With 2023 just around the corner, Barron’s contributor Nicolas Jasinski believes U.S. stocks could fall next year on an expected recession before rebounding on an improved economic outlook in 2024.
Baron recently interviewed eight investment strategists, and their average forecasts showed thatS&P 500 Index It could close at 4233 by the end of 2023, 9% above current levels. Including dividends, the total return could exceed 10%.
That compares favorably with performance in 2022, a year that has seen many assets suffer their worst year on record, not just stocks but bonds as well. The S&P 500 has fallen about 20% this year, while the Bloomberg U.S. Total Bond Index has fallen about 11%. But the good thing is that stock valuations have become lower, and the benchmark U.S. Treasury yield is about 4%, which is more attractive than in the past.
Affected by monetary policy tightening and geopolitical shocks, stocks, bonds, real estate,cryptocurrencyAll fell, and investors had few safe havens, such as the U.S. dollar and commodities.
If a string of rate hikes by the Federal Reserve pushes the U.S. into recession, stocks could slide in 2023 as they have this year, Jasinski said. But if the economy slows, it could also help bring inflation down closer to the Fed’s 2 percent target. As long as the Fed suspends monetary tightening, it can create the conditions for the stock market to rebound.