U.S. equities continued to slide toward the end of the year, and it appears increasingly unlikely that the stock market would be able to mount a successful rally to build momentum into 2023. The NASDAQ 100 index lead the market downfall during the holiday-shortened trading week and is on pace for its worst decline for the year since the Global Financial Crisis, amid growing concern about a recession in 2023 and surging COVID-19 cases in China.
With light news flows this week, financial markets were choppy and traded on low volumes as return from the Christmas break was muted with investors extending celebrations into the new year. Traders are wary about a possible end-of-year recovery and look to farewell a dismal year for the stock market and prepare for more volatility in 2023.
Economic data this week showed that house prices aren’t falling further, which has the potential to give the Fed additional ammunition in its campaign of monetary policy tightening and could in turn serve to limit upside potential for stocks in the coming months.
Wall Street’s main indexes rebounded strongly on Thursday, however the NASDAQ 100 index is still trading near its 2022 low, as investors grappled with mixed economic data, surging COVID-19 cases in China, and geopolitical tensions heading into 2023.
The tech index was supported by a fall in Treasury yields and economic data showing the labour market is slowing, although it is possible that after heavy tax-loss selling last week, investors were looking for bargains. Continuing jobless claims came slightly ahead of economist’s expectations; however, the labor market remains very tight as unemployment claims are rising from historically low levels and it is likely to take a bit of time before we see deterioration.
With one trading day left in 2022, the stock market is on track for its worst year since 2008. The NASDAQ 100 has been the worst performer among the three main U.S. indices, losing nearly 34% this year, while the Dow Jones Industrial Average and S&P 500 are on track to lose over 9% and almost 20%, respectively.
The latest NASDAQ 100 underperformance was driven by more than 31% drop in Tesla Inc over the past two weeks as the electric vehicle maker would continue a weeklong production pause at its Shanghai facility.
Every time the tech heavy index has rallied in 2022, it faced strong selling pressure, amid the highest interest rates over the past 15 years, which are the main culprit for the underperformance of the rate sensitive index. The latest slump is likely to get worse before it gets better, and even as the Fed’s battle with inflation is showing success, as we see signs that inflation has peaked, it will come at the price of a recession next year.
No recession has been more predicted than the one that still hasn’t occurred yet, with number of economists expecting the recession will hit the U.S. economy in the first half of next year, with inflation remaining top risk factor for the stock market in 2023. While its hard to predict if the U.S. economy will face a soft or hard landing in 2023, our baseline scenario for fresh lows next year remains unchanged.
Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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