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

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

The Wall Street investment bank sees a choppy decline for stocks more likely before eventually 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 by 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 (excluding Japan) index may rise by 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 soaring inflation, stoking fears of a recession.

The Goldman Sachs report came amid a long-lost rally in markets, driven by weak U.S. inflation data and news of an easing of epidemic restrictions in Asia, with multiple global indices entering a technical bull market. However, U.S. stocks underperformed as Fed officials reiterated their view of continuing to tighten policy.

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

This view is basically in line with that of Morgan Stanley’s Michael Wilson, who reiterated that U.S. stocks will end 2023 at almost the same level as they are now, and that the process of achieving this goal will also be full of bumps. There may be a sharp drop in the first quarter.

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

As the bear market has not yet fully unfolded, 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 risks and well-off families.