2023 is underway, but it's still good time to have a look at predictions for the year prepared by analysts around the globe. Today, we publish Michael Stark's (Exness) views on 2023. In this part, Michael talks stock market.
Michael Stark (Exness): As of late January, sideways trends or weak uptrends seem to be most likely. The most hawkish expectations for the Fed seem to have been rejected for now and, while the economy around the world might grow less this year, a deep recession is unfavourable. Many of the constituents of both the S&P 500 and the Nasdaq lost a lot of value in 2022 and the enthusiasm of sellers might have been excessive.
The main uncertainty there is how severe the current or upcoming recession might be. Expectations at the moment vary significantly between very negative and cautiously optimistic while some large banks even expect recession to be avoided in most major countries except the UK. Monetary policy looks clearer for the time being but there's still a long way to go before inflation is under control in most countries, including the USA.
Probably the most positive - or least negative at any rate - would be for large companies simply because these have suffered most since early 2022 from outflows. The outlook for various large companies such as Apple, Tesla, Amazon and so on isn't as negative this year as the trends in prices of their shares would suggest. Large companies also have significantly more options to cut costs and boost dividends, attracting investors whose focus is on value and cashflow.
Primarily tech and financial companies are in view this year. Tech shares were some of the biggest losers in 2022, but now that the outlook for the economy and monetary policy seems less gloomy there could be scope for recovery or further recovery, especially if participants rotate away from energy over the next few months. Most major tech companies seem to be reasonably well prepared for a recession and aware that investors are currently stressing sustainable profitability rather than rapid growth.
Financial companies - primarily major banks - could also be in view this year because rising rates almost everywhere mean that their profit margins from mortgages will be higher, while as above most large banks are implementing cost-cutting measures, continuing to downsize their networks of physical branches and push online banking. The obvious concern here is rising rates of default among borrowers, especially if the recession proves to be worse than currently anticipated.
