Where Is the Stock Market Headed in 2023?

January 2, 2023

Where is the stock market headed in 2023? For many of us, the bear market of 2022 was the first bear market we’ve ever experienced.

I’ve been invested in the stock market since 2019, but many of my readers began investing in 2021.

In 2021, many experienced their first bull market, and it was incredible.

So, what can we expect from the market in 2023?

Let’s look at the S&P 500 index and see what experts are saying.

SPY Stock at A Glance: Will Stocks Keep Going Down?

SPY stock (S&P 500) is currently trading in a channel where we may still see the market retest $400.

Breaking below this channel allows us to identify a strong probability of SPY dropping as low as $322.

See the figure below.

This drop in share price means the stock market will plunge to retest its macro channel.

If price breaks below this channel, the U.S economy may experience a much larger market crash.

A bounce on the trendline may momentarily move the market back up until it retests its highest level on that channel.

A break above this channel could eventually bring the stock market up later in the year.

But why not in the beginning of 2023?

Bank of America and Wells Fargo CEOs are expecting a recession to hit the United States during the first quarter of the new year and subside sometime in the last quarter.

Elon Musk recently sold 22 million shares of the company cashing in approximately $3.6 billion earlier in December, stating that he’s preparing for a ‘serious’ recession.

A recession would likely trigger further selloffs causing the market to crash.

But what are other experts saying?

What Are Experts Saying About the Stock Market?

While technical analysis shows us the stock market is in a downtrend channel, experts are saying a recession will have a great impact on the continuation of a bear market in 2023.

Dan Raju, CEO of Tradier, a brokerage platform says, “The Fed’s obsession with recession will likely result in more interest rate hikes in the first quarter of 2023, which means that we are going to have continued volatility in the financial markets.”

“Two-in-three economists are forecasting a recession in 2023, yet corporate earnings estimates haven’t come down to reflect that,” says Greg McBride, CFA, chief financial analyst, Bankrate.

“If the economy continues to slow and quarterly earnings calls in January reveal a dour outlook for the year, corporate earnings estimates will be marked down and the market could have a renewed tumble.”

“We feel that going into the fall, the stage will be set for a strong recovery from the 2022-2023 cyclical bear market,” says David Keller, president and chief strategist at Sierra Alpha Research.

“If and when a market bottom emerges in the first half of 2023, we’d be looking to technology as a fantastic long-term opportunity, given the heavy drawdowns since late 2021.”