The Errors Tour: How the Pros Bungled the End of Zero Interest Rates

We were supposed to be in a recession by now, at least if you listened to mainstream economists. The exact opposite happened: Unemployment is down near a half-century low, consumers keep spending, and residential real estate demand remains insatiable. The dire forecasts started in mid-2022 and reached a fever pitch at the start of 2023, when 40 out of 44 respondents in a Bloomberg survey of economists said a recession would hit that year. Executives fretted on TV news about a slowdown. Stock market strategists cranked out pessimistic calls. Investors who listened too closely could have made a costly mistake, missing out on a technology stock rebound and a 24% gain in the S&P 500 index in 2023. In January of this year, the S&P 500 notched an all-time high.

Things could still turn ugly from here. But the difficulties that economists, traders and corporate leaders have had in divining the near future say a lot about the times we’ve been through. Everyone knows how the Covid-19 pandemic scrambled expectations, but for financial decision-makers the roughly two-year period since March 2022 has been its own kind of chaos. As soon as Federal Reserve Chair Jerome Powell began lifting the benchmark interest rate off near-zero, in an effort to tamp down the fastest spurt of inflation in a generation, crystal balls cracked and playbooks were thrown out the window. Here’s a look back at some of the notable miscues, mistimings, head fakes and outright flops since the end of the easy-money era. —Katia Dmitrieva