David Kelly, chief global strategist at JPMorgan Asset Management, is betting that inflation will continue to ease in 2023, helping the US economy to narrowly escape a recession. Ed Yardeni, the longtime stock strategist and founder of his namesake research firm, is putting the odds of a soft landing at 60% based on strong economic data, resilient consumers and signs of tumbling price pressures.
“If you talk to people, they say it’s the worst of all possible worlds,” Kelly said in an interview. “It’s not – inflation is coming down, unemployment is low, we are moving past the pandemic. The chances are risk assets are going to do very well.”
An almost 20% slump in global stocks last year has most analysts and investors erring on the side of caution, with the majority predicting that historically high inflation is here to stay and a recession is inevitable. Kelly, who thinks the Federal Reserve will wrap up its historic hiking cycle after the March meeting and start cutting rates in the fourth quarter, says the pessimism may provide good opportunities to buy US value stocks and investment grade credit at discounted prices.
Yardeni, who doesn’t rule out the possibility of a hard landing, sees opportunities in financial, industrial, energy and technology stocks that he says now look much cheaper than they did last year. The bonds of such companies may also perform well in 2023, he said. “Optimists and pessimists agree that 2022 was a terrible year for stocks and bonds but it doesn’t go on forever,” Yardeni said in an interview.