Opinion: 11 predictions about money, technology, stocks and cryptocurrencies for 2023

Here are some predictions for 2023 for financial markets, the economy and stocks.

I’ve spent the last year and a half being cautious in the wake of the bubble-popping bull market that finally wrapped up in early 2022. After this year of turmoil, it might be the right time to see the economy turn into something healthy for a while.

That would be unexpected in a world where so many CEOs and analysts foresee difficult times ahead.

Keep in mind that markets and economics are not the same thing. And now, about some predictions and comments.

1. ChatGPT and its AI genre will kickstart another leap forward for worker productivity.

During 2023, we will see the initial blossoming of improved capabilities and efficiency as people in many walks of life embrace AI. This will lead to productivity gains over the next three to five years that rival what spreadsheets, word processors, and the Internet have done in the past 30 years.

Companies will be more efficient and effective in managing their clients, their scheduling, their legal costs, etc. Economists will be talking about it as an ongoing issue by the end of next year.

Higher productivity will mean an upward shock to corporate earnings in 2024, and as the stock market always thinks ahead, AI will help drive a tech rebound in 2023.

2. The US economy will be one of the strongest in the world.

Aren’t we already in a recession? There was a debate a few months ago about whether two consecutive numbers of negative GDP growth was a recession or not. Certainly, the tech industry and the real estate industries are in their own recessions.

I expect a decent US economy with flat corporate earnings in 2023. How about a surprise?

3. The job depression in technology/software engineering jobs to bottom by mid-2023.

During 2024, the demand for these talents will grow again.

4. Operating margins will expand.

Margins for Meta Platforms Inc. META,
+0.07%,
Amazon.com Inc. AMZN,
-0.21%
and others in the tech space that have cut jobs and luxuries will expand. This will lead to a pretty good year for the FAANG stock group (Facebook Meta holding company, Apple Inc. AAPL,
+0.25%,
Amazon, Netflix Inc. NFLX,
+1.29%
and the holding company of Google Alphabet Inc. GOOGL,
-0.25%

GOG,
-0.25%
) and mega-caps in general, with most around 10% to 15%.

5. The Federal Reserve will not cut interest rates: The federal funds rate will be in the range of 5% to 6% for most of 2023.

The Fed will not have to cut rates as the US economy stabilizes and begins to surprise to the upside later this year. It’s healthy for people to be rewarded for saving money at a bank or lending to a government.

As someone who has experienced Fed-led bubbles and crashes over my nearly 30-year professional career, I would be thrilled to see a normal growing economy with near-natural interest rate levels for a few years.

6. Inflation will rebound from month to month.

CPI data will be the most volatile we have seen in decades. This is another reason why the Fed won’t be forced to cut interest rates.

7. We will end 2023 with two-year Treasuries yielding 3% to 4% and 10-year Treasuries yielding 4% to 5%.

That would be normal and healthy.

8. The stock market will be flat for the year.

The Dow Jones Industrial Average DJIA,
-0.22%
will pull back another 3% – 5%, the S&P 500 SPX,
-0.25%
will be flat and the Nasdaq Composite Index COMP,
+5.91%
will increase by 5% to 10%.

Small caps will be wild to watch, as there are hundreds of them that will run out of money. Then again, some will be quick to roar back. I expect the iShares Russell 2000 IWM ETF,
-0.28%
underperform the Dow.

9. Oil will drop to $50 or $60 a barrel and stay there for most of the year.

OPEC+ member states will start overpumping as the US increases its supply. This will be a boon for the rest of the US economy, as it will also mean earnings estimates for many energy companies will have to fall, putting pressure on their stock prices.

10. Bitcoin will hit $9,000.

After hitting bottom, bitcoin BTCUSD,
-0.11%
will bounce between $11,000 and $15,000 for most of 2023. Ethereum ETHUSD,
+0.24%
it will bounce between $300 and $600.

There are still billions of dollars of “valuation” for a few hundred cryptocurrencies to be wiped out in 2023, and the Securities and Exchange Commission and Justice Department will “ride to the rescue” finally bringing charges against some of the people involved in their sale.

11. The space revolution makes progress, even if it doesn’t quite take off.

I’d love to buy some space stock, but we have to wait for the next batch of good private space companies to go public in the next two to five years. I’m holding on to Rocket Lab USA Inc. RKLB,
+2.17%,
because I can’t believe that companies like Boeing Co. BA,
+0.84%
or countries like the UK wouldn’t want their own orbital launch capabilities. Rocket Lab can be purchased for a huge premium – it’s currently valued at less than $2 billion.

Thanks to each of you for reading Revolution Investing on MarketWatch. Have a good year!

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