The World’s Biggest Banks’ 2023 Economic Predictions

Key Takeaways:

• Make sure our email – TheJuice@news.investingchannel.com – is in your contacts, because The Juice has big plans for 2023. 
• As we ease into the new year, we look at what the world’s biggest banks say about the economy and stocks going forward. 
• Overall, the outlook is bullish for 2024 after an uncertain, if not rocky 2023. 

Between servings of lasagna, espresso martinis, and shots of mulled wine, The Juice spent some of our holiday scouring the reports big banks send out with 2023 economic and stock market predictions. 

And to kick off the year, we compiled a list of the most interesting, bold, or otherwise compelling. 

For the record, The Juice has a big 2023 planned. 

We’ll double down on our promise to make sense of the economy, so together, we can be better with money and become better investors. 

We’ll also share more hacks, ideas, and strategies about spending, saving, debt, and other important elements of your personal finances. 

Plus, in February, we’ll spend some time going back to basics on two areas we expect to get even more popular with investors in 2023 than they were in 2022: ETF and dividend growth investing. 

Now, let’s sample the sentiment of the fat cats on Wall Street per big bank. 

Goldman Sachs

• The most notable thing Goldman said: It thinks a U.S. recession in 2023 is much less likely than its relatively bearish peers do. 

Source: Goldman Sachs’ Macro Outlook 2023

• Goldman sees a 35% probability of a 2023 domestic recession versus a median consensus estimate of 65%. 

Morgan Stanley

• This bank also breaks from consensus on the economy, this time as it relates to stocks. 
• While, in Morgan Stanley’s words, “the consensus view” for 2023 calls for an earnings “collapse” that will bring “the stock market down with them,” MS thinks earnings will “drip down slowly” amid inflation improvements that could help catalyze “a strong first quarter.” 
• Morgan Stanley is investing in “companies with pricing power and recurring revenues that can grow their earnings steadily,” such as “favorite consumer brands, mission-critical software services and quality-assured health care companies.”

Citibank

• Citi isn’t quite as bullish as Goldman or Morgan Stanley. 
• The bank expects a “mild recession” in the U.S. marked by drastically lower spending, unemployment north of 5%, and a subsequent 10% drop in corporate earnings ahead of a 2024 rebound and recovery. 
• Citi likes dividend stocks with strong balance sheets and bonds in 2023. It anticipates taking on risk and seizing opportunity in late 2023 into 2024. 

Wells Fargo

• Wells Fargo anticipates a U.S. recession in the first half of 2023, followed by a recovery and strengthening rebound during the last six months of the year. 
• The bank favors domestic large- and mid-cap stocks in defensive and high-quality sectors (IT, healthcare, energy) before turning to more cyclical names as the late-2023 rebound takes shape. 

BNY Mellon

• While BNY Mellon puts the probability of a global recession at 70%, it expects it to be “mild and short-lived.” 
• The best three sentences from all 20 or so reports we read came from this BNY outlook:

“History tells us that markets can rebound before a recovery in the real economy. These rallies are very hard to pinpoint and can happen quickly, making it critically important to stay invested. It’s likely to be a challenging investment landscape, but one that will undoubtedly present opportunities.” (Emphasis added.)

The Bottom Line: Opportunity. No matter the bank’s outlook for 2023, the word “opportunity” appeared – often multiple times – in every report we read. 

The banks that expect a recession in 2023 almost unanimously expect it to be significantly worse in Europe than in the U.S. And any domestic contraction isn’t a reason to panic. In fact, it presents meaningful opportunity. 

The Juice’s takeaway: If you’re a long-term investor, stay the course. 

As 2023 takes shape, look at beaten-down sectors you like and start nibbling as you see signs of a macroeconomic recovery and renewed strength in the stock market. 

Even if this rebound comes slower or choppier than these Wall Street firms predict, time is on your side. While it might feel scary at times, putting money into stocks in 2023 could pay dividends – literally and figuratively – for years, if not decades, to come, particularly for patient and astute investors. 

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