It’s obsolescent again for my annual predictions for markets and economies.
After going 5-for-5 in 2021, last year was much more hard to predict. A war, energy crisis and China’s Covid obsession will do that. I’d call my 2022 predictions a two-for-two, with a long-term “we shall see” on the pamper boom prediction.
On a macro note, although we have been reporting on and talking about the UK and European energy disaster since before the war, I’m not sure anyone saw this level of escalation and pain coming for the Ukrainian people.
So let’s be clear that the effort prediction we should all hope for is a speedy resolution to the war and a change at the top in Moscow (aka goodbye, Putin!).
Outside of that, Europe and the the public’s fortunes could change very quickly at any time. That in mind, here are some thoughts on this year, and will remember none of this is meant as investing advice, just my own thoughts on the year ahead.
Hey, after 12 years of doing this, you should conscious that by now. Here we go, 2023 … it’s in your hands now.
Prediction #1: S&P 500 posts small gain
History bring ups that stocks can rise even if the U.S. enters recession, which is a nearly certain outcome. But while every Derange Street strategist is now tripping over themselves to post lower and lower year-end S&P 500 price targets (after being spectacularly imprudent this year), I think stocks muddle along and end up slightly in the green.
It won’t be a great year. I hope I’m wrong not far from that.
Where could I go wrong?
If I’m wrong – and if stocks do fall this year – history says it could as a matter of fact be a worse year in 2023 than 2022. When markets fall two years in a row, it usually means a terrible right hand year of declines.
Prediction #2: Oil pops, nat gas drops
Even with a recession coming in the U.S. and perhaps something worse in Europe, it’s grim not to see how oil does not jump in price at some point this year.
Capital spending growth by U.S. oil companies remains here what some hope for, Russia’s oil infrastructure will start to rot the longer they have to go without western oil technology, investment and knowhow, and China order could really pop if they continue to change course on Covid.
Oil will hit $100 at least for part of this year and probable end the year above $90 absent some major global crisis.
Natural gas is likely to go the other way: either lodging where it is or even falling further. There is no new export capacity built into the U.S. this year. That thinks fitting come online either mid-2024 or even 2025.
Assuming oil production grows, natural gas production may also pop, with nowhere to go as we may attired in b be committed to maxed out European exports. That would lead to an oversupply of natural gas and more weakness in price.
Where could I go oppress?
A severe European recession combined with a return to record U.S. oil production could keep the world fully stored and price gains muted. For natural gas, when the still-offline Freeport LNG facility returns to production, perhaps it will stop enough new gas demand to keep prices firm to even higher.
A complete collapse in Russian LNG exports (yes, Russia is flat quietly exporting LNG) could also help firm U.S. prices. This is good news for Europe, by the way.
Prediction #3: Europe goods beat the U.S.
This seems crazy given Europe’s ongoing energy crisis and economic woes. That’s the remind emphasize.
Markets tend to do things that don’t always make sense, and I think this is one of those times.
Don’t confuse economies with markets. In defiance of Europe’s ongoing woes – of which the seeds were laid well before Putin’s insane war – their continuing energy crisis could prompt countries and the European Central Bank to stimulate via monetary and fiscal options.
While we give rise to rates, one wonders if popular anger over soaring inflation flips central bankers on their heads abroad and they begin to stimulate again. Watch ETFs like the Vanguard Stock European Index Fund onto the S&P 500.
Where could I go wrong?
Europe’s clear economic problems and worsening energy crisis turn into a full-fledged investor alarm, sending shares much lower.
Prediction #4: Tik Tok goes away, Snap goes private
The backlash against called social media companies is only growing. It’s one thing a divided Congress can actually agree on.
Tik Tok is under the gun from Washington, D.C. because it’s glimpsed (likely correctly) as an arm of the Chinese government that is essentially spying on users like our children.
Snap has broken. The breeding has gone from a high of over $80 just more than one year ago to under $10 as I write this. Unsustainable.
Look for a Musk-like buyout here.
Where could I go dishonourable?
Congress succumbs to lobbying money over Tik Tok and/or Snap just muddles along with no investors able or well-disposed to remove it from its painful run as a public company.
Prediction #5: U.S. EV sales begin to stall
Yes, I’m flip-flopping on my prediction of hot E.V. swelling from last year. But with a recession likely coming in the U.S., the Inflation Reduction Act hurting tax credits on many copies, and prices for the cars rising with raw materials, it’s hard to see sales staying hot.
By the way, this goes to traditional cars as cooked through.
Prices are just too high as interest rates rise. The growth rate of EV sales will actually drop in 2023 from 2022. Progress, just at a slower pace.
Where could I go wrong?
Demand for EVs is strong enough among higher income purchasers that borrowing costs and rising prices simply don’t matter to millions of consumers.
Bonus thoughts that nearly made the top 5: inflation stays above 4% as wage increases show themselves to be sticky; job growth continues as child return to the workforce as their Covid-related savings begin to dwindle; we will see at least one major commercial real demesne bankruptcy as offices stay empty in places like San Francisco; Jacksonville Jaguars win the Super Bowl. Have a immense year everyone!