Global stocks will be in a rut for another 3 months, but inflation concerns and central bank tightening mean 2023 gains won't be enough to erase this year's losses, survey says

• Inflation woes mean 2023 gains won't be enough to erase this this year's stock market losses, per a Reuter's poll.
• Analysts predict top global stock indexes will have single-digit gains by the end of 2023.

Global equities are expected to drop for at least another three months as markets prepare for further rate hikes into next year, according to a Reuters survey of market strategists.

Of the 90 strategists interviewed, 70% said stocks will stay in a rut through the beginning of 2023, and the rest of the year is expected to be lackluster as well.

Most of the 17 global stock indexes covered were predicted to notch only single-digit gains by year-end 2023, leaving equities unable to fully recover from this year's losses. The S&P 500 and Dow Jones Industrial Average are down 17.7% and 8% year-to-date, respectively.

In order for stocks to "snap back to a rising trend," per Reuters, the majority of strategists said markets needed better economic fundamentals.

The key will be how much harder central banks push back against decades-high inflation, with the Fed widely seen slowing down its pace of rate hikes and then pausing early next year.

"This theme will likely continue to dominate during the first half of 2023, leading to muted equity performance," Credit Suisse strategists wrote in their response to the survey. "Sectors and regions with stable earnings, low leverage and pricing power should fare better in this environment. In the second half of 2023, we expect that the discussion will turn to peak hawkishness, with earnings resilience in a slowing growth environment in focus."

Other analysts have also sounded bearish recently. Deutsche Bank predicted in a November 28 note that major stock markets will tumble 25% once a looming recession hits the US next year. The investment bank sees earnings per share among S&P 500-listed firms falling to $195 in 2023 from $222 in 2022.

"We read the Fed and ECB as being absolutely committed to bringing inflation back to desired levels within the next several years," David Folkerts-Landau, chief economist at Deutsche Bank, wrote. "Although the costs in doing so may be lower than in the past for reasons we lay out, it will not be possible to do so without at least moderate economic downturns in the US and Europe, and significant increases in unemployment"