China stocks weighed down by COVID-19, shaky recession predictions, Goldman Sachs predictions for the U.S stock market
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Summary:
- Since the start of the epidemic, China has struggled with its deadliest coronavirus outbreak.
- The argument that this recession will be "brief and shallow" risks complacency.
- The stock market had a poor year, and U.S. equities investors may not have much to look forward to in 2023.
China’s latest COVID-19 outbreak
Since the start of the epidemic, China has struggled with its deadliest coronavirus outbreak. Large-scale demonstrations have been provoked by the lockdowns Beijing ordered to stop the spread of disease. Market movements on Monday indicated escalating financial concerns due to political unpredictability.
This past weekend saw protests start in a number of cities, including Beijing, Shanghai, and Wuhan. In Xinjiang, a fatal residential fire fueled protesters' rage against the government's policies. Party officials have been hesitant to import large quantities of foreign vaccines that are superior to the domestically produced Sinovac jab. Instead, they have turned to strict lockdowns.
The effect on china’s stock market
The commodities markets were initially affected by public unrest. Copper, iron ore, crude oil, and coal prices all increased last week's severe declines. This indicated a decline in demand from China, the biggest importer in the globe. Local stocks experienced a steep dip in early trading before partially recovering. The few equities that did increase made the situation even worse. One of the largest manufacturers of ventilators and oxygen inhalers, Jiangsu Yuyue Medical Equipment, increased by more than 5% on Monday, adding to gains of more than 50% over the previous six months. That was a reflection of the high infection rates and the anticipated demand for numerous additional hospital beds and intensive care units.
Performance deviates from fundamentals when unpredictably political decisions are made in stock markets. Then, investors should hold off on adding more money and think about selling. That category has included Chinese tech firms for a while. Whether the Chinese market as a whole is becoming uninvestable is the current question.
China: stocks becoming uninvestable amid lockdowns and protests https://t.co/TRpsgfmWZM | opinion
— Financial Times (@FT) November 28, 2022
Recession complacency
You would think that consensus forecasters would be more flexible in how they define the US recession they expect to occur in 2023 after the chastening delivered by last year's temporary inflation call.
However, they assert with assurance that this recession will be "brief and shallow" and urge us once more to "see through" a significant development. There are concerns that this could be a repetition of the cognitive and behavioral fallacies that were present in the disastrous inflation call made last year, the effects of which we are still dealing with.
The populace as a whole does not necessarily agree with what is true for the economy as a whole. The most vulnerable individuals and businesses have already depleted their funds, have fewer possibilities for employment and less access to low-cost financing. They have a negative influence on growth that is difficult for the wealthy to make up for. While inflation will decline over the coming months, rate stickiness of around 4% is likely to continue. There are numerous causes for this, including changes in wages, the evolving nature of globalization, the long-term effects of rewiring supply chains, and the energy transition.
The consensus forecast on recession risks complacency https://t.co/fCQoW2YK4a
— Financial Times (@FT) November 28, 2022
US Stocks as predicted by Golman Sachs
The stock market had a poor year, and U.S. equities investors may not have much to look forward to in 2023, according to Goldman Sachs strategists. The analysts described a scenario in which there will likely be no change in the benchmark S&P 500 next year due to little earnings growth in Corporate America. The top investment bank on Wall Street forecasts that S&P 500 earnings per share will remain steady in 2023 at $224 and that the index will close the year at 4,000. The S&P 500's closing price on Friday was 4,026.12.
The index's three-month target from Goldman is 3,600, down about 10% from where it was as of Friday's close, and its six-month target is somewhere around 3,900, down about 3%. The firm's ideal situation is for there to be no stock market gain. The S&P 500 could experience a "hard landing" in 2023 and drop to 3,150 in early '23, a 20% decline from current levels, if the Fed's interest rate hikes cause a sharp decline in the U.S. economy.
Goldman Sachs sees stocks enduring 'less pain but also no gain' in 2023 https://t.co/rtFMkouYSf by @alexandraandnyc
— Yahoo Finance (@YahooFinance) November 28, 2022
Sources: ft.com, finance.yahoo.com, twitter.com
