Top of the morning, readers. Phil Rosen here, ready to jump start your Friday with a breakdown of what some of Wall Street's top players expect for the stock market for 2023.
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Tomorrow, you'll receive a special weekend edition of the Opening Bell newsletter, which features a fascinating Q&A from a veteran strategist about the state of the US economy and the biggest risks ahead.
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1. Morgan Stanley's top market strategist said the bear market isn't over yet. Investors might pour back into stocks on hopes of the Fed pausing rate hikes, but that's unlikely to have staying power going into the new year, according to Mike Wilson.
"Powell's commentary is right in line with what we've been saying, which is that they're going to pause probably in January and the market is getting in front of that," Wilson said in an interview with Bloomberg on Thursday. "This is a classic Fed pause stock market rally."
In fact, Wilson, who this year was named Wall Street's top portfolio strategist by Institutional Investor, warned that the S&P 500 could see another 26% drop next year to as low as 3,000.
His comments followed those of Fed Chair Jerome Powell, whose remarks this week caused markets to surge on the expectation that the central bank will slow the pace of interest rate increases at its meeting this month.
"This rally will go further and will probably drag people back into thinking that this bear market is over," Wilson said.
Similarly, JPMorgan analysts wrote in a note to clients yesterday that the S&P 500 is set to revisit this year's lows early next year. They said the Fed's inflation fight won't end anytime soon, and that's going to weigh on indexes.
"Fundamentals will likely deteriorate as financial conditions continue to tighten and monetary policy turns even more restrictive (Fed raises rates by another 75-100bp with an additional ~$1T in QT), while the economy enters a mild recession with the labor market contracting and unemployment rate rising to ~5%," the firm's analysts said.
Ultimately, JPMorgan's view is for disinflation, a rising jobless rate, and weaker corporate sentiment to force the Fed to signal a policy pivot.
That move could then lift the S&P 500 to 4,200 by the end of 2023, according to the bank. That's just slightly above where the benchmark index closed on Thursday, meaning investors should be prepared for tepid gains in the coming year.
What's your full-year 2023 forecast for the S&P 500?
A) Below 4,100
B) 4,100-4,500
C) 4,500-4,800
D) Above 4,800
Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2. US stock futures fall early Friday, as investors await the US monthly jobs report. Meanwhile, Binance has frozen withdrawals of a crypto linked to its own token that looks like it's been hacked. Here are the latest market moves.
3. Earnings on deck: Copart Inc., Prospect Capital Corp., and more, all reporting.
4. These fund managers have beaten 98% of their peers in 2022. They broke down the "keeper stocks" they are betting on for 2023 — and the three market sectors they are overweight on heading into the new year.
5. European Union leaders have reportedly settled on a $60-a-barrel price cap for Russian oil. The trading bloc must now convince its members to agree to the level, and time is running out — the deadline is meant to be December 5.
6. A housing market correction will take a long time. Prices need to fall as much as 20% in the next few years to return to their historical trend, DataTrek said. The research firm pointed to previous decades' home cycles and bubbles that could help forecast what comes next in 2023.
7. China's yuan now accounts for nearly half of Moscow's currency market. Russia's central bank called for a balanced transition to the redback, even as it's seen its share of the market jump from 1% to over 40% in less than a year.
8. Goldman Sachs made its case for why the US won't be hit with a recession in 2023. Low jobless claims, positive wage growth, and slowing inflation are among the reasons analysts listed in their forecast. Here are 10 reasons why they expect to skirt a downturn.
9. BlockFi is the latest victim in the crypto contagion. The fallout from FTX's collapse has spread to other companies in the digital asset space, and it's becoming more important than ever for investors to educate themselves on associated risks. Experts shared their best tips to safely gain exposure to the market right now.
10. Shares of a Japanese company that makes MSG are up 29% and just notched a new record high. Food seasoning maker Ajinomoto will accelerate its expansion in producing high-tech chipmaking film, the CEO told Bloomberg. Find out more about its push into the hot semiconductor industry.
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Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.