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The FED will NOT Pivot
This may be my most controversial prediction according to FinTwit. Financial Twitter has been screaming for the Federal Reserve to pivot or either stop raising interest rates for quite sometime now. The recent FOMC meeting, the minutes released described the Fed continuing to raise interest rates throughout 2023 and there will be no pivot in sight. I have no reason to NOT believe the Fed and no reason to believe there will be a pivot. The Fed is working on making the United States prosper in a very uncertain time. In a world economy that is extremely globalist does not mean that the US will not feel any pain. On the contrary, the US will feel pain in the short term. Unemployment will increase, housing prices will decrease as mortgage rates stay relatively high compared to what the rates were during COVID, and the stock market will struggle. Unemployment recently was released, beating expectations, meaning that the unemployment rate is lower than predicted. As rates increase, the Fed expects unemployment to increase as well. This has been slower than expectations. If this continues, it will give the Fed more leeway to continue to raise rates. Both of my other predictions revolve somewhat around the Fed not raising interest rates, so I will go on as to why I believe those in the next two sections.
Housing will Stagnate in most cities but rent will increase
The housing market has become one of the more popular investments in the Covid boom because of the massive rise in prices and need for more space. As rates continue to rise, housing may decrease overall in price but the monthly mortgage payments will be more expensive. Not only are payments more expensive, labor to fix homes has become more expensive as well as insurance and other overhead costs. Mom and Pop landlords have struggled in the past couple of years with people losing their jobs and the increased difficulty to evict bad tenants have left landlords needing to increase rent in order to profit the same amount. Also, more and more good renters are putting off buying homes in order to “wait” to time the housing market in order to buy a home. This means the rental market is more competitive therefore the price to rent the same property in 2022 will increase in 2023 (at least that is my prediction).
The Stock Market will go sideways all of 2023
This seemingly relies on what the Fed will do as far as interest rates go, but there seems to be no indication of slowing down. The stock market is extremely reactionary lately. Stocks will go up if there’s any indication of a pivot or the Fed slowing down. Any sort of positive news, i.e. beating any sort of expectations, the stock market will go up. On the flip side, any negative news about the stock market will go down. All and all the short term news does not matter. Let me repeat. Short term news does not matter. But the sad part is, investors/traders trade heavily on this short term news. The stock market will move very slightly overall throughout the year. I do not expect for it to be a positive year and for the most part I expect the market to be flat. It will be difficult for companies to grow as inflation is still rampant and unemployment continues to rise.
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Have a great week everyone,
Brandon
Disclosure: The article was written by Brandon Keys, and it expresses the author's own opinions. I am not receiving compensation for it. I have no business relationships with any company whose stock is mentioned in this article. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Brandon is not a financial advisor. I encourage all readers to do further research and do your own due diligence before making any investments.
Great post!