Market Outlook Q3 2023

Stock Market Outlook Q3 2023: Stay Cautious

Our forecast is for major central banks to keep raising rates till year end.  This will put a break on economies and potentially lead to a global synchronized recession putting pressure on profits and leading to credit issues.  Recently prices of technology stocks have gone up largely based on AI hype.  This is potentially a game changer but we see this AI bubble deflating in the medium term.

Market Forecast 

Our view is that market will hit some headwinds in the near to medium future.  What could deflate the overbought conditions especially in the tech sector?  Look at Apple to potentially disappoint.  Apple is currently at 193 or about 2.5% below its 52-week high, this is a result of having beaten earnings expectations during the last 20 of 21 times.  You would think things are perfect.  Contrary indicators such as the top 10% of owners of Apple stock have been mostly selling in the past week.

Bubble to Burst Soon 

The market will still run up for a while but we see Apple earnings disappointing on the 3rd of August.  How big they miss will hit market sentiment and may be the start of popping the tech bubble.  Of course, this may not happen but the risk is certainly on the downside in our opinion.   If not Apple then keep an eye out on other high-profile tech companies in the next few months.  Apple Chart

Potential Buying Opportunities and Investment Thesis

For value investors, we estimate that cyclical stocks will get hit hard and may present a good buying opportunity.  Keep in mind that in this market environment active strategies should outperform passive strategies.  Good stock picking and being nimble are keys to success in our view.

The US market looks the best at the moment but good stock picking needed.  Stay away from Europe at the moment due to continued inflation and rate rises plus less bounce from China reflation trade.  As mentioned, keep your eye out for cyclical stock bargins in next few months.