It’s an open question whether the U.S. — and New York — can avert a downturn

Not easy being bullish

Goldman Sachs warns the bear market will "get deeper" this year as rising interest rates flatten corporate earnings growth.

"Though many equity markets around the globe are trading at low valuations, U.S. stocks aren't —American equity valuations are still at levels consistent with the peak of the technology bubble in the late 1990s," Goldman said in its 2023 outlook.

BlackRock, the world's biggest asset manager, is also bearish. "Earnings downgrades are starting, but don't yet reflect the coming recession," the firm said. — Aaron Elstein

Swelling interest rates

The good news is interest rates probably won't rise as quickly as they did in 2022.

The bad news is they'll keep going up because the Federal Reserve is still wrestling inflation to the ground.

BlackRock says the Fed will raise rates into "restrictive territory" in 2023 or to levels that constrain the economy and wages, which in recent years finally started growing for lower-paid workers for the first time in decades.

Goldman Sachs reckons the U.S. will avoid a recession, but there won't be any rate cuts from the Fed in 2023. — A.E.

Bloomberg

Goldman Sachs warns the bear market will deepen next year.

Large-scale layoffs loom

The late-2022 cadence of layoffs, especially at technology firms, could be a harbinger of more pink slips.

Tech employers say they overhired amid pandemic booms, and the layoffs at Amazon and Meta Platforms are reactions to demands for financial discipline. Other firms may follow suit.

On the other hand, many firms could be done cutting the fat and will implement hiring freezes instead. "We do expect companies to cut back decisively on new hiring, not just in tech but across most sectors of the economy," a note from Morgan Stanley said.

Already in 2023, Salesforce cut around 8,000 workers, while Amazon increased its staff reduction from 10,0000 to 17,000. Outside tech, PepsiCo announced plans to eliminate hundreds of jobs at its headquarters in Westchester County. — Cara Eisenpress

Budget questions remain

While Covid relief funding will buoy city and state shortfalls in 2023, the city has allocated the lion's share of that money already, including to items in the city's record $101 billion budget for the fiscal year that concludes in 2023.

Even if the tax revenue suffers from reduced consumer spending or a falling stock market that lessens capital gains, federal funds may find a way to bolster the local economy. Early in the year, details about grants and funding programs from the 2021 Infrastructure and Jobs Act should emerge from the federal Department of Transportation, a pick-me-up for the construction industry.

The city expects at least $1 billion from changes to funding methods. Several of its transportation projects will also compete for $150 billion in grant money set aside for infrastructure that improves environmental sustainability or supports racial equity, including a Cross Bronx Expressway update.

That's in addition to nearly $1 billion already allocated by Amtrak and the Metropolitan Transportation Authority to East River tunnel repairs and the Penn Station Access project. — C.E.

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Published on Jan. 9, 2023