A Look Into 2023 [Thread]
1/ The Conference Board, Dec. 22: “We project a US recession is likely to start around the beginning of 2023 and last through mid-year.”
2/ The stock market traditionally launches the broad and powerful advance heralding a new bull market [Breakaway Momentum] about three months before the end of a recession.
3/ So: If The Conference Board is correct – a giant “if” -- the stock market should generate Breakaway Momentum about three months before “mid-year” (i. e., late in the first quarter or during the second quarter).
4/ And -- if it does, it would help the market to validate all the statistical studies in September assuring us that the market had a 100% probability of being higher a year later.
5/ But for all that to happen 1) we need to have a recession and 2) it has to end by “mid-year”. Two very, very big assumptions…
6/ And there’s another thing: Sentiment needs to change.
7/ When a new bull market is launched it is *not* typically widely accepted or believed at the outset. A new bull market needs a “wall of worry” to climb.
8/ So rather than cheering for a Fed Pivot, sentiment should turn deeply skeptical of the Fed’s efforts: “The Fed will be pushing on a string” rather than “Yippee; the Fed Pivot is just around the corner”.
9/ There should also be general concern about the economy’s ability to recover quickly from the recession. Strong economic and earnings recoveries just aren’t usually taken for granted early in bull markets.
10/ But if everything falls into place, 2023 could turn out to be a pretty good year for the stock market.
11/ Sincere Happy and Healthy New Year wishes to all!
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