Stock-market investors have plenty of reasons to feel gloomy heading into 2023: Inflation is still high, the housing market is sputtering and the Federal Reserve just raised interest rates by another 50 basis points.
What’s more, central bankers indicated Wednesday that their benchmark rate could peak at 5.25% next year, a level last seen in the run-up to the 2007-’08 global financial crisis, although not too far from its current 4.25% to 4.5% range. “There are bubble-related exceptions, like the ‘Nifty Fifty’ and the ‘Tech Bubble’ of the early 2000s,” he wrote, “but the most common outcome has been returns in the 10% to 20% range in the year following one that saw negative returns.”
But in a potentially positive sign for stocks in 2023, new projections for the terminal fed-funds rate released Wednesday showed rates could rise by only about another 75 basis points in this tightening cycle.
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