Recession Or Not, 2023 Will See Elevated Restructuring Activity — But Maybe Not A Boom

We can't recall another new year beginning with such negative sentiment and low expectations for the domestic economy as 2023, with the lone exception of 2009 during the global financial crisis. A mild U.S. recession beginning later in 2023 is now the consensus expectation while inflation remains well above the Fed's target despite seven rate hikes to date and the highest interest rates in 15 years.¹

The housing market is poised for a painful year of contraction and falling prices as ultra-low mortgage rates have become a distant memory. More Fed rate hikes are coming in 2023, though fewer and smaller. The only silver lining is that corporate earnings have held up reasonably well through 3Q22, but EPS estimates for 2023 are getting trimmed weekly. Such widespread pessimism makes it tempting to be contrarian here and assume that the negativity baked into economic and market expectations is overdone and won't fully materialize. Perhaps, but don't bet the rent money