Investors may be happy to close the door on 2022 after the worst year for stocks since the 2008 financial crisis. Now, Wall Street is assessing whether the new year will further punish investors or if it could offer some respite to battered portfolios.
The first trading day of 2023 kicked off on a downbeat note. The S&P 500, which fell more than 19% last year, closed down 0.4% Tuesday, while the Dow Jones Industrial Average ended the day essentially flat and Nasdaq fell 0.8%.
Last year’s decline has led to trillions in wealth losses and caused the typical 401(k) to shed $1 of every $5 through the third quarter, according to Fidelity. Stocks tumbled last year amid concerns over the Federal Reserve’s regime of interest-rate hikes to tame the highest inflation in four decades, moves that have made it more expensive for businesses to borrow and for consumers to buy big-ticket items like homes and cars.
Although inflation remains historically elevated, it is now cooling. The Fed has signaled that it plans more modest interest rates this year than the series of jumbo increases it ordered up in 2022.
“Looking ahead, there is still a lot of uncertainty — the war continues in Ukraine, China is starting to ease its policy of zero COVID,” Bruce Helmer, co-founder of Wealth Enhancement Group, told CBS station WCCO. But, he added, “There are reasons for optimism.”
Here’s what Wall Street pros are predicting for your portfolio in 2023.
Could the market go lower?
Yes, according to Comerica Wealth Management.
“We are of the opinion that for a true low to be achieved, it must be successfully tested, thereby forming a ‘double bottom’,” the bank said in its 2023 market outlook.
Several bear-market rallies last year means that the market may not have truly tested its bottom, the group said in the report. “For a classic ‘double bottom’ to form, we look for the 3,500 range to act as the next level of major technical support for the S&P 500,” it noted.
That means the S&P 500 — now trading at about 3,800 — could slip another 8% before hitting its bottom, which would mark another painful dip for investors. Other Wall Street experts agree that more pain could be in store early this year, with JPMorgan forecasting that the market will “re-test” the lows of 2022 in the first half of 2023.
Is a stock rebound in the cards?
Although the first months of 2023 may be painful, the stock market could recover later in the year, JPMorgan forecasts.
The market could suffer early in 2023 due to a weaker U.S. economy and rising unemployment as the Fed’s rate hikes ripple through Corporate America and impact household finances.
But those headwinds, which experts warn could broaden into a recession, may convince the Fed to pause on its series of rate hikes, JPMorgan noted. That could drive the stock market higher, pushing the S&P 500 to 4,200 by the end of 2023, or about 10% higher than its current levels, the investment firm predicts.
How would a recession impact the stock market?

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