Market preview – week of Jan. 3, 2023

Weekly Market Preview – Jan. 3, 2023

Welcome to 2023. Hope we all get through it alive.

For the past 14 years we have published a weekly market preview that summarizes the price action in the S&P500, and in the futures markets for oil and gold. If you’ve been reading them, you know those previews are quite detailed. We give specific price levels for what we expect to happen in the week ahead.

I can’t do that this week. The year-end activity in US markets we follow has been disturbing and frightening. The price movement has no sense of direction and is too uncertain to make projections for the coming week. I’ll have a better idea after the market opens and there is better evidence of what will happen next.

But I do have some thoughts about the broader trends for the year 2023.

Outlook for 2023

I am very pessimistic about the markets and about the way the world is moving.

I think most commentators have not given enough weight to the negative possibilities, not only for external events like the war in Ukraine, but also for internal market head-winds like continuing inflation, higher interest rates, and less obvious situations like reductions in stock buybacks from corporations.

This is likely to be the year of retracement, not the year of expansion. If there is any kind of sharp rally in the markets this year it will probably be followed by a sharper decline. I don’t know if 2023 will be the year the market crashes, but I’m pretty sure it won’t be the year it rallies.

Are any market sectors hopeful?

The tech stocks have had their big runs and are consolidating now. I don’t see any signs of a similar hot new sector developing. Oil? Maybe, but not enough to drag the whole market up.

Any positive market effects from the surge in electric vehicles will probably slow down or die in 2023. That wave may have passed.

The US government wants to save the environment but is reducing cash incentives for buyers of electric cars, which will make them more expensive to buy. The cost of electricity will go up, which will make them more expensive to operate.

That’s not positive for manufacturers. Tesla, for example, has invested hundred of millions in a new factory in Shanghai but production is hopelessly snarled.

Will China save us? Unlikely

Any hope that the Chinese economy will suddenly grow and boost global markets is a mistake. China is in much worse shape than Western commentators can imagine.

The social unrest and disappointment with the government’s handling of the Covid crisis is extremely strong. There is no sense of optimism or moving forward. China will not bail us out. I don’t think anyone will.

But we can prosper anyway

Fortunately we are traders, not investors. We have the ability to make money whether the market goes up or down.

Here’s hoping we can all do that in 2023. We’ll do our best to help you.

— Nat









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