By
Steve Muchoki
April 16th, 2024
While the US Fed’s Funds Rate is getting near its peak, the drivers of the economy may shift focus into reviving the stock market after winning the fight against inflation.
Dear readers, welcome to the last episode of the Coinspeaker Advent Calendar Series where we wrap up our outlook with a look at the Stock Market for 2023. Over the past three weeks, we have dived and given the forecast for different assets including FAANG stocks, Bitcoin (BTC), Ethereum (ETH), and the Nasdaq Composite (INDEXNASDAQ: .IXIC).
One thing is sure though, every of these asset’s growth and future performance is generally hinged on what will befall the stock market in the coming year. There were a lot of ups and downs in the US stock market as well as in most other developed and developing countries.
The strain was typically stirred by inflationary growth across economies as well as the devaluation of fiat currencies across regions. With this inflation, Central Banks tried to step up to control the growth, and by hiking interest rates, a whole new hawkish dimension was lent to the market that further cushioned access to capital and the overall spending by organizations.
While the trend for the market was gloomy, Central Bank officials took solace in the knowledge that their measures were yielding the desired results in tapering inflation. While corporations and stocks nosedived, regulators were comforted that the masses could spend less to gain more from their earnings.
Comprehensively Bearish Stock Market
With the losses experienced in the stock market this year, the S&P 500 Index (INDEXSP: .INX) is on track to end the year with a 17% slump, the harshest drop since 2008 when it fell by more than 38% during the great recession.
On average, the S&P 500 is known to always close the year with mild gains and in the advent of a loss, chances are that the following year will erase the gains implying that the downtimes are best described as a good buying opportunity for investors looking into the long term.
Besides the S&P 500, the duo of the Dow Jones Industrial Average (INDEXDJX: .DJI) and the Nasdaq Composite are also bound to end the year in double-digit losses. By the natural trend, this is supposed to serve as a springboard for good growth in the coming year. However, actualizing this potential rebound will depend on how well inflationary growth responds to the Central Bank’s monetary moves in the first quarter of the year.
Outlook for the Stock Market in 2023
For the stock market to see any observable growth or leap in the coming year, there must be some form of slowdown by the Fed. Interest rate hikes do not help stocks as the companies do not invest capital to expand as they should, a situation which in turn impacts causes revenue and dividends to stagnate.
While the US Fed’s Funds Rate is getting near its peak, the drivers of the economy may shift focus into reviving the stock market after winning the fight against inflation. The earlier the fight is won next year, the faster more attention can be placed on implementing the policies that can help drive sanity into the stock market across the board.