This analysis is by Bloomberg Intelligence Gina Martin Adams, Director of Equity Strategy, Chief Equity Strategist and Anurag Rana, Senior Industry Analyst. It appeared first on the Bloomberg Terminal.
Out of the hundreds of predictions and outlooks for 2023 published by Bloomberg Intelligence’s analysts and strategists, here are a handful of their most compelling or surprising ideas for the US:
Bond yields drop more than expected.
US rates strategist Ira Jersey expects the 10-year Treasury yield will shrink to 2.68% when the year draws to a close versus consensus of roughly 3.40%. While the economy is slowing, services inflation remains a concern — so he doesn’t expect the Federal Reserve will declare victory without a deeper decline in energy prices.
A year for value stocks.
This year’s equity market probably won’t look much like 2010-21, which favored high-growth technology and turned into a mega-cap bubble. Value stocks across the spectrum could lead for an extended period, predict US equity strategists Gina Martin Adams and Michael Casper. Both the large- and small-cap sectors that are typical early-cycle leaders — financials and industrials — could take the reins and shun the typical growth-style (and still pricey) stalwarts tech and health care
Small-cap stocks to lead the way.
Once a bull market emerges, valuations and history suggest a shift to small caps, predicts Casper. The Russell 2000 Index now trades at 1.2 standard deviations (shrinking from 1.8 when we first made the prediction) below its average forward price-to-sales ratio since 2008 relative to the S&P 500, an important discount. In the year following each small-cap bear market since 1980, the Russell 2000 has outpaced the S&P 500 by an average 2,090 basis points.
Earnings slump may be contained.
A shallow earnings recession is likely this year, quite unlike the short and sharp drop of the 2020s or the deep and extended slowdown of 2008. Adams says easing inflation pressure could go a long way toward improving the margin and earnings outlook (excluding energy)
Big legal trouble for big tech.
The Supreme Court will likely pierce the longstanding liability protection afforded big tech companies such as Alphabet and Google. That, says legal analyst Matt Schettenhelm, could potentially increase their legal costs by hundreds of millions of dollars a year.
Bloomberg
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