Will the Market Rally Last? Here Are How Analysts Think.
Technology stocks may be enjoying a big bounce to kick off 2023, with the $Nasdaq Composite Index (.IXIC.US)$ up almost 12.6% on the year through Thursday, even with this week's pullback. Should investors hold their breath for a sustained stock-market rally?
Morgan Stanley
Stocks have rallied despite worsening earnings and economic expectations, creating "massive disconnects" that threaten market stability, Morgan Stanley Wealth Management's Lisa Shalett warns.
She attributed the recent rally to potentially short-term technical factors, such as short sellers buying back stocks to cover bearish positions and the seasonal tendency of investors to flock to the market's biggest losers from the previous year, which is causing the market deviates from the fundamentals.
JPMorgan
$JPMorgan (JPM.US)$strategist Marko Kolanovic reiterated Monday that investors should fade last week's Federal Reserve-induced stock-market rally, arguing that the US economy's disinflationary process could just be "transitory."
Kolanovic sees the first three months of the year likely marking an “inflection point in the market,” with an air pocket during the second and third quarters, he wrote in a note to clients. That will be followed by renewed deterioration in fundamentals through the end of the year since the central bank will likely keep interest rates high for some time, he added.
"We advise to use the current strength in order to reduce exposure," a team of strategists led by Kolanovic wrote, pointing to how investors piled back into speculative assets from crypto to meme stocks.
Wells Fargo
Investors should brace for the $S&P 500 Index (.SPX.US)$ index to keep oscillating in the 3,700-to- 4,300 range, as it has been for more than a year, according to strategists at the $Wells Fargo & Co (WFC.US)$ Investment Institute, due to a continued "disconnection" between the market's view on where rates are headed and what has been outlined by the Fed.
"The Fed has communicated that the peak in rates is near, but, for a year now, equity markets consistently have extrapolated this message to mean that rate cuts are soon coming, the team wrote, in a Thursday client note, "Inflation past its peak only encourages this view among investors. But a slower rate of interest rate increases -- or even a pause -- is not the same as rate cuts."
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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scrapqueen : I agree, NO rate cuts are coming this year, NO pivot at all.
The best we can hope for is a slowing of the current rate increases, which is what we have seen take place. I believe it’s possible, we will actually see an increase in rate hikes at some point later this year if macroeconomic conditions show inflation, rising again?
But for now rate hikes will continue at the current rate AND definitely NOT going to have rate cuts as the Fed has stated repeatedly that they plan on maintaining these restrictively high rates for quite a period of time in order to ensure inflation doesn’t flare back up and become a worse problem that will be even more difficult to try to control.
KingKing scrapqueen : Ppl