📈We Know This About 2023

In 2022 we have had varying accounts of the state of stock market and economy. Whether investment banks thought the Fed would slow down raising rates to if the stock market bottomed. The investment perspectives were greatly varied. After reading 20 of the top investment banking 2023 outlooks four themes were common in them. When we have consensus over several investment banks that are headquartered in various parts of the world its important to pay attention those themes. This is the way they lead their client base.

In 2023 China is predicted to be the only country in the world with GDP growth year over year and the U.S. is predicted to to grow slower than the world average. This theme is prevalent in the majority of investment banks.

Goldman Sacs sees the U.S. growing at 1% versus China at 4.5% GDP with the World at 1.8%

Citibank has the U.S. growing slower than Goldman at .7% but maintains similar China and World GDP.

Deutsche Bank has GDP for the US at .4% but China actually stronger at 5% and the World GDP coming in at 2.8%

The majority of banks follow the above consensus . The importance of GDP growth is that it tracks SP500 earnings growth. SP500 earnings is the primary engine of the stock market moving higher. The graph below is from the World Bank. In 2001 we had less than 1% GDP growth and a change year over year of -3.12%. While the change year over year remains to be seen in 2023 we do know the US GDP estimates.

If we look at the SP500 earnings in 2000 56.131 Versus 2001 38.85. We have a 31% drop in earnings. If we compare 2021 54 to 2022 44.5 SP500 earnings we see a more muted drop. What about 2023. GDP is expected at 2.9% for 2022. 2023 US GDP estimate is 1% and lower by some investment banks.

This is directly from Factset “Despite concerns about a possible recession next year, analysts still expect the S&P 500 to report single-digit earnings growth in CY 2023. The estimated (year-over-year) earnings growth rate for CY 2023 is 5.5%. “

To be clear we have declining GDP growth similar to 2001 as an estimate for 2023 and we have a 2023 SP500 estimate that is predicting growth mostly on the 2H 2023. This does not sound realistic but maybe something else could help us make a more informed decision.

Credit Suisse shows earnings rising despite ISM manufacturing dropping bucking the trend. How long can companies cost cut to meet earnings expectations?

Two things are clear. China benefits the most from reopening and is predicted to have the highest GDP for 2023. GDP equals earnings growth. The U.S. is predicted to have a decline in GDP yet somehow achieve EPS growth mostly on the 2H of 2023. These are two of the outlooks by most investment banks. To learn more of the top 4 trends from top investment banks in 2023 watch the video below.

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Wishing Everyone Massive Success in 2023 🍾