2023 Predictions: We are preparing to see the S&P500 decline in the first weeks of the new year down to 3600

We're back with analysts' 2023 predictions and today we present visions of Alex Kuptsikevich, Senior financial analyst at FxPro who answered our questions about the value of S&P 500 and Nasdaq in 2023 and dynamics among small, medium and large firms. We also asked Alex what sectors and industries are worth focusing this year.

✕

We are also left with a significant 30% chance of the economy sliding into a self-sustaining recession

We are preparing to see the S&P500 decline in the first weeks of the new year down to 3600, which could be followed by a slow and stumbling rise towards 4000 at the end of the year. In favour of a short-term decline is that we have yet to see the full impact on the economy from higher rates and the depletion of cash reserves from the coronavirus stimulus. The optimism is since the Fed triggered fiscal tightening, so is not as dangerous as an internal contraction in the economy requiring intervention lest it collapses, as it did in 2001/02, 2007/08 and 2020. We are also left with a significant 30% chance of the economy sliding into a self-sustaining recession. In that case, the disappointment of early speculative buyers and the retail sector (which has actively recruited stocks in the past year) could push the S&P500 towards 3000 by the end of the year. In our view, the Nasdaq would be 3-6% points worse. In the baseline scenario, we expect the Nasdaq to be near 11000, and in the adverse system, just below 8000.

The most challenging year looks to be for mid-sized businesses

Based on the expectation that the worst of inflation is over, we assume that smaller companies will be able to show more flexibility by being the first to return to sustainable hiring. Larger companies may also benefit from global diversification and accumulated cachet. The most challenging year looks to be for mid-sized businesses.

Read next: 2023 Predictions: Peter Garnry - Our target for S&P 500 is still around the 3,200 level sometime during the year leading to an overall drawdown of around 33% from the peak in early 2022 | FXMAG.COM

Which sectors and industries are worth focusing on in 2023 and why?

Right now, the most significant potential is seen in companies from the Financials and Consumer Defensive sectors. Companies in the communications sector will likely become interested at the end of the year.