It’s easy to look back on things that happened and say, “Well, that was obviously going to happen.” Of course actually making those predictions ex-ante is much more difficult. So at the risk of saying something grossly wrong that I’m going to regret later, here are some of my predictions for 2023. I’m going to hedge by saying I’m not super confident on any of these. Well, except for the Bears finishing under .500.
Inflation will decline, but will still be above 4.0% at an annualized rate. Specifics: The Fed has raised interest rates at a record pace, and the results are beginning to show. Inflation has fallen from a high of 9.1% in June to 7.1% in November. This is good news! The Fed, however, is trying to make a “soft landing”, or achieve its 2% long-term inflation target without causing a recession. I think the current Fed would prefer 4% inflation with no recession to 2% inflation with a moderate recession, so they will take their foot off the brakes too soon. The result is that inflation will still be double the Fed goal at the end of 2023.
Source to check prediction that inflation will be over 4% when November 2023 numbers are reported: Bureau of Labor Statistics
Housing prices will plateau, and the Case-Shiller National Home Price Index will not increase or decrease by more than 10%. Specifics: Housing prices went ballistic during 2021 and 2022. This had several causes: stimulus package money, people wanting more space to work from home, increasing interest rates, etc. This lasted for longer than I thought possible; where is all this money coming from? The housing market is unique in a lot of ways, but one of them is that typical US citizens are allowed far more leverage than in other situations, which is a key reason behind the spike in housing prices.
Source to check prediction that the Case-Shiller National Index is between 270-330 based on whatever month is the most current at the end of 2023: FRED Data.
Gas prices will be above $3.00 a gallon. Specifics: There are two things to watch regarding gas prices in 2023: The Russo-Ukrainian War and China’s Covid response. If the Russo-Ukraine War continues, and China stays the course and does not bring back its zero-Covid approach, the supply of gas will be constrained and demand will increase. That means the relief all of us are looking for will not come to pass. Gas prices have plummeted from an all-time high of $5.02 in June to $3.18 today. I think gas prices may continue to fall over the next few months, but will rise next summer/fall.
Source to check prediction that the average US gas price is over $3.00/gallon at the end of December 2023: AAA Gas Prices
The Russo-Ukrainian War will still be active at the end of 2023. Specifics: Ukraine has achieved far more than anyone expected when Russia launched a new offensive in February 2022. It’s important to note that the events of February 2022 were just that, a new offensive. Russia first invaded Ukraine in 2014, and the two countries have been fighting ever since. Granted, the conflict was much smaller, but I think those predicting a quick end to hostilities often forget that the war is already close to a decade old. Given Putin’s stability and Zelensky’s insistence that all Russian-held territory be returned to Ukraine, I don’t think this War is going to end anytime soon. Right now I think the most likely outcome is a reversion to a situation similar to the 2014-2021 status quo, where Russia has a significant amount of Ukrainian territory but the conflict is relatively quiet.
Source to check whether the Russo-Ukrainian War is over: A withdrawal of Russian forces from all Ukrainian territory and/or a signed armistice/peace treaty/etc.
The Chicago Bears finish the 2023 Season under .500. Specifics: The Bears were terrible this year. As of this writing, they are 3-12, they have the worst record in the NFC, and are slightly better than the league worst 2-12 Houston Texans. Amazingly, some Bears fans are happy about this. The common reframe is, “It’s a rebuilding year. We weren’t going to make the playoffs anyway, so it’s better to be terrible to get a better draft pick.” This is nonsense - just ask the Jacksonville Jaguars. A team that finishes the season 3-15 is just as likely to make the playoffs as a team that is 7-10, but that doesn’t mean the teams are the same. A successful rebuild means one throw-away year (2022), one ok year (2023), and then at least two years of being in contention to win the division (2024-2025). I don’t see either of the latter happening.
Source to check if the Bears are at least .500 next year: The amount of salt the city of Chicago saves putting on roads due to the crying.
I’ll bet $10 on the last one!