Goldman Sachs: Don’t rush to buy funds, the performance of global stock markets in 2023 will still not be very good

Goldman Sachs issued a warning on Monday local time that global stock markets still won’t perform very well in 2023, and investors hoping to enter the market now to buy the funds will be disappointed. The main reason is that the deterioration of the global economy has not yet bottomed out, the Federal Reserve-led central bank is still raising interest rates, and interest rates have not yet reached their peak.

The Wall Street investment bank sees a choppy decline in stocks more likely before bottoming out next year. By the end of 2023, the S&P 500 will hover around 4,000, implying a gain of less than 1% from current levels.

In addition, the Euro Stoxx 600 index will rise about 4% next year to close at 450 points. Goldman Sachs also expects Asian stock markets to outperform the broader market next year, and the MSCI Asia Pacific (ex-Japan) index could rise 11% to 550 points by the end of the year.

Global markets have experienced historic turmoil this year, with major central banks aggressively raising interest rates to curb rising inflation, stoking fears of a recession.

Goldman Sachs report comes amid a long-lost rally in markets, led by weak US inflation data and news of an easing of epidemic restrictions in Asia, with more global indexes entering a technical bull market . However, US stocks underperformed as Fed officials reiterated their view to continue tightening policy.

But Goldman Sachs noted that this recent rally is unsustainable, as stocks typically don’t recover from lows until the economy deteriorates and earnings growth slows.

This view is broadly in line with that of Morgan Stanley’s Michael Wilson, who reiterated that US equities will finish 2023 at nearly the same level as they do now, and that the process of achieving that goal will also be fraught with hurdles. a sharp decline in the first quarter.

Wilson said in a note on Monday that he sees the S&P 500 drop as low as 3,000 in the first quarter of next year, down 24% from Friday’s close. He believes, “Risk to gain has not been valued by the market, and this will ultimately be the catalyst to push US stocks to new lows.”

Because the bear market hasn’t fully developed yet, Goldman Sachs analysts recommend focusing on high-quality companies with strong balance sheets and stable profit margins, as well as energy and resources stocks with limited valuation risk and affluent households.