Bloomberg News reports that the Federal Reserve remains quiet before its scheduled meeting to finalize its next course of action. However, even though Federal Reserve is quiet, it is not the same for the others. There is a growing chorus around Wall Street among the watchers that the economic outlook and stocks for the next year will be grim.
A Grimmer Scenario in 2023 Foreseen by Experts
David Solomon of Goldman Sachs Group Inc.’s warned that the economy would likely face bumpy times ahead. Dimon of JP Morgan Chase & Co. holds the same view about a grimmer economy, but he said that recession could be mild to hard. Lisa Shalett of Morgan Stanley Wealth Management spoke on Bloomberg Television that the corporations are being subjected to a so-called “rude awakening” related to earnings.
Mark Haefele, the chief investment officer associated with UBS Global Wealth Management, revealed in a note that it is quite unlikely that the economic conditions for consistent growth are likely. The central bank continues to increase the rates despite growth being slow.
Are Investors Hearing?
The investors are listening to the experts and have been paying heed to their warnings. After a 60 days rally, the S&P500 Index was found to fall in all, excluding one out of the past eight sessions. It further dropped on Tuesday by 1.4%.
Historically, the biggest cheerleaders of the market are the equity strategists, and they anticipate that 2023 will be down. Red flags are already waving in the context of the wages and service-related data, hinting that the economy will be in the clutches of the forces of inflation.
It is also being seen that the charts are not of any help this time around. According to BTIG’s Jonathan Krinsky, whenever the S&P 500 Index drops below 15% or lower in any year in November and continues, December is usually weaker. From January through November, this benchmark index witnessed a drawdown of 19%, and the gauge was found to be giving up the ground.
Momentum is Downturn
Morgan Stanley, one of the biggest bears on Wall Street, and its strategist, Michael Wilson, supported the latest call that recovery in the markets might last until December.
Layoffs are further adding to the grim situation. On Monday, Morgan Stanley revealed that it plans to curb its workforce by approximately 2000 just before the potential recession hits the United States, and Bank of America Corp stated that its recruitment has slowed down.
Many other tech firms have already cut their workforce by a considerable percentage and thousands. From Twitter Inc to Amazon.com and Meta Platforms Inc, corporations are curbing staff and slowing down recruitment as they are combating surging interest rates and applying brakes on consumer spending.
Bloomberg News reports that Charles Schwab & Co’s Liz Ann Sonders still thinks and believes the economy will improve in the second half of next year. This is because there has been evidence that inflation is gradually easing down, and there is a cooling off in the labor market, triggering a wave of optimism.
