By Investing.com Staff
The Stock Trader's Almanac issued an update to their 2023 market outlook and the message to investors is clear "remain calm" amid the uncertainty witnessed over the past few weeks. While the group is pulling back from its most bullish scenario for the year, they still expect gains of 10-15%. Currently, the S&P 500 is up 3.15% year-to-date.
The Almanac said the Q1 chop in the market was forecasted. However, amid the Dow’s December Low being breached, banking sector woes, government, and Wall Street fearmongering, as well as heightened geopolitical tensions with Russia and China they are adjusting their 2023 forecast and outlook back to our original base case scenario, which is still bullish - "Slightly below average pre-election year gains of 10-15%."
As governments step in backstop poorly managed regional and niche banks, the Almanac expects "the fallout will be contained, the contagion prevented, and a banking crisis averted."
Looking back at past banking crises since the Panic of 1907, the Almanac said the current banking woes pale in comparison. Even comparisons to Washington Mutual's 2008 collapse don't stack up. Washington Mutual's assets were about 2% of the $15 trillion U.S. economy vs. SVB’s at less than 1% of the current $26T economy. Further, the 2008 GFC was systemic and widespread up to the top of the “too big to fail” banks. Now were are dealing with a few niche VC and crypto-related banks.
The Federal Reserve system is also much different today. In 1907 there was no Fed and since the Fed founding in 1913 "interest rates were not managed – or micromanaged – anything like they have been since the GFC."
"There is just no comparison between today’s Fed and the Fed of the 1970s and 1980s. Forty years ago, interest rates were set by the bond market and the Fed would meet every so often to adjust their rates to match the bond market," the Almanac comments. "This is the exact opposite of what is happening today. Putting things further into perspective, from the FDIC’s 2022 Q4 report there are 4,746 reporting institutions, 4,157 commercial banks and 589 savings institutions – and so far, three have failed."