USA 2023 Stock Market Outlook

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The USA did not see its best year in 2022. The S&P 500 ended off the year on quite a low, declaring 2022 to be its worst year since 2008. What is 2023 looking like? Is there any hope as this year begins?

2023 seems to have begun with a glimmer of hope with inflation rates finally dropping as the year began , but there are still some rising concerns about the Federal reserve’s financial battles with inflation, economists are concerned that it may still be far from over. A recession has been predicted for the first half of this year 2023. Dan Ferris predicts that the markets could fall into a “Dead Zone”.

The stock market decline in the years 2022 and 2023 have been described as an ongoing economic event which brought about a decline in stock markets worldwide. Some say it is massively underperforming.

The U.S. stock market’s decline has had a major negative effect on global economies. The S&P 500 stock market index saw a rise in January 2022 and since then it’s been declining. The stock market index experienced its largest decline since March 2020 in September of 2022. Starting off January 2023, stock market index would continue to decline 20% whilst the Nasdaq composite saw a 35% decline from their ATH.

What Caused This Crisis?

The major cause to blame for all the financial instability is the covid-19 pandemic. It’s safe to say that this worldwide pandemic has some serious and detrimental long-term effects on the global economy. The next crisis that would cause a further decline in the global economy would be, of course the Russian invasion of Ukraine which escalated the decline and energy destruction came to life.

The MSCI ACWI index also declined 21% from a November high.

The Effects

Due to the inflation surge the Federal reserve had to quickly increase interest rates and this further increased the decline in investor confidence. Low interest rates are better for the market as companies are able to increase spending and this also leads to increased stock prices. A rise in interest rates meant that the opposite would happen.

Fears of an economic recession rose when the United states gross domestic product shrank within the first quarter of the Year 2022. This then played a role in the equity prices decline. Following this, the gross domestic product also decreased at a rate of 1.6% within that same quarter of the Year 2022.

All of these crises also had an effect on China. The country has seen a decline in its own stock prices. In June of 2022 the Alibaba group’s share price also declined to a price below 100 US dollars.

Is There Hope?

Yes, the S&P 500 saw a 4% decline in December, but this does not mean the end of the world or rather that the following financial year is automatically doomed. Previously when the S&P 500 saw a decline during the month of December, the index averaged a 20.5% increase over the next 12 months of the following year.

There is still hope. Through reducing stocks exposure as well as increasing cash holdings, those investors that are highly concerned about recession risk can really take advantage of the rising interest rates. These investors can benefit and earn above 4% interest upon high-yield savings accounts from Federal Deposit Insurance Corporation (FDIC) insured banks. Not only that but the rates are also highly likely to see more increase throughout the year 2023.

There are many different points of view and outlooks for the 2023 financial year. However, its outcome truly remains to be seen as the year proceeds.


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About the Author: Brian Novak