Market breadth surge in 2023 strengthens case stocks surprise to upside in 2023. Also strengthens case Oct 13th was low + Fed made unforced error in Dec.

Equities have been off to a solid start in 2023, gaining nearly 5% so far. As shown below, this strong start in 1st 5 days, particularly when the prior year was negative (ala 2022), bodes well for the remainder of 2023:

  • 1st 5 day >1.4% + neg prior year = 7 instances = median gain 26% (100% win-ratio)
  • If VIX falls on avg vs 2022 (avg 25), median gain is 22% (n=23)

Contrary to the consensus view that stocks will be "flat" in 2023, equity markets seem to be following more closely the historical context.

  • as our clients know, we think the fundamental case for 2023 hinges upon a leg down in the trajectory of inflation that is underway
  • but the Fed and consensus have yet to acknowledge/discount this
  • bonds see a less aggressive Fed and economic data has been more supportive of a soft landing
  • if market view of inflation does leg down, investors will arguably look past the earnings "valley" and focus on a more predictable/possibly easing Fed
  • as such, we think 2023 is arguably more akin to 1982, when stocks went nearly vertical
The chart in this report is only accessible to members

In fact, the strength in 2023 also seems to be improving the technical picture. As noted by Mark Newton, Head of Technical Strategy, recently:

  • S&P 500 and Nasdaq are showing long-term trend breakouts
The chart in this report is only accessible to members
The chart in this report is only accessible to members
Thus, we think investors will increasingly look at th...
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