The end of the year is approaching and as always we take stock of the past 12 months and hazard predictions about the next ones to come.
If 2022 was a year to sell on strength, 2023 will be a year to buy on weakness in view of a generalized recovery in 2024. On his podcast “On the 4th floor”Alessandro Fugnoli, Kairos Strategist, advances his forecasts for 2023, emphasizing that, never like this year, there is a strong dispersion in the estimates, given the complexity of the phase we are going through.
Inflation trend, dollar strength or weakness, interest rate forecasts, economy stability and related monetary policy decisions by Central Banks. All these variables will lead to tensions and volatility in the markets.
So how to face the new year?
“For 2023, in any case, the broadest agreement of all is, again, that inflation will drop significantly and return to close to 2% by the end of the year”, said the expert according to whom “Those who go as far as 2024 see a further descent. Here perhaps the optimism is excessive. Thus writes the analyst according to whom 2024 is in fact foreseen by everyone as a year of strong economic recovery, which is usually hardly accompanied by a drop in prices”.
The idea that the dollar will weaken is also unanimous. However, there is no agreement on when and how much. For some it has already reached its maximum, for others it will reach it in the first part of next year. For some, the descent will be in 2023, for others in 2024. Then there are those who see it stop at 1.10 against the euro and who sees it weaken to 1.20 in 2024.
For our part, rather than making a definite forecast, we highlight a tension that will accompany the whole of next year. We are talking about the tension between a market that will try to anticipate and immediately celebrate, as it has already begun to do in recent weeks, the approach of the next positive economic cycle and the central banks, which will instead try to tone down the enthusiasm and not to lower rates before we are certain that the inflation containment is lasting.
This tension will bring volatility to the markets. In order not to fall victim to it, it will be advisable not to run after premature increases in order to instead be able to buy without too much hesitation in moments of disappointment. These moments will come when the market, having stretched too far, will have to realize that rates will not be lowered immediately and that, at some point, the economy will slow down.
And the stock market forecast, says Fugnoli “as always, it remains the most demanding of all because, in addition to all the factors we have already listed, it also requires an estimate of the company’s profits, which are unlikely to grow compared to this year. In any case, the forecasts for 2023 that have been published range from a modest decline in the indices to a 10 percent recovery”.