Strategists expect little from the S&P in '23, but SA readers still love stocks
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"Dear Santa, please bring equities for next year" is the simple message from the latest Seeking Alpha poll.
More than 2,300 readers responded to this week's Wall Street Breakfast poll. Asked where they would deploy most of their investing capital in 2023, a vast majority of readers said "stocks."
More than 62% of respondents will tilt most of their investments to equities (NYSEARCA:SPY) (QQQ) (IWM) (URTH), according to the results. For the more risk averse, cash (SPRXX) at 17.5% was a favorite over bonds (TBT) (TLT) (SHY) (JNK) (LQD) (BNDW) at 12.2%, indicating that those investors are skeptical of Fed rate cuts coming next year.
The latest Summary of Economic projections "shows the 'median' FOMCer expects short rates to rise to 5.1%, and remain there for the entirety of 2023, inflation to remain hundreds of basis points above target through the end of next year, the yield curve to remain in inversion for two more years (given the current level of long rates) and the unemployment rate to 'only' rise 110 bps from recent trough to prospective peak," MKM strategist and economist Michael Darda wrote in a note (emphasis his).
Rounding out the results, 5.4% said they will put most of their capital to work in commodities (USO) (GLD) (DBC), nudging out crypto (BTC-USD) (ETH-USD) (OTC:GBTC) at 2.7%.
Wall Street skeptical: The confidence in stocks from those surveyed is in sharp contrast to the expectations from Wall Street strategists.
Strategists expect below-average returns for the S&P 500 (SP500) (SPY) in 2023, with many of their colleagues on the economics side predicting a global recession.
On average, the 2023 end price target for major Wall Street shops is 4,080, a little less than a 7% rise from current levels.
On the top end, Fundstrat's Tom Lee is the most bullish with a target of 4,750. BNP Paribas' Greg Boutle is the most bearish, predicting a drop to 3,400.
Among other notable calls, J.P. Morgan's Dubravko Lakos-Bujas is expecting the S&P to close out next year at 4,200, a view also shared by Wells Fargo's Chris Harvey. Goldman Sachs' David Kostin, Citi's Scott Chronert and BofA's Savita Subramanian all predict a mostly sideways year with a target of 4,000.
No Santa yet: The stock market would need a major rally on this low-volume Friday for a Santa Claus rally to appear.
The S&P is currently down 1.45% for the week leading into Dec. 25 and the three-day Christmas weekend. But opinion is divided on when exactly a Santa Rally is supposed to happen.
For those in the camp that it is the week leading up to Jan. 2, there is a chance bulls could prompt some outsize gains in next week's holiday-shortened, low-volume trading.
SA contributor Lawrence Fuller says this inflation number could prompt Santa Claus to come to town.