Deutsche Bank: S&P 500 Forecast for 2023

Analysts at Deutsche Bank believe that in 2023 the US stock market will experience a rollercoaster ride. According to the bank’s forecast, the S&P 500 index will show strong volatility throughout 2023 amid the risk of a recession in the United States.

In the 3rd quarter of 2023, the US stock market may collapse by 25% from local highs due to the onset of a recession, according to a forecast by Deutsche Bank.

In the first half of 2023, the S&P 500 index could rise by 13.5% from the current level, reaching 4500 points. Already in the 3rd quarter of 2023, the S&P 500 index may collapse by more than 25%, and by the end of the year it will recover to 4,500 points.

“The US Federal Reserve and the European Central Bank plan to return inflation to its target level in the next few years,” said chief economist David Folkerts-Landau of Deutsche Bank. It will be impossible to reach the target level for inflation without rising unemployment and plunging the economies of Europe and the United States into at least moderate inflation.

The US Federal Reserve and the European Central Bank have set an inflation target of 2% per annum. Recall that in October 2022, consumer inflation in the United States amounted to 7.7%, and in the Eurozone inflation accelerated to 10.6%, according to Eurostat.

Deutsche Bank forecasts S&P 500 earnings to drop to $195 per share in 2023. For example, in 2022, the earnings of companies from the S&P 500 were estimated at $222 per share.

As a rule, experts do not have a unanimous opinion on what dynamics the US stock market will show in 2023. For example, Morgan Stanly analysts predict that the S&P 500 will show zero growth in 2023.

The most optimistic forecast for the US market comes from Jeremy Siegel (Professor of Finance at the School of Business at the University of Pennsylvania). He believes that the S&P 500 index will grow by 15-20% by the end of 2023. The growth of the US stock market will begin after signals from the US Federal Reserve to stop the growth of rates, says Professor Siegel.