- Wall Street has turned unusually bearish on the stock market as their 2023 predictions arrive.
- Ongoing fears of an imminent economic recession have paralyzed Wall Street strategists.
- For the first time in more than 20 years, Wall Street expects a flat year for stocks in 2023.
A 10% annual return for the S&P 500 has been a tried-and-true target Wall Street strategists have often gravitated towards when they roll out their year-ahead stock market outlooks.
But this year, that’s not the case, as more and more 2023 stock market predictions show an unusually gloomy outlook for the S&P 500.
The negative outlook seems to be mainly driven by fears of an imminent recession, as the Federal Reserve’s outsized interest rate hikes — combined with elevated inflation — are expected to finally take a bite out of the consumer’s spending power.
And Wall Street isn’t alone in these fears. A recent survey from the Conference Board found that 98% of CEOs expect a recession sometime in 2023.
But for much of Wall Street to be bearish on stocks heading into next year is no doubt rare, even in the face of a potential recession, according to data from Bloomberg. The data shows that 2023 is the first year in more than two decades in which Wall Street strategists expect a flat year for stocks.
Even heading into 2009, when the global financial system was on the brink of collapse, Wall Street strategists expected a 10% annual return for stocks.
Of course, a common belief on Wall Street is that sentiment follows price. And with the S&P 500 on track to finish the year down more than 15%, it’s no wonder Wall Street is bearish on stocks going forward, as the constant ups and downs of the market this year have conditioned investors to be more skeptical of potential rallies.
A top-down analysis of 17 Wall Street strategists’ predictions shows the average S&P 500 price target for the end of 2023 is just 4,009, which represents potential upside of less than 1% from current levels.
The predictions show a relatively balanced risk/reward profile for stock market investors. The lowest estimate so far comes from BNP Paribas, which has a 3,400 price target set. A decline to that level represents 14% potential downside and would take out the S&P 500’s mid-October lows of 3,491.
Meanwhile, the highest 2023 year-end price target is 4,500 from Deutsche Bank, which represents potential upside of 14% from current levels.