Message to bears + 2023 Year End targets from major banks

by Retirement Advisor | Dec 1, 2022 | Resources

Dear fellow bears, I am in as much pain as anyone else. Thankfully, my put options expire in September and I have the capacity to wait out the irrational holiday rally. I may even add to my position if things go up enough.

In the end, a recession for next year is pretty much 100% and stocks have not priced any of that in. Its a hill I am willing to die on. In the meantime while the bulls enjoy their short lived period of joy and exuberance, here are some 2023 market commentary from some of the top investment banks.

**Goldman Sachs**

* 2023 Bear Case: 3150 Trough -> Year End 3750
* 2023 Base Case: 3 Month 3600 -> 6 Month 3900 -> Year End 4000
* FY23 to be highlighted by a lack of earnings growth as revenues grow y/y but margins are pressured
* Sharp inflection in the cost of capital to weigh on valuations
* Tightening cycle to end in May at 5.0-5.25%
* Base case sees a soft landing, but a hard landing remains a distinct risk
* Favors defensives with low rate risk (healthcare, consumer staples, energy)

**Morgan Stanley**

* 2023 Bear Case: Year End 3500
* 2023 Base Case: 3 Month 3000-3300 -> Year End 3900
* Flexibility is now critical as street earnings expectations remain far too high vs reality; margin expectations also far too high
* Fed pause to coincide with the arrival of a recession (payrolls are negative); to peak at 4.625% in Q1 2023
* Does see a return to growth in 2024 off positive operating leverage returns
* Favors Defensives such as staples, healthcare, utilities, and some energy

**JPMorgan**

* 1H 2023 Base Case: To bottom around 3200-3500
* Expected current rally strength to stall in the 4100-4200 area; notes economy not at imminent risk of recession
* Largely dependent on inflation prints and market rate expectations; hot inflation would raise expectations of higher/longer rate hikes and vice versa for cold inflation prints
* Base case sees a 5% Fed funds rate, a US recession in late 2023, and some easing soon after
* Bear case sees a global recession in 2024 as inflation does not normalize in 2023 and rates are forced to rise materially further
* Notes there is a lot of room for forecast errors & believes core CPI is the key in forecasting terminal rate eases

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