Stock Market Forecast for the Next 6 Months
Goldman Sach’s chief economist Jan Hatzius said in a release today that “The recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession.”
GS has revised its outlook for a recession down to 20%. Yes, as I mentioned, we don’t need a recession. It’s a manufactured recession to serve political gains, and not to control inflation from the pandemic stimulus rollout. We’re waiting for US Companies to be freed from their shackles to produce, process, manufacture and transport products to world markets.
GS seems to believe the FED won’t overshoot, when it appears they fully intend to.
Their prediction comes after a positive consumer sentiment report, falling inflation numbers, strength in the housing market, and an ongoing boom in factory building in the U.S. Hatzuis believes inflation will ease further in the fall which it almost certainly will do.
Tom Lee of Funstradt is talking 5000 for the S&P by year-end. That’s a gutsy call given things are souring this summer. Tightened lending may be the big factor as small businesses can’t get capital. If sales should slip too heavily this fall, they will be in danger.
For the last half-year forecast period take special note of:
- government spending levels
- Fed rate 2024 intentions (2023 will have another 50 basis point increase)
- S&P 500 corporate earnings
- BLS employment and earnings trends (wages up 4.4%)
- Russell 2000 small business trends (looking good again)
- energy prices (oil prices and natural gas prices)
- rising US dollar
- deepening economic and political rift with China
- dangerous new deals with enemy countries by Biden
The NASDAQ and the S&P are still up 26% and 12% respectively this year to date, while the Dow (+2.3) and Russell 2000 (+.5%) have been badly injured by high rising rates, balance sheet tightening, and the global economic slowdown. The path ahead may be volatile yet the markets are performing well beyond expectations, which were for 1% to 3% growth.
Not mentioned by Goldman Sach’s and media outlets, is that a 2024 recession would cost the Democrats their Presidential re-election bid. Which means they will need to prevent a recession.
Other economists speak of a rolling recession trend with a changing timeline/phasing. The lagging effects are happening but it’s the unexpected extension of high rates that will ultimately take its toll, perhaps on the Russell 2000 small caps. At some point, investors will get hit as two more FED hikes take place.
Given the amount of money in money markets ready to jump into US stocks to feed US company productivity and ingenuity, and reignite wages and inflation, the FED will try to keep the brakes on, until they’re told to let go.
Take a stock like Tesla for instance. Right now it looks great, but the downturn in Q4 and Q1 2024, will cut deeply into sales. Today’s TESLA earnings report disappointed investors, even though total revenue rose 47% to $24.93 billion. Expectations of profit are extremely high and unrealistic, and that means a market pullback is possible. Some are calling for the S&P to drop by almost 1000 points by year end. There’s much forecast division among stock analysts and economists. In 5 months, we’ll find out who was accurate. They will gain a lot of credibility among investors.
It’s a key stock in the NASDAQ, over-weighted, and if it falls, there’s not much to replace it. The magnificent 7 will not be so glorious at some point, regardless of what Tom Lee thinks. The FED really wants to sink this ship fast.
3 to 6 Month Forecasts
The 3 month and 6 month projections are of keen interest to stock market investors. It’s the most relevant and immediately useful for them. And over in the real estate market, homebuyers are poring over projections for the next half year forward to the next 5 years, to make their big homebuying decision. And if the real estate forecast is relevant, it seems to be suggesting a turnaround as home prices head upward.
Market volatility won’t be disappearing anytime soon. This is mostly due to political strife and how the US government is mismanaging a number of critically important issues such as:
- Debt ceiling crisis — paying high debt payment in a higher interest rate environment
- Excessive trade deficits — dealing with China professionally and avoiding
- Hampering of US productivity — supporting US manufacturing and commercial activity
- Out of control government spending – threatens more debt and credit downgrades for the US government
- High interest rates as inflation cools slowly — overshooting aim and launching a recession
Macroeconomics suggest the next 6 months won’t be good for stock valuations and this dip might be the right time to buy the bottom. Few have confidence in the NASDAQ stocks it appears.
Again the headlines back before the New Year said this below. CNN got it right and Yahoo Finance couldn’t get it right. At this point, the next 5 month period leads us to the end of the year.
Goldman Sach’s Outlook 2023
Goldman Sach’s David Kostin reported their outlook for 2023 is for less pain but less gain. They believe zero earnings growth translates to zero stock price growth. They predict 2023 S&P 500 earnings per share will stay at $224 and the index will finish at 4,000, by end of 2023. Goldman’s three-month target for the S&P is 3,600. They are suggesting a soft landing for the economy.
“Our strategists expect the benchmark to fall about 9% in the next three months before rebounding after the Federal Reserve’s tightening cycle ends in May…Our strategists favor stocks that aren’t as sensitive to changes in interest rates, like companies in healthcare, consumer staples and energy.” from news release on Goldman Sachs website.
With the lower price of energy, vast amounts of US consumer cash ready to spend, and strong corporate balance sheets, it’s not surprising October, November and December will post strong results.
What’s unsettled is how the energy market will play out, how much further rate hikes can go, and whether China will grow.
This 6 month outlook is a pivotal one for investors, providing the context for longer term, 5 year to 10 year investment horizons. Today, this week to 3 months can be misleading but six months gives us a better benchmark. The current market rally in October provides further context for smart investors who see predictions as vital information.
Month by Month Projections (Forecasts.org)
Forecasts.org sees the path ahead as volatile, ultimately with the Dow falling 2000 pts to 32,660.
Trading Economics US GDP Forecast
Trading economics offers their forecast for various GDP factors. Their 6 month outlook is dour for the rest of the year with only slight improvement in early 2024 (1% to 2%), with a downgrade from that point on.
The Economy Will Grow very Slightly
The Economic and Strategic Research (ESR) Group sees GDP contracting 0.7% (annual) in the 4th quarter. They expect real GDP growth to slow but still reach 2.9% growth in 2023.
|Stats courtesy of BEA||2022||2020*||2021||2022||2023|
|Real Disposable Income||-3||0.5||1||1.5||6.2||2.3||-2.7||2.2|
|Real Consumer Spending||4.7||2.6||2.9||2.4||-3.8||8||3.4||2.6|
|Inventory Change (bln chn ’12$)||50||55||60||65||-42||-68||61||40|
|Total Gov’t Spending||2||2.5||3||3.8||2.5||0.8||2.3||4.2|
|Unemployment Rate (%)||4.2||3.8||3.6||3.5||8.1||5.4||3.1||3.3|
|PCE Inflation (%Y/Y)||5.5||4.7||3.7||3.1||1.2||3.9||3.6||3|
|Core PCE Inflation (%Y/Y)||4.5||4.4||3.7||3.2||1.4||3.3||3.6||3|
Over the June to December forecast period, we’re going to see more stock market index records. The Dow, S&P, NASDAQ and Russell are poised to reach their respective records soon. Sure there’s debt based crash talk and volatility test investors convictions. Yet, the momentum is clear and any inflation that occurs might encourage more investment (bond market hates inflation).
Take a good look at the fastest gaining small, mid and large cap stocks with an eye on safety and hedging. Experts believe the market will cool, but they’ve been saying that for years, so you have to take their predictions and projections with a grain of salt. See more on the best tech stocks, 5G stocks, and oil stocks.
CBO Report: Positive for 5 Years
“Specifically, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its pre-pandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025. In CBO’s projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its prepandemic level in 2024.” — CBO Overview of the Economic Outlook: 2021 to 2031.
The final word on the forecast for the next 6 months is volatility, political squabbles, government debt, and a FED that may not take mercy on the US economy in a self-absorbed obsession that’s proven wrong before.
See more on the 2023 2024 2025 Market Projections
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