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It’s impossible to forecast the near-term path of the markets, but we can try and distinguish trends and upside and downside risks to these trends:
Base Case: a mild recession in the first half of 2023, which brings down inflation, letting the Fed ease in the second half; the S&P 500 (SPX) rallies 10%-20%.
Bear Case: the Fed over-tightens, sending the economy into a “hard landing,” sending stocks down for the year.
Bull Case: the Fed succeeds in bringing down inflation without causing a recession, and stocks rally as they did in 2021.
It would be reasonable to work according to the base-case outlook while hedging against different scenarios that might affect some stocks more than others.