Date: 1/02/2022
Author: Chris Hood
I suppose it’s the curse of every professional trader.
As much as I try to sidestep macroeconomic forecasts, it seems that everyone wants to know what I think will happen in 2023.
I’ve never been a stock speculator, but I do maintain an investment portfolio.
And even though I trade exclusively using technical analysis, I’m not without opinions.
After all, I do have a doctorate in economics and I’ve been involved in finance in some capacity or another for nearly 30 years.
So I’m just going to put my thoughts out for you to read.
If you’re looking to invest, then take what I’m about to say as a starting point for your research. I don’t have a crystal ball.
With those caveats in mind, here are a few ideas to ponder for 2023.
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First, I think we’re going to see a spike in oil prices.
Russian sanctions from the ongoing war with Ukraine (which shows no signs of letting up) and OPEC cutting production will curtail the supply.
On the other hand, China is starting to feel the economic impacts of its zero-COVID policies.
If they indeed follow through with their stated goals of reopening, then we’ll see a massive surge in demand from one of the largest global oil consumers.
Basic economics tells us that lower supply and higher demand will drive up crude prices.
Second, I believe the dollar will remain strong and could potentially see a powerful move to the upside.
We have a Fed that’s hell-bent on raising interest rates to counter inflation.
These rate hikes are historically unprecedented and the moving goalpost of the terminal rate will likely continue to push down equity prices.
Even though other central banks are hiking rates, the dollar remains a safe haven for investors worldwide.
Our economy is cracking, and when equity prices fall it tends to put upward pressure on the dollar.
Whether it reaches new highs remains to be seen, but I doubt its value is going to plummet anytime soon.
Finally, there’s the equity market itself.
While bear markets are historically shorter than bull markets, it often takes more than a year to find a bottom.
The strong macroeconomic headwinds already discussed – higher interest rates, persistent inflation, and a strong dollar – suggest equities may have more downside in 2023.
So I expect the current trend to continue.
We’ll likely see a volatile, declining market throughout the upcoming year. In other words, look for more of the same.
It’s going to take a significant turnaround on the charts to break the current downtrend.
Forecasts like these aren’t trading set-ups, but rather ideas that should guide your analysis.
I’ll be keeping an eye on oil stocks such as BNO, UCO, CVX, and OXY. For any plays on the dollar, I typically trade UUP.
And I’ll typically trade the equity markets using index/ETF options such as SPX, RUT, QQQ, and others.
Just some key ideas as we move forward into the new year.
Cheers,
Chris Hood
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