After the market swoon in 2022, analyst Sylvia Jablonski said Tuesday that a pause in the Federal Reserve’s interest rate hikes and surprisingly strong corporate results could prompt the markets to soar out of bear territory in 2023.
“There could be some potential tailwinds [to drive market gains]: one would be Fed stopping, two would be margins holding up,” the Defiance ETFs CEO and CIO told CNBC. She added that corporate balance sheets are “looking good” as well, “even with the Fed hikes in play” early in the year.
Later in 2023, Jablonski predicted that “choppiness” could continue, but the Fed’s halting of its rate hikes will give fuel to the broader market. Meanwhile, tech stocks will likely rebound on positive quarterly results and U.S. stocks will get a boost from the reopening of the Chinese market after the current COVID-19 wave, she said.
Jablonski also pointed to historical precedent for evidence of a potential rebound. She noted that the S&P 500 tends to rise after a double-digit decline. However, given the conditions headed into 2023, she predicts growth around 9% to 12% — far less of a rebound of than was seen after the 2008 recession or in the post-COVID period.
A rebound in 2023 would follow the worst performance by the major U.S. equity averages since 2008, with S&P 500 (SP500) falling around 20% in 2022, despite hitting an all-time high last January. Meanwhile, the Nasdaq Composite (COMP.IND) dropped more than 30% and Dow Jones (DJI) retreated approximately 9%.
For more on market scenarios, see why SA contributor JR Research says “We move into 2023 with cautious optimism“.