Wall Street may get lot worse before getting better in 2023, forecast analysts
Traders work on the floor at the New York Stock Exchange in New York
The stock market's darkest days are yet to come. Some of the most severe downfallsthe index suffered over the first 10 months of the year have been somewhat offset by Wall Street's mini-rebound since mid-October. It increased by more than 10 per centsince its low two months ago and ended the day Monday just around 4,000. Many analysts forecastthat if the Federal Reserve eventually stops raising interest rates to bring rising inflation under control, equities will end in 2023 at least in this area, if not slightly higher. But many of Wall Street also anticipate that stock prices will decline significantly in the meantime before we reach that final destination.
Take Morgan Stanley, which estimates that within the first three months of the new year, the S&P 500 could fall all the way to a range between 3,000 and 3,300. Accordingly, it might lose up to 25 per centof its value from Monday's closing level. The bottom end of that range would be 37.5 per centlower than the previous high, which was established in early 2022.
The bank is pessimistic because its strategists predict significantly lower corporate earnings than those of the rest of Wall Street. Businesses are under pressure to increase revenue while manufacturing and other sectors of the economy are deteriorating. However, Morgan Stanley predicts that once firms made sacrifices, increasing wage expenses will limit profitability.
Additionally, Goldman Sachs strategists projected a low in the first half of the year, probably near 3,600. Based on Goldman Sachs' prediction that the economy can avoid a recession, it would be a decline of close to 10 per centfrom Monday's closing.
Goldman strategists led by David Kostin predicted that the S&P 500 may drop as low as 3,100 if the economy does really collapse as many on Wall Street anticipate.
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The U.S. economy will experience a recession in the second half of 2023, according to strategists at Deutsche Bank. The German bank forecasts that the recession will persist into the last six months of the year, and that may push the S&P 500 as low as 3,250 before it reaches its bottom.According to the strategists led by Binky Chadha, assuming equities follow their usual playbook during recessions, the S&P 500 could conclude the year as high as 4,500.
(With inputs from agencies)
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