The expectations of a slowdown in the aggressive interest rate hike during the next Fed session in December have given many investors the hope to expect a recovery in stock prices during the first half of 2023. Is the stock market set to recover again after losing so much value this year? This work has examined the general expectations from the stock market during the first half of 2023.
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Why is the stock market down in 2022?
The stock market has performed below expectations in 2022. A vast majority of the stocks have witnessed massive price crashes this year. The S&P 500 used to measure the overall performance of the stock market has been down by more than 16% this year.
The poor performance of stocks this year has been largely due to the effects of inflation across the globe. This has caused the Fed to take more drastic measures by embarking on a series of aggressive interest rate hikes to checkmate the rising inflation.
Raising the interest rate for the US dollar so high up to 4% in November has affected the performance of the stock market as large investors were compelled to withdraw from the risky assets including stocks to invest in the less risky assets. This has reduced the overall stock market capitalization in 2022 causing prices to continue falling. The high increase in the interest rate has further made it very difficult for companies to borrow money from the banks to expand their business.
Consequently, the stock market generally has not been able to make any significant bullish move so far this year.
However, with Fed officials now hinting at a possible slowdown in the aggressive interest rate hike from their coming session in December 2022, investors are currently hoping for a rally in the stock market again.
Can the stock prices recover again within the first half of 2023? Will the possible slowdown in the interest rate hike cause the stock market to recover again? We have discussed these important questions in the next paragraph below.
What to expect from the stock market during the first half of 2023
The possibility of a slowdown in the Fed’s aggressive interest rate hike from their next session on December 14, 2022, has given many stock traders more reason to hope for a recovery in stock prices within the first half of 2022.
Given the position of many analysts, the major reason why the stock market has been down so far is based on the current aggressive rate hike that has taken place since March 2022 up to the last month of the year. A greater optimism for a rally in stock prices has been generated amongst investors after the Fed Chairman Jerome Powell hinted during his speech last week at the Brookings Institution that:
“The time for moderating the pace of rate increases may come as soon as the December meeting,”
Based on this note, investors are currently pricing for a moderate rate hike of just 50 basis points. This will allow the stock market to rally again and march for a recovery within the first half of 2023.