U. S. stock market rose on optimism-otzyvy Budrigantrade com
U. S. stock market rose on optimism-otzyvy Budrigantrade com
2023.01.07 12:05
U. S. stock market rose on optimism-otzyvy Budrigantrade com
Budrigantrade.com – The slew of Wall Street forecasts that predicted a global economic contraction and difficult times for risk assets in 2023 offered little hope. However, as January trading picks up, a small group of optimists is defying the general consensus and betting that a soft landing can result in gains for the market.
JPMorgan Asset Management’s chief global strategist, David Kelly, is betting that inflation will continue to fall in 2023, helping the US economy avoid a recession. Based on solid economic data, resolute consumers, and indications of price pressures falling, Ed Yardeni, the longtime stock strategist and founder of his namesake research firm, estimates that the odds of a soft landing are 60%.
Kelly stated in an interview, “If you talk to people, they say it’s the worst of all possible worlds.” It isn’t because the pandemic is over, unemployment is low, and inflation is falling. There is a good chance that risk assets will do very well.
The majority of investors and analysts predicted that a recession was inevitable and that historically high inflation would continue after a slump in global stocks of almost 20% last year.
According to Kelly, who is of the opinion that the Federal Reserve will conclude its historic cycle of rate hikes following the meeting in March and begin cutting rates in the fourth quarter, the pessimism may provide favorable opportunities to purchase investment grade credit and US value stocks at discounted prices.
Yardeni sees opportunities in financial, industrial, energy, and technology stocks that, according to him, appear to be significantly less expensive than they were last year. He does not rule out the possibility of a hard landing. He said that such companies’ bonds might also do well in 2023.
Yardeni stated in an interview, “Optimists and pessimists agree that 2022 was a terrible year for stocks and bonds, but it doesn’t last forever.” The market has reacted to the fact that the Fed has been more aggressive and inflation has become more persistent.
The optimism argument was bolstered by Friday’s economic data. Another strong US jobs report showed that hiring increased more than expected while wage increases slowed more than expected. Inflation in the Eurozone fell back to the single digits for the first time since August, raising hopes that the worst ever rise in consumer prices in the bloc has come to an end.
The S&P 500 has only experienced four consecutive down years since 1928, making them extremely uncommon. However, when they have occurred, average declines of 24% have always been greater in the second year than in the first.
Bloomberg surveyed strategists in December and found that the average year-end target for the S&P 500 was 4,078, which would imply a 6% gain for the index. However, this largely reflects the significant decline that occurred at the year’s conclusion. The typical forecast called for a decline in November.
Bespoke Investment Group’s research indicates that year-end goals are typically 5 percentage points off in either direction. Paul Hickey, cofounder of Bespoke, stated, “We don’t usually do targets because we think they should be taken with a grain of salt.” If there is one thing experience has taught me, it is that when there is such widespread agreement on anything, things typically do not proceed as planned.
The credit market’s gap between high-grade and junk companies’ default swap spreads has decreased by more than 100 basis points since September, reducing the likelihood of a recession. In market parlance, this indicates less concern that the weakest credits will default in the event of a severe economic downturn. Nonetheless, the measure remains above levels prior to the pandemic.
Kelly’s belief that the market consensus is too pessimistic appears to be supported by a Bank of America measure of strategists’ sentiment. It has fallen so much that it now indicates a return of approximately 16% within the next year.
According to him, the most significant change since last year is the price drop, which has opened up opportunities “all over the place.” The S&P 500 index members are trading at approximately 17 times projected 12-month profits, which is the same as its typical reading this century.
Kelly wrote in a note, “One resolution I’ve made at the beginning of 2023 is to avoid unreasonable gloom.” Like a new baby, the beginning of a new year merits optimism.
