Big rollover! Wall Street's 2022 US stock forecast encounters Waterloo, what will happen next year

　　In less than 10 trading days, US stocks will end trading in 2022.

Affected by geopolitical factors, interest rate hikes and other factors, the three major U.S. stock indexes will end their previous three-year upward trend, which also caused major errors in the forecasts of institutions that were generally optimistic about the market at the beginning of the year.

　　Wall Street is overvaluing the S&P 500's performance by nearly 40% in 2022, the most since 2008, according to data compiled by FactSet.

As the Federal Reserve slows down the pace of raising interest rates next year and may end the cycle of raising interest rates, the global economy is facing greater challenges. What is the agency's forecast now? Can it save face?

　　Wall Street: A slight rebound from low to high next year

　　Wall Street has generally become more cautious in its forecasts for next year as the Federal Reserve extends its rate-hiking cycle to combat inflation, keeping volatility in risky assets.

　　First Financial Reporters found that the mainstream view of the market is that in 2023, the U.S. stock market will be low and then high, and the closing point will be slightly higher than this year, but the deviation between institutional expectations is relatively large.

Specifically, the most optimistic is Deutsche Bank, which sees a year-end target of 4,500 for the S&P 500, and the most pessimistic is Barclays, with a target of 3,675.

The average forecast point is 4038 points, which is 5% higher than Wednesday's closing point.

　　Institutions generally believe that as the U.S. economy will fall into recession in the middle of next year, as corporate profits decline and the unemployment rate rises, stock market valuations will be further affected, which in turn may lead to a low in the first half of the year.

　　In the context of the recent increase in volatility of major economic data, concerns about the risk of a hard landing have begun to increase.

For example, Richard Clarida, the former vice chairman of the Federal Reserve and now the global economic adviser of Pacific Investment Management Corporation (Pimco), warned after last week's meeting on interest rates that a mild recession in the United States looks like a challenge.

　　Jonathan Pingle, chief U.S. economist at UBS, said in an interview with China Business News that the U.S. economy will experience a hard landing in the middle of next year.

He believes that with the release of monetary policy, the impact of high interest rates on credit card consumption and corporate investment and financing demand will further escalate in the next few months.

This imbalance caused by restrictive interest rates will be enough to push the economy into contraction next year.

His forecast is that the turning point will occur at the end of the first quarter of next year or the beginning of the second quarter, which is expected to last for 8 months and cause a 1% decline in real GDP.

　　Chris Senyek, chief investment strategist at Wolfe Research, is more pessimistic, saying inflation will persist stubbornly, leading to a deep recession.

"We believe that the (monetary) tightening that has occurred is sufficient to push the U.S. economy into recession, with U.S. real GDP growth at -2% to -3% sometime in 2023," he wrote in a note.

　　There are also not a few views that the United States is on track to achieve a mild recession.

Bob Schwartz, a senior economist at Oxford Economics, told China Business News that the cooling trend in inflation will continue with the help of continued supply chain repairs and slowing growth.

He expects that the impact of monetary policy will be further manifested in the first half of next year. From the second quarter, the US economy will fall into a short-term mild recession, and the labor market will be the key.

　　JPMorgan expects the U.S. to enter a mild recession next year as rate hikes could cost more than 1 million Americans their jobs.

Weakness in the labor market will convince the Fed that it has generated enough inflation-reining momentum to ease the pressure to tighten policy further.

　　As one of the most accurate analysts on Wall Street this year, Morgan Stanley's chief U.S. stock strategist Michael Wilson's latest opinion may be worth referring to.

In his latest report, he described the market in 2023 as a "tale of two halves".

Wilson believes that the short-term U.S. stock market may repeat the plunge in 2008, because the market has not yet fully priced in a recession. What will happen next will be a recession in corporate earnings. The S&P 500 will bottom out to 3000-3300 in the first quarter of 2023. This will be an "excellent buying opportunity", and the index is expected to rise back to 3900 points by the end of the year.

　　Can the Federal Reserve Become a "Savior" Again?

　　Last week, the Fed revised down its economic growth forecast in its economic outlook, and the rate forecast was more hawkish than in September.

Federal Reserve Chairman Powell said at a press conference that the fight against inflation will persist until the task is completed, and a restrictive policy stance may be required for some time in the future.

　　Judging from the resolution statement and the latest statements of subsequent officials, the Fed has not released any signal to cut interest rates next year, even if it may pay the price of the economy and unemployment rate.

New York Fed President John Williams, the No. 3 Fed official and a Powell ally, said on Friday that inflation had begun to ease, but that would need to ease further before the Fed could ease the brakes on monetary policy.

　　Contrary to the Fed, market expectations for a rate cut next year remain high.

CME Group's CME interest rate monitoring tool shows that the Fed will raise interest rates by at least two 25 basis points next year, and the terminal interest rate will reach about 4.85% by the middle of the year, which is 25 basis points lower than the Fed's latest forecast. By the end of 2023, the final value of interest rates will fall To around 4.45%, which is equivalent to 1-2 interest rate cuts.

　　This is why many market participants are optimistic about the market next year. As inflation subsides and unemployment rises, the Fed will eventually "change" its policy stance sometime next year, which will help support stocks and valuations.

Marko Kolanovic, chief global markets strategist at JPMorgan Chase & Co., believes that market and economic weakness could emerge in 2023 due to excessive central bank tightening. Start the turn signal.

　　As the most optimistic institution, Deutsche Bank believes that with the impact of the US economic recession, the index plunge will appear in the middle of the year.

After the panic is vented, the index will gradually rebound to recover, and the S&P 500 is expected to rebound to 4,500 points by the end of the year.

　　Historical data is also expected to support the outlook for next year.

As a well-known bull in U.S. stocks, Fundstrat Global Advisors research director Tom Lee expressed optimism in his 2023 forward-looking report.

He found that since World War II, it is very rare for the U.S. stock market to fall for two consecutive years.

Double-digit pullbacks are likely for the three major stock indexes this year, and historical data shows that U.S. stocks tend to be followed by particularly sharp rebounds, with the S&P 500 averaging a 13.5% gain the following year.