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Aswath Damodaran lists 2 factors that will drive stock prices in 2023

NEW DELHI: After Wall Avenue ended within the bull market territory following beneficial feedback from Fed Chair Jerome Powell, valuation guru Aswath Damodaran on Thursday stated the trajectory of inflation and economic growth will drive returns within the stock market in 2023.

“In Nov 22, long-term treasury charges dropped, the treasury yield curve turned extra inverted, the S&P was up >5% & the ERP (fairness threat premium) dropped from 5.48% to five.26%. Traders, rightly or wrongly, are pricing in expectations of easing inflation & a slowing financial system,” Damodaran stated on Twitter.

He stated whereas there’s a foundation for each expectations, there are questions on how shortly inflation will come down and the way a lot the financial system will sluggish. “How these questions get answered will largely decide the course of markets in 2023,” stated the finance professor on the Stern Faculty of Enterprise at NYU in a tweet.

After Powell stated the Fed might ease the tempo of rate of interest hikes “as quickly as December”, merchants now see a 91% chance that the Fed will enhance charges by 50 foundation factors in its mid-December coverage assembly and see a 9% likelihood of one other 75 foundation level hike.

The 2-year US Treasury yield, which generally strikes consistent with rate of interest expectations, was down 5.2 bps at 4.321%.

(Disclaimer: Suggestions, options, views and opinions given by the consultants are their very own. These don’t signify the views of Financial Instances)

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