"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.
Looking ahead to second-quarter reports, analysts are calling for S&P 500 earnings to fall 6.4% compared to a year ago. Fortunately, analysts are projecting S&P 500 earnings growth will rebound back into positive territory in the second half of 2023.
Morningstar also points out that the RBA's central forecast is for growth around 1.5% in 2023 and 2024, which would be more than a 50% decline from 2022's growth rate. A slower growth rate obviously has implications on spending and corporate earnings.
For calendar-year 2023, the consensus earnings estimate is for a 2% contraction. But that estimate is still coming down, and based on historical patterns, could continue to do so.
The stock market is poised for a strong rally in 2024 as corporate earnings impress and trillions of dollars of sidelined cash gets invested, according to a Monday note from Bank of America.
Stocks have continued their rebound into 2023, delivering one of the best openings to a calendar year since January 2000. The buoyant mood intensified last week following the Federal Reserve's widely expected quarter-point interest rate hike.
Wall Street analysts expect companies in the S&P 500 to boost earnings by 1.5% in 2023, according to Refinitiv. "In a plain-vanilla recession, earnings go down 20%. We've never had a recession where earnings were up at all," Rosenberg told MarketWatch, calling this year's forecasts a "glaring anomaly."
“The bear [market] is almost over, and a new exciting bull market awaits in the second half of 2023,” he said, pointing to potential in technology stocks in particular.
U.S. equities may disappoint in 2023, but patient investors can find potential income and returns in other markets. A grueling bear market, touched off by decades-high inflation and an aggressive Federal Reserve response, made 2022 one of the most challenging years for investment returns in the last half century.
Once you cash out a stock that's dropped in price, you move from a paper loss to an actual loss. Cash doesn't grow in value; in fact, inflation erodes its purchasing power over time. Cashing out after the market tanks means that you bought high and are selling low—the world's worst investment strategy.
Citi tips ASX 200 shares to gain in 2023
Citi has reportedly upgraded Australian shares to neutral and tipped the ASX 200 to reach 7,400 points by December 2023. The outlook is based on earnings' expectations at a price-to-earnings (P/E) ratio of 14, The Australian reports.
CommSec has released its forecasts for this year. Economists at CommSec have predicted that the Australian share market could rise by up to 7 per cent over the coming year, rebounding from the falls suffered in 2022.
KPMG's forecast is for Australia to experience a slowdown in economic activity. There are positive signs emerging in 2023 that the inflation surge which has been plaguing most countries around the world is starting to ease, with commodity prices retreating and supply chains returning to pre-pandemic operations.
The answer is no, according to advisors and investment analysts. "Allocating more funds to high-yielding CDs, money market funds, or treasuries may seem prudent; however, this is a form of market timing and should be avoided," explained Jonathan Shenkman of Shenkman Wealth Management.
Here are some additional reasons why 2023 is shaping up to be a historic bull market. The previous week's better than expected Consumer Price Index (CPI), and Producer Price Index (PPI) confirmed that inflation was on the decline. It's still too high.
Often, stocks fall before a recession starts and rise before it's over. The economic research bureau “dates recessions only after they've begun,” Marlena Lee, the global head of investment solutions at Dimensional Fund Advisors, said in an email. “Markets, on the other hand, call them well in advance.”
Taking the past 12 bear markets into consideration, the average length of a bear market is about 14 months. How bad has the average bear been? The shallowest bear market loss took place in 1990, when the S&P 500 lost around 20%. The deepest by far happened during the financial crisis between 2007 and 2009.
Should You Be Worried About a Recession? If the U.S. does slip into a recession sometime in the second half of 2023 or early 2024, there's no reason for investors to panic. First off, historically recessions don't last very long. The average duration of a U.S. recession since World War II is just 11.1 months.
The bottom line
Signs point to a recession in 2023, not just in the U.S. but globally, though many experts remain hopeful it will not be too severe. This is good news for everyone, as it could mean fewer people lose their jobs, and household financial impacts will be mild.
The labor market is cooling down, putting less pressure on wages, while housing prices and new construction have both declined. Unfortunately, this slowdown in economic activity will likely come with a cost: According to Bloomberg's December 2022 survey of economists, there is a 70% chance of a recession in 2023.