2023 seems rather easy. The Federal Reserve will bring on a recession, if it has not already done so, to get inflation under 3%. Unfortunately, the Fed’s financial forecasting reputation is far from stellar recently. The Federal Reserve forecasted inflation ending just above 2% in both 2022 and 2023. The longest ongoing forecast of professional economists, the Livingston Survey, produced a June 2022 consensus of CPI inflation being 3.8% in 2023 and the unemployment rate staying very close to its current level of 3.5%. Given this backdrop, I forecast inflation slightly over 4% by summer 2023 with the unemployment rate creeping to just over 4% as well. As for Colorado, inflation will be slightly higher and the unemployment rate about the same as the nation. It will be the year of the 4s supported by a continued strong labor market as some people re-enter the workforce to keep up with inflation.
There are very significant risks as we look forward to financial forecasting for 2023 considering the tumultuous state of health, weather and war. It’s a trifecta of possible crises where the potential for miscalculation by leaders also runs high; especially given our mistrust of their competency and legitimacy. While a certain degree of this dysfunction is built into democracies with free speech, the challenge appears especially acute with a recent Sienna College – New York Times poll finding 70% of Americans, regardless of their political affiliation, believe our democracy is at risk.
Whatever happens in 2023, the year continues a period I call “the great disequilibrium” — a socio-economic and political disruption that will define the next half-century. The disruptors offer both positive opportunities and negative challenges, including:
Global Warming and Sustainable CO2 Emissions
The only question is how bad will it get and to what degree we can bend the curve through rapid societal efforts on many fronts, but especially in transportation, electricity and food production.
The great resignation of baby boomers in recent years was the tip of the iceberg. Anticipate a health-care surge and eventual loosening of the housing market. The millennials are bringing new technology, skill sets and life values including ESG (environmental, social and governance) investing as well as greater diversity at the top of organizations.
High National Government Debt Levels Supported by Monetizing the Debt (aka, Printing Money)
Even without more or prolonged significant wars, projections call for continued deficits to fund the demographic shift, as well as address new technologies, more severe weather and a retrenchment from economic globalism.
Financial markets’ growing complexity, foreign exchange volatility and new products such as non-fungible tokens (NFTs) and cryptocurrency increase speculation and fragility. Stagnant asset prices for homes and stocks are more likely. Fortunately, the financial world is becoming heavily focused on ESG rather than just bottom lines to support the changing landscape.
Technological Transformations in Virtually All Realms From Artificial Intelligence to Microbiomes to Autonomous Driving
History offers good lessons in times like this. Niall Ferguson of the Hoover Institute notes historically high inflation rates are associated with wars. We fought the pandemic like we fight wars (throw money at it) thus adding demand fuel to the supply shock inflation, and now we face a proxy war with Russia without direct military confrontation. To make matters worse, China’s Xi Jinping is watching carefully as he determines China’s next move with Taiwan, which is the global center for semiconductor manufacturing. Unfortunately, as Ferguson points out, America does not appear to be engaging in détente, as painful as that might be. And even if we engaged, can the U.S. be trusted? In the eyes of many around the world, we look rather crazy on many fronts, including our taking up the cause of democracy globally while feeling it is threatened at home.
Eventually, a new equilibrium will emerge. Mother Nature will persist. The only question is which side of human nature will dominate – good or evil? Can we bend the curve of history along with the trajectory in climate change? With the lack of future clarity, I turned to a tarot card reading based upon 2023 being the year of 4s.
Unfortunately, mysticalnumbers.com tells me the number 4 in the tarot is the card of the emperor who represents “material goods and worldly authority” and when reversed means “immaturity.” Hmmm. My gift to myself for 2023 will be to remain hopeful, ignore the tarot, and to engage the possibilities rather than surrender to cynicism.
Tom Binnings is a senior partner at Summit Economics in Colorado Springs. He has more than 30 years of experience in project management, economic and market research, real estate development, business analytics and strategic planning. He can be reached at (719) 471-0000 or firstname.lastname@example.org.