©Health & Fitness Journal. A trader walks past the German DAX index board on the trading floor of Frankfurt Stock Exchange, Germany, June 24, 2016. REUTERS/Ralph Orlowski/Files
By Hari Kishan
BENGALURU (Health & Fitness Journal) – The global economy needs to find a firmer footing before most stock markets can break out of their torpor, according to market strategists polled by Health & Fitness Journal, who have broadly lowered their forecasts for 2023 compared to three months ago.
That may be a tall order, however, as major central banks still have months to go before halting one of the fastest and most aggressive rate-hiking campaigns on record.
After a strong start to the year, stocks around the world gave up much of their gains after the COVID-19 pandemic bottomed out. With a few exceptions like India, most are struggling to achieve a sustainable recovery.
Analysts cut their 12-month forecasts from three months ago for most of the 17 global indices covered in Health & Fitness Journal polls conducted between November 14-29.
When asked how long the current downturn would last, a strong majority of 70% – 66 out of 90 – said it would take at least three more months. Nine said it would end within that short timeframe, while the remaining 15 said it had already happened.
Much will depend on how long central banks stick to their current mantra that, while interest rates may rise at smaller increments over the coming months, they will remain higher for longer than investors are expecting.
“This theme is likely to continue to dominate in the first half of 2023, leading to subdued stock performance,” write the Credit Suisse strategists in their 2023 investment outlook.
“Sectors and regions with stable earnings, low debt and pricing power should fare better in this environment. We expect the discussion to peak in the second half of 2023 on the hawkish stance, with earnings resilience in a slowing growth environment.” will be the focus.”
Single-digit gains were forecast for most of the 17 stock indices included in Health & Fitness Journal polls through the end of 2023, which would not be enough to erase losses from 2022 to date.
November’s quarterly survey was the fourth consecutive survey for strategists overall to downgrade their estimates.
Perhaps the biggest unknown is how successful central banks, particularly the US Federal Reserve, will be in inducing a sharp fall in consumer price inflation from multi-decade highs without triggering a punishing recession.
The still predominantly optimistic forecasts for an upward trend on the stock markets depend on slight or no recessions.
When asked what would be the main reason for stock markets returning to an uptrend, more than 70% of strategists, 52 out of 74, said improving economic fundamentals.
Seven spoke of corporate profits, while six said that simply being afraid of missing out would be enough. Among the remaining nine, who gave myriad reasons, the most common was that the Fed stopped raising interest rates.
But with many major central banks expected to continue raising interest rates into next year, several economies were forecast to slow sharply or enter recession soon.
“We remain of the view that equities will continue to push higher into December, but see an increasingly challenging growth environment in 2023 provided central bank policy remains hawkish,” wrote Marko Kolanovic, chief global markets strategist at JP Morgan. in a message.
Wall Street’s benchmark has been predicted to end at 4,200 next year, only about 6% higher than current levels.
The STOXX index of the eurozone’s top 50 blue-chip stocks fell about 8% by mid-2023 and should also be trading there by the end of the year.
However, the survey forecast relatively better performance for emerging equity markets.
Partly helped by rising domestic inflows into equity funds from a younger risk-taking population, the Indian BSE benchmark index, already up almost 7% for the year, should gain another 9% by the end of 2023.
Brazil’s benchmark stock index is up just 4% year-to-date, and it was forecast to rise 13% by the end of 2023. Mexico’s S&P/BMV, which fell 3% in 2022, should recover nearly 7% by the end of next year.
(More stories from the Health & Fitness Journal Q4 global stock market survey package 🙂