This article from the Atlantic, talking about the stock market volatility this year, had an interesting tidbit:
https://www.theatlantic.com/ideas/archive/2022/12/stock-market-inflation-interest-rates-recession/672612/The Fed is hiking interest rates to fight inflation, and that often causes a recession. So, even though the U.S. economy is pretty strong
right now - unemployment at 3.7%, household finances and corporate balance sheets both relatively good - day-traders are selling stock in anticipation of a recession next year.
That's given rise to a bear market in which speculative growth stocks, like Tesla and tech in general, have been hit the hardest.
But:
To look at the stock market’s performance this year and conclude that we’re definitely headed for a sustained economic downturn would therefore be a mistake. After all, the economist Paul Samuelson’s famous 1966 saying that the stock market had predicted nine of the previous five recessions was backed up by a 2016 CNBC study, which found that in the postwar era, of 13 bear markets—usually defined as a sustained period of a 20 percent market decline—only seven were followed within 12 months by actual recessions.
Going by this data, even the collective intelligence of the market is a poor predictor of recessions. It's basically as good as a coin flip!
It's still possible that the Fed will pull off a soft landing, and that inflation will subside without there being a recession at all. As always, no one knows what's going to happen, and timing the market almost never works.