According to veteran stock strategist Ed Yardeni, 2023 stocks will be a challenging year for optimistic investors.
Yardeni Research founder Ed Yardeni said investors making optimistic investments in equities will have to take a narrow path to declare victory in 2023.
Speaking to Bloomberg TV, Yardeni said stock optimists “are almost certain to not win” in 2023 if the economy remains strong and the Fed raises rates further.
According to Yardeni, the critical factor for the narrow path that will allow the stock investor to win will be inflation falling faster than expected.
Expressing that he also expects a faster inflation decline than the market expectation, Yardeni drew attention to the softening in used car, rent, and energy prices and predicted that 3 to 4 percent headline inflation could be recorded in the USA by the beginning of 2023.
In 2022, many strategists were mistaken in buying the theme that inflation rises with temporary factors. As a result of the Fed’s rapid increase in interest rates in the face of rising inflation, the S&P 500 lost more than 20 percent this year, while the Nasdaq 100 lost about 35 percent.
Stating that the leading indicators frighten everyone, Yardeni said, “If there will be a recession, it will be soon. “The markets are afraid of this,” he said.