JP Morgan Strategist, Mike Bell, has stated that the biggest risk to the market in 2023 is the absence of a recession, as reported by Markets Insider. The Federal Reserve's actions could have a negative impact on the economy, as the absence of a recession may lead to higher wage growth.
This, in turn, could result in the Fed having to raise interest rates more than expected, which would combat inflation but also cause a decline in stocks and bonds.
Market in Danger Without a Recession?
The current economic state in the US is delicate, with many fearing a recession due to the Fed's interest rate hikes throughout 2022. However, according to JP Morgan Strategist Mike Bell, the greatest threat to the market in 2023 is the absence of a recession.
Bell believes that if the US economy avoids a recession and wage growth remains high, the Fed would have to resume interest rate hikes in the second half of the year, leading both bonds and stocks to decline.
JP Morgan's best case scenario involves a recession in 2023, which would allow for wage pressures to decrease and the Fed to cut rates in 2024. Bell predicts that the Fed will bring rates down to 2.5% by the end of 2024.