After a great rally to start the year, stocks have slowed. According to one of the most successful market watchers of 2023, they may struggle to find it again before the end of the year.
With a difficult August in the rearview mirror, the market has historically started out as the most painful month of the year. Bulls still hope stocks will regain some of their mojo, but
Bannister, who called the market move this year, expects.
S&P 500
By 2023, it will not be far from its current level. In Tuesday’s research note, it stuck with 4,400 at the end of the year, putting the index below 4% from its current level.
While the strategist spent much of the first half of the year saying the rally appeared to be on a solid footing, he is more cautious now that the market’s momentum is expected to top the S&P 500’s peak before 2022. Bear market caught.
While the focus of our research from October 2022 to June 2023 will be to eliminate the concerns of the uber-bears, it seems timely to examine the bullish assumptions now…[who] The S&P 500 was I believe it will achieve 4,800+ by the end of 2023,” he wrote. “Our conclusion is that the highly-positive outlook for the end of 2023 is unlikely to materialize.
For the S&P 500 to retake and surpass its previous high of 4,796.56, Bannister said, it will require very favorable conditions, which appear largely out of reach. The massive growth spurred by the Covid-era stimulus will make it harder for companies to post big increases in earnings per share, while the economy’s resilience will give the Federal Reserve little reason to hold back from raising interest rates as some investors want. he said.
Likewise, artificial intelligence may not be the savior that many predict it will be, at least not without setbacks. Others have made similar points about how positive tech news in 2023 boosted the market.
In fact, he argued, investors would do well to remember early September 2000, when the dot-com bubble began to burst. Although the S&P 500 finally bottomed out in October 2002, it “actually did not reach the (CPI inflation-adjusted) level of 1,520.77 again until Dec-2014.
Of course, Bannister doesn’t think stocks will be lost in the wilderness for long, and many other strategists hope the rally isn’t completely out of gas. They say Wall Street’s continued patience is a harbinger of further gains ahead, while continued consumer resilience could keep some of 2022’s most-hated stocks afloat, such as consumer discretionary stocks.
However, with the continued challenge of inflation, mixed economic data and a lot of good news selling into stocks, it wouldn’t be surprising if the rally took a while to regain its footing. This means that 2023 will end with a whimper, not a bang.
Write to Teresa Rivas at [email protected]
