Much of the tone for 2023 will be set by the inflation numbers being released in the march to the end of 2022 and the Federal Reserve’s assessment of the embodied inflation risks. It slightly appears that the debate over peak inflation has been resolved in favor of an outlook for modest and grudging declines, but it remains to be seen what that means to the Fed AFTER the increase of the Fed Funds rate by 75 bps on November 2. Earnings resilience continues to offer some support against an otherwise weak financial market backdrop. However, economic risks are prevalent and threaten further margin pressures moving forward supporting our expectation of downward earnings revisions over the next several months. On the wealth planning front, the IRS announced last week a 7% increase for income tax brackets and the standard deduction in 2023. The increases are designed to align income, after taxes, with the largest increase in the consumer price index (CPI) in four decades.
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