What will happen on the stock market in 2023? For now, it still depends on the inflation narrative. Futures fell on Friday morning as November nonfarm payrolls rose more than expected — 263,000 versus 200,000 estimates, according to Dow Jones — but more importantly, average hourly wages were higher than expected. expected, up 0.6 percent month-on-month (0.3 percent expected) and 5.1 percent on a year-over-year basis (4.6 percent expected). That runs counter to the “improving inflation data” narrative that’s been driving the stock market lately. What about 2023? Judging by some comments from strategists, 2023 sounds pretty bleak. Here’s JPMorgan: In the first half of 2023, “we expect the S&P 500 to retest this year’s lows as the Fed tightens excessively on weaker fundamentals,” they said in the note. in its statement, citing “falling inflation, rising unemployment and weakening business sentiment” that will force the Fed to begin cutting rates by the end of 2023. JPMorgan is not alone. Michael Hartnett at Bank of America says the 2022 “inflation shock” narrative is over, but 2023 will see a “recession shock” to Main Street and the new year job losses could could be “as shocking as 22nd inflation.” Overall, most Wall Street strategists – who are paid to examine the economy and then extrapolate to see where the stock market is headed – have lowered their earnings estimates for the year. 2023. Mike Wilson at Morgan Stanley, who has been bearish for a while, thinks earnings will fall between 15% and 20% in 2023. Analysts now expect earnings to rise by about 15%. 4%, but most strategists actually think earnings will stay flat next year. Here’s the problem: Traders don’t seem to want to believe it. This week, painful trading – the move in the market that can cause the biggest shock to traders – has sent the market higher. That’s a lot different from last week. A few days ago, the trading community stepped up its defense, expecting Federal Reserve Chairman Jerome Powell to sound belligerent in his speech Wednesday. There are fears of a repeat of the December 2018 disaster, when Powell last raised rates and the S&P 500 fell 16% from early December through Christmas. The Fed is still raising rates, much more aggressively than in 2018, but the opposite is happening. Market breadth – the number of shares that increase per day relative to the number of shares that fall – has widened considerably. The S&P 500 is above its 200-day moving average for the first time since April. Seven of the 11 S&P 500 sectors are above their 200-day moving average. The dollar is collapsing and bond yields are in a downtrend. The chattering classes (analysts, strategists, bloggers) are going crazy in anticipation of the market falling, but it’s not. “Everybody’s been calling me and yelling at me… the market can’t go higher, a recession is coming!” a trader told me. So keep this in mind as you read about all the “23rd projections” from the big companies that are now flooding your inbox: They were assembled by committees more than a month ago. Since then, the data has become more mixed. Inflation forecasts for some data points have improved, for others not. The problem for stocks now: Prices are rising, while earnings estimates are falling. That’s a problem, because the market multiple (P/E ratio) is now expanding into territory that implies a soft landing and a relatively benign economic environment in 2023.