Will the Stock Market Continue to Fall
Stock Market Outlook 2023
Today, Tuesday October 4th, the stock markets soared against all predictions and expectations. It seems there's no connection to the economy, Fed, or stock performance. It's just wishful thinking.
The Dow rose 825.43 points, or 2.8%, to reach 30,316.32. The S&P 500 rose nearly 3.1% to close at 3,790.93. The Nasdaq Composite gained up 3.3% to finish today at 11,176.41.
Two days of euphoric buying, likely caused by expectations of a dovish Fed, a sudden falling US dollar and bond yields. Suddenly everyone's bullish, as though inflation has been beaten, and the Fed's job is done.
Yesterday, one fund manager, Eric Johnson of Efficiency Market Advisors suddenly turned bullish for the 3 month outlook. He and his stock investment advisory firm were just calling for a continued bear market. He says inflation is falling sharply, the VIX is down, oversold indicators are up, rents are falling and home prices are falling, and the FED will stop hiking on December 14th, in an interview on CNBC.
Johnson believes this pattern, V bottoms, has happened before and investors will jump on news the Fed is done. The S&P, Dow Jones and NASDAQ are exhibiting some volatility of late.
Is this just Another Bear Market Rally Blip?
However, what plagued investors this last week was more news on the intent to raise interest rates, new inflation numbers (still above 8%) and the conversation about the Fed not pivoting on its hawkish view of the economy. Putin's claim on Ukranian soil and the gas pipeline bombing were not helpful and it's predicting a long cold winter in Europe economically. Where are the bull conditions in Europe?
If rates do fall are banks going to suddenly lend to home buyers? Will rent prices and gasoline suddenly fall? Will Europe and China's situation suddenly reverse?
Is this rally just another sneaky bear market rally that's going to catch optimists off guard? I like what Jim Cramer said about the bulls being angry at the bears. Could this just be petulant stand of a teenager against reality? There was news today to tell us things are going the other way — rising unemployment and oil prices.
The Saudi's just advised they are ready to cut 1 million+ barrels of oil per day, which has sent oil stocks rocketing today. Investors will be eyeing earnings and wages reports this week. Today's ISM manufacturing report shows it fell to 50.9 vs 52.2 forecasted.
Are investors sneaking a peak at the upcoming Mid-Term Election results? With the elections only 4 weeks away, it makes sense this will the most important matter for the markets.
A Repub win would be met with delight by investors who feel it will stop the Biden administration from further interest rate and tax hikes and crippling regulations on US manufacturing and energy supplies. Less regulation would mean supply might increase. Biden announced new capital gains taxes aimed at the rich but coming at a bad time when the economy needs a lift. That bill has to be passed however.
This week's events suggest volatility is in store for the last quarter, and that we're still on course for an economic recession. The hurricane in Florida will reduce US GDP, and affect this winter's vacation season.
Last week's trading volume was high as more investors divested and moved into cash. Bonds struggled as well, and oil struggled to keep pace. The outlook for these last 3 months of 2022 is downward. The elections will tell us about next 6 months into 2023. Investors looking ahead to the next 5 years will find some great buy the dip opportunities.
Historically, the months of September, February, June and August are the worst. This fall however, experts are worried about a big correction. Some feel we'll finally hit bottom, but no one's sure of the politics and effects of trade sanctions. Some experts believe we may not hit bottom till next spring.
Market Sectors
Energy stormed ahead today, while consumer staples were completely ignored by investors. People really forgot that we're in the midst of a terrible recession.
CNBC's Jim Cramer is the latest to chime in saying it's way too early to call a market bottom.
In an interview on Yahoo Finance, CFRA Chief Investment Strategist Sam Stovall warns "Bear markets with recessions have ended up being deeper and lasting longer than those without a recession, with the average decline being 35%. He predicts this bear market for the S&P will bottom around 3,200.
Investors, perhaps influenced by the media and politicians are unwilling to recognize the dangers ahead. The decision to not open up market supply and instead suppress demand is a political gambit with real consequences. As market volatility increases, investors wonder about bad decisions and big market responses. As risk grows, more investors will want to sell off.
View the best and worst performing stocks below. For those with cash, a buy the dip opportunity is coming.
There are divided views of what will happen in 2023. Not all the factors are in for next year. For the short term however, the big question is whether to sell.
Most commentators this week are discussing how the markets will fall to new 2022 lows. After J Powell's rate announcement, the Dow has fallen about 780 points, while the S&P is down about 140 points. That's minor given the stated intent of the FED. Everyone's waiting for things to start breaking.
UBS director Art Cashin appearing on CNBC's "Squawk on the Street says "I think we may even go back and retest the June lows." In fact, he was right, it did last week. And Goldman Sachs Chief Economist Jan Hatzius in an interview with Yahoo Finance Live said he expects a lengthy period of below-trend growth.
Investors will grow more cautious as the Fed pushes the central rate up. The next rate hike in October could push things over the edge. The 3 month to 6 month forecast looks dim. Those still investing are looking for hedging strategies or for defensive stocks to get through the recession.
Oil prices have reclined given new fears of a recession and strong demand reduction across Europe. The natural gas price will pressure many Americans finances this winter and work to push inflation back up. This will embarrass the Fed. Some like JP Morgan believe oil prices could rocket when oil production is cut by 3 to 5 million barrels per day. That would push oil prices up above $200 a barrel. China's demand will grow with the resumption of their economy.
Persistent Inflation and the Fed's Certain Response
The Fed's goal is to lower employment and for that to happen, profits must drop and consumer and business spending must stop. Experts say the Fed is focused on unemployment numbers. The current optimistic mood will take a few months to erode, but 2023 will bring it down.
Jobs claims were down, and job growth continued in August, and wages rose so you can see the Fed will have to jump rates up high and 6% unemployment rate is the target.
The most recent 8.3% CPI inflation number was disappointing given how much energy costs dropped. The big news is about the housing market teetering on the edge set to tumble hard which would help bring inflation down. The Fed might see this as an acceptable loss and an aid to bringing the headline inflation rate down.
Foreclosure activity in the housing market is up strongly so September's stats should be starker as more mortgage holders are unable to make their payments.
Experts are all over the place about stock prices, valuations, and market direction in the coming 3 months and 6 months. They might only agree that investors might consider buying now and enjoying the prices return over the next 5 years.
But what about the hundreds of billions of dollars held in cash that could float right into stocks at any time? Investors aren't that foolish to buy stocks right now. Darkening the picture for the US is a very high dollar ($1.10 on index) which gives US producers big headwinds. The dollar should stay high as the Fed raises rates. And markets never bottom until the rate hikes stop.
What To Take Into Account for the Stock Market Forecast?
The next 3 to 6 months look scary driven by these factors:
- rising Fed rates — likely hike of 75 basis points, moving up to 5% in 2023
- higher unemployment and rising job claims (although good right now)
- wages still strong but turning downward in 2023
- housing market failing
- persistent high inflation
- much lower US GDP for 3rd quarter
- import prices declining
- Sept Philadelphia Fed business outlook survey fell -16.1 to -9.9
- Sept Empire manufacturing survey index rose +29.8 to -1.5
- corporate earnings struggling for 12 months ahead
- coming blockade of Russian oil by Europe
- high US dollar due to high interest rate
It's tough to predict much about the 3 month to 6 month outlook given this fall of 2022 seems to be a turning point where the economy could fall flat, or just sputter along, permanently crippled.
Expert's 2023 Outlook Isn't Rosy
The updated Conference Board Forecast is a little gloomy too. They predicted a recession would begin before the end of the year.
Yet many investors are overjoyed with the crashing price of oil and gasoline which is due to weakening consumer and industrial demand. Energy and food prices might fall, but what comes with it might not be to stock market participants liking in September/October. The Conference Board projects 2023 growth will plunge to a 0.2% year-over-year rate.
Coming Market Bottom Should Create Some Excellent Opportunities
Plenty of investing gurus are suggesting we're in a buying opportunity, while some say we haven't seen the bottom yet. The usual bears such as Michael Burry, Jeffery Gundlach, David Rosenburg gave gloomy outlooks, supported by the last Bank of America prediction as well.
Current Major Indexes (as of Sept 26, 2022)
- S&P 500 : 3,693.00 ↓
- Dow Jones 30 : 29,511 ↓
- Nasdaq : 11,397.00 ↓
- Russell 2000 : 1,675.70 ↓
- WTI Crude Oil : $77.09 per barrel ↓
- Gold : $1,638.50 per ounce ↓
- US Dollar : $113.87 ↓
This is not investing advice, but in the best scenario, the 3 to 6 month forecast is negative, yet after bottoming out in the fall, we may see a rebound after the mid term elections. There are news stories to that effect, but Russia isn't done bombing the Ukraine and the Fed's balance sheet reductions and interest rate hikes might be just starting. That does predict a weakened stock market crash scenario.
3 Month, 6 Month and 5 Year Forecasts
See today's stock market data below. And enjoy the expert's forecast, 3 month forecast, 6 month forecast, and 5 year to help you visualize the investment road ahead. If you invest for the 10 year period, and pick solid long term companies, it might take the worry out of your investment porfolio.
Recession Indicators Glowing Stronger
Rising energy costs, discouraged US companies, huge debt, and rising rates has everyone bummed out. After the next 3 month period, we could be headed down strongly into a deep dark period 6 months from now.
Ethan Harris, head of global economics research at Bank of America Corp. "We're either going to have a weak economy or a recession." — TBS News Report
Jamie Dimon of JP Morgan said there's a 66% likelihood the U.S. is headed into a mild recession or something even worse.
"We put the odds that the economy will suffer a downturn beginning in the next 12 months at one in three with uncomfortable near-even odds of a recession in the next 24 months," said Moody's Analytics chief economist Mark Zandi said in a May 16 note — Washington Post.
These economists aren't the only one's as more predictions of late are increasingly negative.
Investors may want shy away from next weeks stocks, next months and even the 3 month outlook and find stocks to hedge against a recession. Make your new stock investing plan based on the 5 year forecast or even 10 year forecast.
Bear Market Territory
Lael Brainard, usually a more dovish policymaker, said she expected "a combination of rate increases and a rapid balance sheet runoff to bring U.S. monetary policy to a more neutral position later this year. Further tightening would follow as needed" — from CNBC report.
The market selloff across the world is making the US greenback a popular choice. The greenback is bolstered by expected interest rate rises, as inflation may not be cooling off for some time. Is the US dollar still a safe haven?
Sector Watch
Trading Views sector watch shows some interesting possibilities in producer manufacturing. The 3 month performance was outstanding and with global supplies cut, US companies will become businesses go to source in 2022. US manufacturing GDP is well down from last year, so what will a full economic reopening along with lower imports do for US producers?
Despite being neglected, the US energy sector will continue to perform very well. The US dollar is up too, generating higher revenues for US exports.
Expert Forecasters Projected Excellent Growth
Brad McMillan CIO of the Commonwealth Financial Network is projecting 7.5% nominal economic growth and 3.5% real economic growth in 2022. That projection is bullish and the summer season will help, but full year will likely not make it. However, the inflation problem is not transitory and it looks like the only tool Biden has to deal with it now, is to raise rates. That creates a likely US recession including a harder landing than many expect.
The tech sell off always happens when interest rates rise and inflation continues. Tech stocks were dumped on as the talk is about inflation and rising rates rises. See more on the best stocks to buy.
See more on the big winners and losers below and more about which stocks to buy. Do the stock market crash prognosticators have a leg to stand on? Well, the 2022 mid term elections will be a battle.
Forecasts for the S&P
Bank of America forecasts the S&P will be flat next year rising only to 4600, however it's already hit a record of 4799 during a dark moment. On the other hand Goldman Sachs' predicts the S&P 500 will rise to 5,100 (+12%) by the end of 2022. BMO feels it could reach 5300. That's well down from 21% growth during 2021. JPMorgan is projecting a 10% S&P gain to 5,050. Morgan Stanley is predicting an S&P drop from 4500 now to 4400 in 12 months. All these forecasts are likely to be downgraded further.
Forecasts are made more difficult due to high market volatility. The volatility is near term and due to rate hikes, oil supply, Fed intentions, and inflation rate announcements. When bad news hits, it tends to take everyone out now. More investors are very skittish, and realizing the 30% hit they've taken this year could increase to 50% loss. Will they start buying gold?
Market Forecast for This Week
This week brought both anxiety and discouragement to the markets. With Covid 19 fading, people are feeling good and they are spending their savings. The 5 year and 10 year forecasts are better because we'll be out of this period and more firmly into the deglobalization era with abundant energy supplies.
The housing market forecast is dampening with the mortgage rate rises. with strong price growth forecasts, and more construction is expected. There's a definite bearish outlook for housing construction stocks yet they're not showing up as the worst performers.
Best Performing Stocks
Energy stocks dominate the top Alpha performers of late, according to Barchart's data. See more on the best stocks to buy including oil and energy stocks.
Top Losing Stocks
Health, biotech, energy, and speculative stocks were hit hard again, and it's been a repetitive fact for the last year. Investors in these stocks might be dreamers who may end up losing their savings. Time to abandon ESG and other high cost dreamer stocks and into practical winners — oil stocks.
Most investors want high growth stocks but it seems they're taking a beating right now. This is where the buy the dip opportunity comes in. Smart investors are experts at buying the dip and hoping this is the deepest point on the charts and stock prices will surge for the next 5 years.
Investors are in volatile period and more are looking the best stock market forecast for insights and guidance. See the 3 month, 6 month, 5 year and 10 year outlooks for ideas.
Top Recommended Stocks This Week
Looking for the latest stock prices and best stocks to buy for next week? Energy stocks will be the darlings again, and despite political tactics to manipulate prices. Limited oil supplies and refinery limitations will be driving prices back to new records. An active hurricane season hasn't been priced in. Electricity utilities are seeing huge price hikes too.
Projections of oil prices are up to $140 a barrel now because of supply shortages (exploration and drilling were discouraged/prevented in the US) so that political choice is coming home to roost this year. Look at Highpeak Energy Inc, Southwestern Energy, Athabasca Oil Corp, Exxon, Marathon, and any of the best Canadian oil stocks.
Forecasts 3 Months to 10 Years
If the US government and GOP stay calm, we'll only suffer a slow 3 month period this spring and then back to moderate races for the next 6 months, next 5 years and next 10 years. Remember, if the Republicans win the November elections, they will likely lower taxes which will stimulate the economy and business sentiment. This could prevent a stock market crash and a housing market crash in 2023.
The forecast for Monday opening and next week is to the downside. Futures were down today. Earnings reports are still coming in stronger than predicted, for most stocks anyway.
Stock Market Crash Possibilities
Combine the unsettled activity this week with lower consumer confidence, debt ceiling issues, war, persistent inflation, high energy prices, out of reach housing prices, fears of rising interest rates, reduced Fed spending, and a prolonged pandemic slowdown, and you can understand why markets might sag. The wind is definitely out of the sales and consumer intent is not strong.
However, predictions still say 2022 will be a good year. The pandemic ruined the 2019 party, but it will disappear globally late. There still is time buy this dip and find the best stocks to buy. Check out the Dow Jones, S&P, and NASDAQ posts for opportunities, and discover more about Bitcoin, Tesla, Apple, Oil stocks, and the 2022 best picks page for more great stocks to buy. Meta is a washout and may never recover.
Although markets sprung back from the recent dip, there is plenty more volatility coming in the next 6 months. October is often a bad month, but again, it creates buying opportunities. So, for smart investors, it's more like a feast!
What are the Biggest Threats to the Stock Market?
Stock market investors and those invested in real estate stocks are trying to visualize the key threats that might cause a lot of pain. If you read the stock market crash report, you'll get a good look at all the crash signals and factors that may lead to big investment losses. Pay attention to those stocks that might be good hedges against a correction or downturn and which securities you should not buy.
Will There Be a Stock Market Crash?
Within a realistic outlook, a stock market crash seems unlikely, however you should still be up on all the factors as they change and combine to present threats to the markets. Choosing stocks that will survive a crash is good and you should know more how to hedge a crash as smart management of your IRA, 401k or RRSP.
Predictions: As for today and tomorrow, next 3 months, next 6 months, or next year, the outlook is positive but maybe not to the satisfaction of some investors. With such bubbly activity, the worry is a high speed wobble (volatility) and a crash of the stock markets, and perhaps even crashing the housing market. This turbulence will reach the housing market and encourage homeowners to sell their house fast.
Retail sales rose only .9% in April, so it looks like the great overheating is overdone. GDP for the first quarter was down 1.4%. However, according to BEA, personal income increased$268.0 billion in the first quarter and disposable personal income increased $216.6 billion, or 4.8 percent, compared with .4% from the previous last quarter of 2021. But will consumers save the stock market and economy in 2021? And will the housing market play a role in a stock market slide? I think we're about to find out.
I said there was a lot of phoniness in this market with Tesla, Bitcoin, Dogecoin, AMC and other stocks flying high. Now in May, it looks like this was very accurate.
Which are the best stocks to buy today/tomorrow or in the next 6 to 9 months? Which will be hottest stocks during the coming fall season? There are other stocks not reflected in today's hot Wtd Alphas but will perform well in 2022.
Looking for good stocks to buy? See more on 5G stocks , FAANGs, top stocks for your 401k investment. See more about Google stock price Apple Stock price Facebook stock price , and Amazon stock price.
Is Inflation a Continuous Threat?
Governing politicians and other "experts" told us inflation is transitory. However the charts tell us it is more persistent. They got that very wrong and therefore are unreliable as credible forecasters.
As I said during the pandemic, trillions in government spending and low interest rates continuing, along with supply chain bottlenecks, is a fertile ground for record breaking inflation. And here we are now with 8.6% inflation. Yet with EU sanctions on Russian oil, we might see inflation push upward toward 10% in July.
You should be hedging your investments with good stock selection. Charlie Munger says diversification is for idiots. Pick the best horses to win. Everyone seems to believe inflation is going to be an issue for the economy and for listed companies. Here's a few stocks CNBC/Insider Monkey believes will weather the inflation storm:
- Newmont Corporation (NYSE: NEM)
- AT&T Inc. (NYSE: T)
- Medical Properties Trust, Inc. (NYSE: MPW)
- Dollar General Corporation (NYSE: DG)
- Activision Blizzard, Inc. (NASDAQ: ATVI)
- Etsy, Inc. (NASDAQ: ETSY)
- Philip Morris International Inc. (NYSE: PM)
- Oracle Corporation (NYSE: ORCL)
- Colgate-Palmolive Company (NYSE: CL)
- Adobe Inc. (NASDAQ: ADBE)
- The Procter & Gamble Company (NYSE: PG)
- Aspen Aerogels, Inc. (NYSE: ASPN)
- Zoetis Inc. (NYSE: ZTS)
Factors affecting the Stock Market
- economy had a meager showing in the last 6 months, GDP shrunk in last quarter
- inflation rises rapidly and will persist despite Fed rate increases
- rising rates are discouraging lending and investment
- bond and treasury rates will may money out of equities (5 year outlook)
- US dollar rising fast which hurts US exports
- summer season pushes demand for travel, gasoline, and food even higher
- rent prices rising putting extreme pressure on American consumers
- markets sagging with increased volatility which scares off investors
- price earnings ratios suggest stocks are grossly overpriced
- Fed said they wouldn't raise rates until 2023 but that's changed
- $5 trillion sitting in money markets and where will it go (oil and energy stocks?)
- Oil prices rising which means higher gasoline prices and transportation and manufacturing costs
- S&P, and Dow Jones, NASDAQ and Russell 2000 still have room to grow
- jobs reports okay but not great
5 Year Long Term Forecast is Optimistic
Just a little discussions on the 5 year stock market forecast (and 5 year housing market forecast ) look really good too because the American consumer is well employed as business is rebuilt from the ground up. The ten year outlook is more clouded, but millennials will need products for some time. Then intent to buy homes remains strong and construction rates will grow fast through the coming spring as labor and supply shortages ease.
The latest US jobs report is good. The 2022 to 2027 5 year projections are not priced into the market, but instead are focused on current earnings/sales and wishful thinking over the 5 year term.
Bank and Broker Forecasts
Goldman Sachs is forecasting recessionary numbers with a new GDP growth projection of a weak 1.75% with a 35% chance of a recession.
Final thought? 2022 looks really good, but if global markets crash due to lingering Covid infections, a stock market crash and housing market crash would be simultaneous. Optimism is a great catalyst, but you can see how periodic reality reaches the investor masses once in a while. Let's cross our fingers for smooth sailing ahead.
See more forecasts on the real estate housing market, and the latest home prices and sales trends for numerous major metros in California including San Diego, Los Angeles, San Francisco, and Sacramento. See stats on other cities, including Denver, Dallas, New York, Boston, Atlanta and in the Florida housing market in Miami and Tampa. Visit Linkedin if you're seeking advanced SEO and real estate marketing services for Fintech or Real estate firms.
Rising mortgage rates, inflation, reduced housing supply and high home prices threaten the markets, it appears 2002's real estate scene will stay strong. Realtors may want to build their presence this year as house prices decline in 2023. Lower prices will bring plenty of homes onto the market and boost your opportunities.
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Source: https://gordcollins.com/stock-market/factors-forecasts/
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