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Foresight’s 20/23

Posted December 29, 2022 at 4:45 pm

What’s going on?

Here’s hoping those novelty 2023 glasses have prescription lenses: let’s take a look at what investors might be in for next year.

What does this mean?

You can be anything you want to be next year, but maybe be patient. See, the S&P 500 and Stoxx 600 – the key US and European stock indexes – dipped 21% and 13% respectively this year, and teetering economies could mean there’s more to come. Goldman Sachs and Morgan Stanley analysts agree, predicting that interest rate hikes and weak economic growth will curb company earnings and, in turn, stock prices during the first half of the year. But chin up: economists are predicting a rosier-by-comparison 2024, meaning forward-looking markets should bottom sometime next year – probably when central banks stop hiking. So not only could you snap up a few bargains when that happens, but strategists expect a rebound in the second half of the year to pull those two stock indexes around 7% and 5% higher than they are today.

Why should I care?

For markets: Not-so-general consensus.

Now, those are average estimates – in reality, analysts’ expectations for the S&P 500 range from a 24% giddy-up to an 11% drop. But history shows that US stocks rarely slip two years in a row (like, a “four times in a hundred years” type of rare), so the odds look promising. But when they have, the second drop has always been worse than the first – a painful 24% on average. So while history says next year is likely to be better, another dip could leave investors nursing another shiner of a bruise.

The bigger picture: The winner is…

If big banks made Christmas cards, Goldman Sachs’s would say, “love your commodities”. The investing titan believes the asset class will ride out a bumpy first few months of 2023, before boasting pumped-up prices due to scarce supply of raw materials. In fact, Goldman predicts commodities will take the best-performing-asset-class medal yet again next year, and says a key commodity index will rise a mouth-watering 43%.

Originally Posted December 29, 2022 – Foresight’s 20/23

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