The year 2023 has just started. However, analysts are warning investors of certain challenges that are likely to take place throughout the year, namely sector rotations as well as a steep fall in tech shares and cryptocurrencies.
Although the US economy remains resilient, it is now facing lots of problems, which may only increase this year. For instance, there might be sector rotations in the stock market triggered by the Fed’s monetary tightening. Analysts at the Wall Street Journal assume that tech stocks will bear the brunt. Crypto assets could also see a drastic decline.
Economists of the largest banks believe that at the start of the year, the S&P 500 is likely to test last year's lows. However, by the end of the year, it could gain more than 4%.
With the Fed raising interest rates, demand for tech shares which have been boosting the stock market for the last decade is likely to be low. On the contrary, investors may flock back to value stocks, which have had low returns in recent years, Ben Inker, the head of GMO’s asset allocation team, said.
The bearish trend will hardly change for tech companies. So, they will stop being the driving force for the stock market in the next decade, Mark Luschini, a Janney Montgomery Scott chief investment strategist, stressed. The well-known strategy of investing in the NASDAQ is not working anymore. This is why traders should be looking for stocks from other sectors.
