Last year proved to be a challenging one for stock investors, as it was throughout the wider economy as high energy prices, rising inflation, supply chain and labor issues and interest rate hikes all produced significant headwinds for investors and traders alike.
There were some exceptions. The online gambling industry continued to expand with an increasing number of bank transfer casinos – who provide safe and secure casino payments, and sports betting platforms servicing a growing market. Energy companies also did well, along with parts of the technology sector. Generally, though, it was a tough year. Will 2023 be better? Here are some tentative predictions for the year ahead:
US recession possible
Recession has been a constant danger across developed economies in recent months and there remains a possibility that the economy will fall into recession at some point this year.
One of the most frequently employed predictors of recession is the behavior of the bond yield curve. Usually, long-term treasury bonds have a better return than short-term bonds, but when this relationship is inverted, as it was in 2022, this can often be a predictor of a recession. In fact, every significant recession since 1945 has been preceded by this type of yield curve behavior. Last year, the size of the inversion was the biggest since the early 1960s.
The bear market will continue
It seems likely that US stock investors will still be facing a bear market at the end of 2023. This is primarily because the Federal Reserve cannot do what it would usually do in response to a struggling market or economy and lower interest rates. With inflation at a historic high, the reverse is more likely. Even if the Fed was in the position of being able to lower interest rates at some point in the next few months, it would be several more months before the market took an upturn.
Inflation falls further than predicted
The focus for much of the last few months has been inflation, but given the overall fragility of the US economy and the consistent rate hikes from the Fed, US inflation seems likely to begin to fall rapidly at some point in 2023. A drop in energy commodity prices, which traditionally suffer in an economic downturn, will assist with that decline. That doesn’t mean, however, that the Fed will change their policy of higher interest rates, which will remain in place for a while yet.
Gold mining performs strongly
There is a strong possibility that gold mining stocks could outstrip the wider economy and perform strongly in 2023. There are several factors that could contribute to this strong performance, including the ongoing economic uncertainty, which tends to result in investors moving into more ‘stable’ assets, and the current high levels of inflation. Gold markets often perform strongly in the early months of a bull market, so a resurgence in this commodity could be an important signal for investors.
Count on healthcare
The healthcare sector should continue to be a top performer throughout the year. 2022 was a mixed picture for these stocks as the Covid-19 pandemic receded, but in the longer term, new technology and increasing lifespans will continue to drive growth in this sector, regardless of the wider economic conditions. The demand for new drugs and new medical technology could make this sector particularly resilient over the next few months.
Tread carefully with energy stocks
Stock investors should tread carefully when it comes to energy stocks in 2023, for a couple of reasons. For starters, economic downturns tend to lead to reduced energy demands, which will hit the price of oil and natural gas. There was also a marked drop in those prices in the latter part of 2022, which has not yet filtered through to gas- and oil-related stocks. When that happens, there could be a significant market correction that could be an unpleasant surprise for some investors.
Toyota is coming for Tesla
Tesla has enjoyed a prolonged spell as the world’s biggest carmaker based on market cap, but that could come to an end in 2023. Toyota is leading the charge and is making significant headway in the electric vehicle (EV) market. Meanwhile, Tesla investors are starting to see signs of weakness in the previously dominant company, as it is hit by supply chain and inflationary problems, and the fact that Elon Musk seems to damage Tesla every time he speaks.
Summary
The story of 2022 was of overall volatility and turbulence in the stock market, with pockets of positivity. That is likely to continue through 2023, with the hope that by the end of the year, the US economy will be in a stronger and more hopeful position.
I am an experienced journalist and writer with a career in the news industry. My focus is on covering Top News stories for World Stock Market, where I provide comprehensive analysis and commentary on markets around the world. I have expertise in writing both long-form articles and shorter pieces that deliver timely, relevant updates to readers.
