As we move into the last three months of 2023, what have the first nine months of the year shown us about what to expect for the rest of 2023? S&P Global Ratings Global Chief Economist Paul Gruenwald and Marketgauge.com Chief Strategist Michele Schneider join Yahoo Finance Live to discuss.

Gruenwald says, “the surprise this year has been, one the resilience, but two the Fed’s been kind of dragging the market behind it.” “This tightening cycle, the Fed’s been dragging the markets higher. The market seems to fully buy…that we’re going to keep rates higher for longer,” Gruenwald explains. “I think we’re going to be at or near this rate for a while into 2024 and we’ll see if the resilience holds up,” Gruenwald notes.

Schneider discusses a few “areas of concern” that could impact the economy, including wages, geopolitical concerns, and weather. Schneider notes that “there’s a lot of similarities” between the 1970s and now. “It really seems like exactly what kind of happened in '76” and “that to me is going to continue to be my concern, until I see conditions change,” Schneider says.

Video Transcript

- Is there anything that we can take from the first nine months of this year and say, OK, for the last three months that where you've got a consumer that the Fed is going to be watching, where you've got a lot of corporate balance sheets that might continue to be restructured going into next year, what that spells out for the economy at large even as we begin 2024?

PAUL GRUENWALD: Yeah, I think the surprise this year has been one, the resilience. But two, the Fed's been kind of dragging the market behind it. We've gone through a couple of decades with the Fed put or the Bernanke put or the Powell put or whatever. And this tightening cycle, the Fed's been dragging the markets higher. The market seems to fully buy this now that we're going to keep rates higher for longer. We don't see the market anticipating any cuts until next year.

And if you look at the CME forwards for the end of 2023, they're right where they are currently on the Fed funds rate. So I think we're going to be at or near this rate for a while into 2024, and we'll see if the resilience holds up. The labor market is still quite tight and growth looks very good right now.

- And Michele, what are some of the catalysts that you're potentially looking at as we do continue to get more data coming out between now and the next Fed meeting?

MICHELE SCHNEIDER: Well, I think inflation is certainly something that shouldn't be dismissed, even though we have seen pockets of it obviously settle down. There are still areas of concern. I mean, wages would certainly be one, and we have a UAW strike possibly happening. And of course, it's all about wages. And we have seen a movement across not just the country, but the world about wages trying to keep up with the price of inflation.