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Forecast 2023

The bears further note that consumer confidence is increasingly fragile with the declining housing market and inflation holding stubbornly. Couple that with more interest rate hikes to come and pressure on purchasing power from high energy prices expected this winter, the bears think the outlook for consumer spending during the holidays and first part of 2023 are rapidly deteriorating.

Many Wall Street insiders are also a bit worried about the weaker forecast for 2023 that will continue to unfold in the days and weeks ahead.

Morgan Stanley yesterday issued a warning that earnings expectations remain too high and predicts the S&P 500 will be down nearly 3,000 to 3,300 by the end of the first quarter of 2023 amid a “recession benefits” much deeper. Goldman Sachs analysts said in a recent research note that they had lowered their 2023 earnings growth forecast for S&P 500 companies to 0%, from a previously expected increase of +3%, noting that margins Q3 “weaknesses” presaged “a headwind” next year.

Nearby, investors are very eager to see third quarter results from Advanced Auto Parts, Home Depot, Lowe’s, Walmart, Target, Macy’s, Kohl’s, Foot Locker and Ross Stores this week, driving a wave of revenue for retailers. Remember that Target and Walmart are considered “indicators” for the retail industry as well as the broader economy, so investors will pay close attention to their details.

I suspect Home Deport and Lowe’s will also be heavily watched. There are also big tech wins later this week which will include Cisco, Nvidia, Palo Alto Networks, and more.

Data to monitor

In economic data, Empire State Manufacturing and the Producer Price Index both came out today. On the subject of the war in Ukraine, President Volodymyr Zelenskyy triumphantly marched through the streets of the newly liberated city of Kherson last night, hailing Russia’s withdrawal as the “beginning of the end of the war”, but also acknowledging the heavy price the Ukrainian troops are paying in their strenuous efforts to fight back.

As for China, we continue to see data that rather confirms an economic slowdown.

Three indicators on China’s economy in October beat expectations and marked a slowdown from September, according to data released overnight by China’s National Bureau of Statistics.

At the same time, Covid is said to be really on the rise in Beijing and the southern city of Guangzhou. Virus testing requirements to enter some public places in the capital are said to have been tightened again in recent days.

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