Laser Focus World is an industry bedrock—first published in 1965 and still going strong. We publish original articles about cutting-edge advances in lasers, optics, photonics, sensors, and quantum technologies, as well as test and measurement, and the shift currently underway to usher in the photonic integrated circuits, optical interconnects, and copackaged electronics and photonics to deliver the speed and efficiency essential for data centers of the future.

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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

Stock Market Outlook 2022-2023: Bull vs. Bear Case

The year 2022 has been a forgettable one, especially now that the major stock market averages have given up their gains since 2020. On a year-to-date (YTD) basis, The Dow Jones Industrial Average (NYSE: DIA) has dropped over 16%, the S&P 500 (NYSE: SPY) has declined over 23% and the NASDAQ (NYSE: QQQ) has given up over 32%, as of late October 2022.

It’s a confusing and sometimes scary climate out there, with inflation running wild across the world, war continuing in Ukraine, slowing economies, and rising interest rates making large purchases such as homes and vehicles more difficult.  Now more than ever investors need a plan for how to approach the remainder of 2022 and the coming year.

First, let’s look at some bull case scenarios.  There may be some good news baked into all the bad news our portfolios have endured this year.  At some point, the stock market will reach points where investors want to build or rebuild positions and current prices represent much more attractive entry points than a year ago.  The market also has the bulwark of steady and regular inflows from 401(k) plans.  Essentially, every two weeks part of corporate America’s paychecks flows into the stock market which should in theory provide some measure of support.

Uncertain economic times can also lead to spinoffs and divestitures as corporations refocus on core businesses. Oftentimes they will unshackle business units that they don’t consider big enough to matter to overall corporate earnings from the mothership, and the newly freed units have room to fly.  Businesses that may have been neglected and underserved may find themselves in a position to receive fresh investment and ramp up their growth.  Spinoff companies and divested units that get to a point of an IPO can provide investors with new ideas and become new growth engines for the overall market.

Now for the bear case.  The first issue is simply momentum. Objects in motion tend to stay in motion and the downward trajectory of the markets this year shows little sign of stopping.  It seems like every time there is a big up day and some possible break in the negative news cycle, it is followed by a further ramp downward.  Rising interest rates provide another barrier.  Central banks around the world are determined to get inflation under control through interest rate hikes.  Financial markets are addicted to cheap money, so higher rates yield reduced leverage, which quells trading activity and tends to bring lower prices.  The coming year will test central bankers’ resolve on how long they are willing to stick with their inflation-fighting strategy even as it has negative effects on stock prices, which can lead to other negative economic events such as mass layoffs.

Nobody can predict the direction of markets over the near term (and anyone claiming they can is selling something), however over the very long term, since their inception, they have tended to go up.  The rest of 2022 and the coming year will probably be tumultuous and volatile.  The best plan investors can have is to have a watchlist of stocks and desired entry points and start building positions in quality companies at prices that they would not have been able to get over the past few years.  For those willing to play the long game, hopefully, 2022 will just be an unpleasant blip on the radar.

The post Stock Market Outlook 2022-2023: Bull vs. Bear Case appeared first on Spotlight Growth.

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