Stock Market Outlook in 2023: What Should We Expect This New Year?

Stock Market Outlook in 2023: What Should We Expect This New Year?

The first month of the New Year of 2023 had already gone and stories were told about the global economy tipping into recession in this year. Investors in the stock market, major and minor ones, are bracing themselves for equity markets and more broadly risky asset classes in 2023. The new four quarters will call for more unemployment, market fluctuations and economic frailties, but there will be some forms of silver linings in store for everyone across the globe as central banks in many parts of the world are set to announce the reduction of interest rates and a fall of inflation this year. A notable incident saw the Federal Reserve System agree in a meeting last December that the central bank in the United States should slow down the increase of its interest rate to reduce risks found within the global economic growth.

2022 Was Stabler, But Was Hit by Numerous Issues

Last year was definitely a consistent 12 months compared to the Covid-19-affected 2020 and 2021. On the other hand, it could have been a whole lot better if several issues did not happen, namely the supply and demand problems surrounding the labour market across the globe, Russia’s brutal invasion to Ukrainian soil as well as the latest wave of Covid-19 cases. China, the most populous country in the world, was particularly affected by the last phenomenon as its zero-Covid strategies did not go as planned and were halted when public protests occurred on the Chinese land. The aftermath of these incidents are likely to be brought upon to 2023, with the services sector of the second largest global economy already feeling the pain.

What to Expect in 2023?

The global gross domestic product (GPD) growth is projected at 1.6% based on several factors. For instance, a series of interest rate reductions will only take place by stages and is expected to stop by the end of first quarter, until then, movements in the property market shall remain stagnant with the tightening of credit circumstances. Nevertheless, while such conditions do not permit an optimistic forecast, it would be foolish to conclude that 2023 is the year where the world succumbed to a global recession, at least not in the early period of the new year.

Quoting Dubravko Lakos-Bujas, the Global Head of Equity Macro Research at J.P. Morgan “In the first half of 2023, we expect the S&P 500 to re-test the lows of 2022 as the Fed overtightens into weaker fundamentals. This sell-off combined with disinflation, rising unemployment and declining corporate sentiment should be enough for the Fed to start signalling a pivot, pushing the S&P 500 to 4,200 by year-end 2023.” This means that the United States market as well as its counterparts across the globe will continue to converge in the New Year of 2023, affecting the United States Dollar and local currencies as a result.

Markets to Watch Out For?

We would say the United Kingdom market as well as Japan are platforms where investors should pay more attention this year as their firmness based on solid earnings, coupled with the momentum lying within the reopening of the economy can make them reign supreme in 2023. As for the Chinese market that many are contemplating about, we are bound to see an estimated upside of 17% by the end of Q4 this year.

Furthermore, investors should shift their focus towards quality companies, particularly those that are specialising in value stocks, tech stocks and small-cap stocks. The key to this year for investors should be thinking beyond the short-term benefits and go slow and steady throughout the year of 2023 because as soon as recoveries take place, investors are likely to see their patience bear fruits and enjoy good bargains they made earlier. Though it could be a rocky year ahead, 2023 is set to pave way for strong bounce back in the future.

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