“The biggest rate shock in history, the most aggressive hiking cycle, the biggest inflationary pressure in 40+ years, rising recession fears, wartime and ongoing geopolitical risks, urgency building around carbon emission reduction suggest macro will loom large in 2023,” the team led by Subramanian said.
All these factors played a key role in the stock selloff that has seen the S&P 500 fall 17% in 2022, they noted.
Bank of America’s most likely investment outlook sees the S&P 500 creep up just 1% by the end of 2023, for a target of 4,000 points, with significant volatility coming before that point as the downturn rattles investors’ confidence.
“The market typically bottoms six months before the end of a recession, so buy in the first half based on our economists forecast of the recession ending by the third quarter of 2023,” they said.
