What Goldman Sachs expects from the market in 2023. Also, are Beyond Meat shares beyond repair?

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Goldman Sachs chief U.S. equity strategist David Kostin became the latest prominent strategist to predict a two-part year in 2023 — a tough and volatile first six months when stock prices adjust lower to expectations of falling profits, followed by a modest rally in the second half.

Adding analytical depth to Goldman’s forecast, Mr Kostin’s colleague, UK-based global strategist Peter Oppenheimer, laid out his rationale for why markets have yet to find a sustainable bottom and suggests ways to spot it when it does.

Mr. Oppenheimer believes the pace of interest rate hikes is a major obstacle for equity buyers. Despite the recent 12 percent rally in the MSCI All Country World Index (which pared losses to 16.4 percent year-to-date), the strategist believes investors will look to sell equities in early 2023 as they gauge the negative and lagged effects of rate hikes on global economic and profit growth.

Goldman Sachs notes that equities have fallen about 30 percent in an average cyclical bear market. They typically last 26 months and stock prices take an average of 50 months to recover to previous highs. The current bear market is almost 12 months old and all country indices are now down 19 percent from their November 2021 peak.

Mr. Oppenheimer also noted that the recent rally in equities represents an easing of financial conditions, at a time when central banks are looking to tighten conditions. This sets the stage for more aggressive rate hikes and lower equity prices than previously expected.

The strategist also emphasizes that market bottoms have historically accompanied valuation levels that are attractive relative to long-term history. “Equities have fallen in valuation since the start of this year but that doesn’t mean they are cheap,” he wrote. The price-to-earnings (P/E) ratio was previously pushed abnormally high by ultra-low interest rates that are now climbing rapidly.

Investors looking for profitable entry points into global equities will need to be patient as the new year begins. According to Goldman Sachs, equity markets will trend lower until they are priced more attractively, and peak inflation is behind us.

— Scott Barlow, Globe and Mail market strategist

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Stock to think about

Caesarstone Limited (CSTE-Q) Shares of the countertop maker are trading at their lowest level in a decade While the stock has disappointed of late, contra guys are spotting a bargain. The company is conservatively managed, has sound debt and has been profitable every year since it went public in 2012.

Beyond Meat Inc. (BYND-Q) When the company went public in 2019, its shares skyrocketed as investors bet that the meatless movement was finally having its moment. During the pandemic, Beyond Meat’s grocery store sales soared as curious customers tried its vegetarian options. But these days, Beyond Meat has lost some of its swagger. Its stock has fallen nearly 83% in the past year. Sales, which the company had expected to grow by 33% this year, will now show only modest growth. The New York Times looks at the company’s fall from popularity — and whether the stock and fake meat industry can regain its glory.

Walt Disney Co. (DIS-N) Could entertainment giant Bank be coming up with another hit sequel? That seems to be the hope behind the company’s surprise decision to replace former CEO Bob Iger with Bob Chapek. The decision was largely cheered by Wall Street, with Disney stock rising more than 6 percent on Monday, paring its losses to 37 percent year-to-date. Yet analysts and some investors say a returning CEO hasn’t repeated their past success, and their decision to hand over the reins again could be a sign that a company’s culture is sputtering. lbl’ David Randall tells us more.


If you want returns of 5% and above, corporate bonds look better than GICs

Higher rates have been a big part of the rise in interest on guaranteed investment certificates lately, but safety also plays a big role. What would you get if you lost the guarantee and instead invested in a bond offering yields comparable to GICs now? Rob Carrick says the two benefits are distinct – a slightly higher yield and the potential for capital gains if interest rates fall meaningfully before a bond reaches its maturity date.

In emerging markets, the bulls are back

The bulls have bounced back after some of the biggest losses in emerging markets on record this year, betting that it’s time for a rebound. With warnings of global interest rates stabilizing, China easing Covid restrictions and nuclear war averted, the annual investment bank forecast for 2023 suddenly has some pretty lofty predictions for emerging markets, lbl reports.

Others (for subscribers)

‘Consumers are about to get squeezed’: What TD now predicts for housing, interest rates and the loonie

Number cruncher: 12 companies poised to recover after economic storm

Number cruncher: 13 US mid-cap stocks that may have been overlooked by the market

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Wednesday’s insider report: Chairman cashes out $1-million from energy stock yielding nearly 10%

Carl Icahn holds a significant short position in GameStop

Globe Advisor

Want to know which direction the market is going? There is a popcorn index for that

The Big Three fast-food chains remain a bright spot for investors as the economy heads into recession.

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation – a powerful tool to help you manage your clients’ portfolios.

Ask Globe Investors

question: I am 86 years old, and I need help. Is the Harvest ETF a safe place to invest? I’m specifically referring to HPF, HDIF, and HHL.

Answer: It depends on what you define as “safe”. If you mean zero risk of capital, the answer is no. Stick with guaranteed investment certificates and high-interest savings accounts. Here’s a closer look at the funds you mentioned

HPF is the trading symbol for Harvest Energy Leader Plus Income ETF. It invests in a portfolio of 20 global energy companies, so you’re buying big oil and gas stocks — a market sector that’s doing well right now but historically volatile. For example, the fund is up 38.5 percent in the first 10 months of 2022 and 34.6 percent in 2021. But it fell to 38.1 percent in 2020 and 18.3 percent in 2018. The average annual compounding rate since inception is negative 1.8 percent. Harvest identifies the fund as high risk.

HDIF is the Harvest Diversified Monthly Income ETF. It is a fund of funds designed to provide fixed monthly income through a portfolio of equally weighted Harvest ETFs. They provide exposure to diversified large global companies in key sectors such as healthcare, global brands, technology, utilities and US banks. This ETF was launched in February this year, so we have no history to judge long-term performance. Since its inception, units have fallen by about 17 percent. As the harvest rate moderate risk.

HHL is the symbol of Harvest Healthcare Leaders ETF. As you might guess from the name, it invests in a portfolio of 20 leading global healthcare stocks such as Boston Scientific Corp., Eli Lilly & Co. and Merck & Co. Inc. The average annual return since inception is 6.8 percent. As of Oct. 31, it was down a modest 1.5 percent for 2022. This is as a moderate risk to harvest rates.

Based on portfolio composition, HDIF is probably the “safest” of these three ETFs, but the fact that it has lost ground since its launch suggests caution.

–Gordon Pape

What’s in store for the coming days?

Veteran investor and former mutual fund chief Robert Tattersall is selling some of his Canadian oil services stock. He will tell us why.

Click here to view the Globe Investor earnings and economic news calendar.

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Compiled by Globe Investor Staff

What Goldman Sachs expects from the market in 2023. Also, are Beyond Meat shares beyond repair?

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