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
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2023 has begun, and we're here to deliver you with insightful predictions for the year which comes after a turbulent 2022. FXMAG.COM asked analysts how the value of the S&P 500 and Nasdaq will change in 2023 and to justify the indication of a bullish/sideways/bearish trend. Additionaly we questioned experts whether we will see greater positive dynamics of price changes in the sector of small, medium or large companies and which sectors and industries are worth focusing on in 2023 and why? This time, we're pleased to share thoughts of Peter Garnry, Head of Equity Strategy at Saxo Bank.
Peter Garnry (Saxo Bank): We remain negative on equities as this year will prove to be difficult in terms of earnings growth due to increasing margin pressures coming from commodities and wage growth. Last year equities got repriced due to significantly higher interest rates. This year the repricing will be all about potentially lower earnings. The decline in equities last year was actually quite benign relative to the interest rate move and the current equity valuation reflects a much lower equity risk premium.
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This sets equities up for a troubling 2023 as both lower earnings and a higher equity risk premium could lead to a new sizeable adjustment of equity prices. 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. The risk to our view is China as a successful reopening after Covid and success in kickstarting the economy could offset the expected weakness in growth.
We are still positive on commodities, power generation (nuclear and renewables), defence, logistics, and India
Our thesis about margin compression could also turn out to be wrong if commodities prices come down and wage pressures ease. We favour large companies over small companies this year but as the deglobalisation theme intensifies over the years small caps could do much better as large multinational companies will face increasing costs to realign their large global supply chains. In terms of equity themes we are still positive on commodities, power generation (nuclear and renewables), defence, logistics, and India.
