◆◆2022 was the worst year for the S&P 500 in more than a decade.

◆◆That's the first time the S&P 500 has lost more than 17% in a year since the Great Recession when it fell 38.4% in 2008.

◆◆But if you look at the big picture, years like this can be great times to buy for the long term.

▎Analysis of Market Fundamentals Affecting American Stocks Prices in 2023

∷1. A drop in consumer confidence and a rise in interest rates are bad for the growth of S&P 500 earnings

In the more than 100 years that the Federal Reserve has been around, it has become a major player in the stock market.

In 2022, the economy would get tougher as the American government fought inflation. Economists think this is one reason why prices on the S&P 500 have been going down for months.

The Fed has raised high-interest rates seven times in 2022 because inflation is rising faster than expected. These higher rates can hurt companies on the stock market, especially tech growth stocks.

Since April 2022, the Fed's portfolio of assets has gone down by more than $336 billion. 

∷2. The conflict between Russia and Ukraine has a profound impact on the US stock market

Russia invaded Ukraine at the beginning of 2022 and the rest of the world put sanctions on Russian oil and natural gas. During that time, energy prices and profits went through the roof. In the third quarter, earnings in the energy sector grew by 137%.

Without the energy sector, the S&P 500 would have lost 5.3% of its earnings in the third quarter. 

∷3. Policy uncertainty affects investors' investment decisions

In the U.S. midterm elections in November, Republicans took back control of the House of Representatives. Wall Street has always liked when there is no clear leader in Washington, D.C.

Since 1950, when Congress is divided, the S&P 500 has had an above-average annual return of 13.6%.

Investors worried about a possible recession might want to take a more cautious approach to the market. They could increase their flexibility by putting less money into stocks and putting more money into cash.

▎The Prediction of US stocks For 2023

★ From The Fundamental Point of View：

It is not unusual for the U.S. Federal Reserve to start changing policy and reducing liquidity at this point in an economic recovery. As financial conditions get tighter, stocks, especially speculative stocks, lose value. 

Earnings that don't meet expectations get all the attention. But the consensus earnings estimates for the S&P 500 for 2023 are higher now than at the end of 2022.

Wall Street didn't expect corporate America to be as healthy as it is. When strong company stock buybacks start up again, that's more good news for stocks.

Most of the year could be marked by the tension between tightening financial conditions and good news from corporate America about their earnings. This is not unusual for the third year of an economic recovery. 

Investors shouldn't let the bears scare them away from taking advantage of selloffs, but they shouldn't chase gains when the market is strong. In the end, 2023 might be a good year for the market, but it might be better than the last few years.

★ From The Technical Point of View:

Currently, the S&P 500 Index has short-term support at 3500, and a stronger support below is around 3170. Technically, the rebound space can reach 4800, an increase of 51%.

▎US Stock Investment Opportunities in 2022

When we look at different parts of the market, we see the following opportunities:

→1. U.S. Value Stocks

There are two reasons why we are still committed to a value bias in the U.S. The first is that value stocks tend to get very cheap during recessions. After a recession, they usually go back to trading at a normal level. They have yet to reach that point. 

The second reason is that the economy could move into a permanent period of higher inflation. If that happens, stocks sensitive to inflation and in the value bucket could do better for a long time.

→2. Growth/Technology stocks

We are less pessimistic about growth than we used to be, given how much it has underperformed the market over the past few months. 

After the COVID-19 lows, people rushed into growth and technology stocks. This made us think of the NASDAQ bubble of 2000 in many ways. We thought it would not be good when the bubble burst, and it has been. 

On the other hand, the more established mega-cap technology stocks never traded at the same level of frenzy. This is one way that the market is different now from 2000. 

Even though there have been a lot of good earnings reports, these large-cap growth stocks have been underperforming recently. This means that many of them are now trading at very reasonable prices.

→3. Euro Penny Stocks

We often hear from strategists that this is finally the year the U.S. will lose out to Europe. European stocks are less expensive and more focused on value; we saw opportunities in some of them last year. 

But I don't think it makes sense to get rid of high-performing U.S. stocks in favor of cheaper European stocks just because they are cheaper.

→4. Asian Market (Except Japan)

This is the part of the world where companies have grown at rates on par with great U.S. companies. Even though the region did badly in 2022, we still think this is a better allocation for assets outside of the U.S. than in Europe.

▎What Are The Ways to Invest in US Stocks?

① Through Overseas US Stock Brokers

The most important choice of brokers investing in US stocks must be overseas brokers. The transaction services that American companies can provide are relatively diverse. Open an account with an overseas U.S. stock brokerage and pay the wire transfer fee to buy U.S. stocks.

• Pros: Mostly no handling fees

• Cons: Higher wire transfer fees, need to send money overseas

  
  

② Invest in US Stock CFDs

CFD (Contracts for Difference, referred to as CFD) is a financial derivative instrument for US stocks. Contract for difference is a kind of financial derivative. You can use contracts for difference to trade a variety of financial markets including foreign exchange, stocks, indices, commodities, etc. Because of its leverage characteristics, investors can use a small amount of funds to obtain excess returns, and investors can not only go long, but also reverse short.

• Pros: Low margin, multiple US stock trading varieties and low transaction costs

• Cons: Big loss

  
  

③ Invest in US Stock ETFs

If you don't have time to study individual stocks, you can also choose ETFs that track the three major US stock indexes.

• Pros: Easy to operate, as long as there is a securities account

• Cons: High management fees

  
  

④ New Trading Apps

A number of fintech startups have launched mobile apps to make investing easier and help investors buy stocks listed on foreign markets.

• Pros: Easy to operate, you can deposit and trade after registering an account

• Cons: Low deposit, low fees, good service

  
  

▎What Are The Advantages of Trading US Stocks on Margin?

When an investor buys an asset by borrowing the rest of the money from a broker, this is called "buying on margin" and is also known as CFD investing.

Next, let's talk about the main investment advantages of trading US stocks on margin:

☆ Increases Your Ability to Buy

When you trade on margin, you can invest more than you could otherwise. Using margin may be the only way to invest in stocks with very high share prices.

☆ Easier to Spread Risks

If you only have cash, you might be able to invest in two or three stocks. If you borrow money, you might be able to buy a lot more stocks (or a bigger share of each stock) to spread your risk.

This "leverage" method is how day traders and professional money managers use margin. They use it to take a lot of different positions and increase their chances of hitting a winner.

▎Last Thoughts on American Stocks Investment Opportunities in 2023

Investing in U.S. stocks is a great way to diversify your investment portfolio. In the beginning of 2023, investors can carefully consider and plan for US stock investment, including how long to keep funds in the market, how to balance risks and returns, etc. Follow us and we will bring you more investment analysis.