August has brought the stock market into a difficult period. This trend is not unusual for this month generally. So, the stock market outlook for 2023 looks uncertain. However, this trough could be a great opportunity for the future for investors.
This past week has not been particularly eventful on the surface, but problems arose in some indices. The S&P 500 index fell by 0.3%, and the Dow Jones only managed to gain 0.6%, which was not exciting but not a disaster either. However, the Nasdaq composite dropped by nearly 2% over the last week alone. Over the whole of August, an almost 5% drop was experienced. Since the Nasdaq has a high portion of tech stocks, it is likely this very sector that is suffering. These appear to no longer be the hot stock.
We can see the likely causes of this easily. Banks have been downgrading credit across the board, Moody’s being a noteworthy example. Additionally, the Fed’s interest rates have increased alongside inflation among consumers and producers. Furthermore, the vast majority of recent growth had been led by just a few tech stocks. This includes Apple, Microsoft, and Nvidia. It seems unlikely that this growth will continue, as the bull run has been so long.
Evaluating the Hot Stock Market’s Pause and Sector Opportunities
There were some false hopes during the week, which had given temporary hope. There were a few false breakouts and temporary dips. The low trading volume especially made such potential moves unlikely to represent real underlying patterns. Therefore, these false moves ended up being noise for traders.
It may turn out that such a pause was necessary so that the market could take a break and could promise further growth in the coming months. The stock market outlook in 2023 may still recover. However, it may take some time to get some true breakouts again, it remains unclear right now.
There are some sectors to look at in preparation:
The Technology Select Sectors ETF has grown a phenomenal 34% from the start of the year. Meanwhile, the Health Care Select Sector ETF has hardly moved Utilities Select Sector ETF has even dropped. So tech would be a good area to invest in while decoupling from areas like healthcare and utilities. Investors could consider investing in a buffer stock for the time being.
