Wall Street has turned unusually bearish on the stock market as their 2023 predictions arrive.Ongoing fears of an imminent economic recession have paralyzed Wall Street strategists.For the first time in more than 20 years, Wall Street expects a flat year for stocks in 2023. Loading Something is loading.
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A 10% annual return for the S&P 500 has been a tried-and-true target Wall Street strategists have often gravitated towards when they roll out their year-ahead stock market outlooks.
But this year, that’s not the case, as more and more 2023 stock market predictions show an unusually gloomy outlook for the S&P 500.
The negative outlook seems to be mainly driven by fears of an imminent recession, as the Federal Reserve’s outsized interest rate hikes — combined with elevated inflation — are expected to finally take a bite out of the consumer’s spending power.
And Wall Street isn’t alone in these fears. A recent survey from the Conference Board found that 98% of CEOs expect a recession sometime in 2023.
But for much of Wall Street to be bearish on stocks heading into next year is no doubt rare, even in the face of a potential recession, according to data from Bloomberg. The data shows that 2023 is the first year in more than two decades in which Wall Street strategists expect a flat year for stocks.
Even heading into 2009, when the global financial system was on the brink of collapse, Wall Street strategists expected a 10% annual return for stocks.
Of course, a common belief on Wall Street is that sentiment follows price. And with the S&P 500 on track to finish the year down more than 15%, it’s no wonder Wall Street is bearish on stocks going forward, as the constant ups and downs of the market this year have conditioned investors to be more skeptical of potential rallies.
A top-down analysis of 17 Wall Street strategists’ predictions shows the average S&P 500 price target for the end of 2023 is just 4,009, which represents potential upside of less than 1% from current levels.
The predictions show a relatively balanced risk/reward profile for stock market investors. The lowest estimate so far comes from BNP Paribas, which has a 3,400 price target set. A decline to that level represents 14% potential downside and would take out the S&P 500’s mid-October lows of 3,491.
Meanwhile, the highest 2023 year-end price target is 4,500 from Deutsche Bank, which represents potential upside of 14% from current levels.