When trading for numerous New York Stock Exchange companies had to be delayed on Jan. 24, it was a perfect symbol for the stock market year so far.
Yes, it’s still the beginning of the year, but its first year has already been a wild ride. Stuart Simonsen of Billings, MT says that the market had been previously strong for much of January, fueled in part by numbers indicating a possible inflation slowdown.
On the other hand, investors seem to fear that the repeated interest rate hikes last year could make this the year that America dives into a full-on economic recession.
Strategists at Ned Davis Research are predicting a 75% chance that an economic slowdown will occur in America during the first six months of 2023 — but also say there are indications that a softer landing could take place as well. Bloomberg is forecasting an economic retraction in this year’s second and third quarters.
That makes it, the company said, difficult for stock market investors to make decisions.
A slew of earning reports will likely have an impact on the stock market for at least the next few months. This includes earning results from IBM, Microsoft, and Tesla.
One recommendation for investors? Small-cap stocks, which Kevin Rendino, 180 Degree Capital’s CEO, says he has already begun to snap up as recession fears loom.
U.S. Stocks Compare Unfavorably with Global Counterparts
There was good news and bad news on the stock market in January.
While there was a 6.3% rise in the Russell 3000 benchmark for the U.S. stock market since October, that number is far below the MSCI World ex-U.S. index (which rose by over 22%) and the pan-European Stoxx 600 (up 13%). The bottom line: The U.S. stock market has been underperforming for months on the global stage.
Low retail sales and industrial production seem to be contributing to the low numbers and the sense around the world that the American economy is slowing. Compare that to Europe, where lower energy prices and positive data, paint a far rosier picture.
Moving Away from a Bull Market
Heading into the second month of 2023, the world’s economy appears to be shifting away from a bull market with high growth to one that will soon bring stock valuations down throughout the entire year.
That’s according to Gateway Credit Capital CEO Tim Gramatovich, who doesn’t expect the stock market to be lifted up by conditions that have improved investment conditions in the past.
Gramatovich says that conditions such as spent dividends on technology and globalization and slowed population growth are among the top shifts making a big impact on world market trends.
Nasdaq is a Bright Spot
It’s not all gloom and doom at the U.S. stock market. The Nasdaq composite experienced its fastest start since 2019, up over 6% in January.
At the beginning of 2022, Nasdaq was down 9.5% during the same time period. An expected end to interest rate hikes and lowered account for much of the Nasdaq ride so far this year. Also a factor – big gains from companies including Indexx Laboratories, Alphabet, and Warner Bros Discovery.
