SPX is up 4.5% since the start of 2023 and 14.5% since its lows in October 2022. As a result, we are noticing an increase in calls for recovery and the beginning of a bull market. However, we are skeptical about these calls. With 2022 full-year results from U.S. banks, we now know their net profit decreased dramatically from the previous year; in the case of Morgan Stanley and Goldman Sachs, we saw this trend also in net revenue. Now, we expect companies in other sectors to follow suit and show corporate underperformance in 2022 (versus 2021). We expect that to confirm our thesis about the economy progressing deeper into recession; due to that, we have strong doubts about the sustainability of the current rally. Accordingly, our price target for 2023 stays at $3400.
Change in net income for particular U.S. banks - 2022 vs. 2021. Bank of America = -14% YoY JP Morgan Chase = -22% YoY Morgan Stanley = -26% YoY Citigroup = -32% YoY Wells Fargo = -38% YoY
Illustration 1.01 Illustration 1.01 displays the daily chart of SPX and sloping resistance. Currently, SPX trades slightly below the resistance. The breakout above the resistance will be bullish in the short term. We would look for a retest of the $4100 level in such a case.
Technical analysis Daily time frame = Bullish Weekly time frame = Slightly bullish
Illustration 1.02 Illustration 1.02 shows the daily chart of SPX and alternative resistance levels. A breakout above Resistance 1 will further bolster a bullish case for the index.
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