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Ryan Detrick, former LPL market strategist

Portfolio > Economy & Markets

Why Carson's Ryan Detrick Predicts New Market Highs by Year End

By Dinah Wisenberg Brin

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Carson Group Chief Market Strategist Ryan Detrick expects the U.S. stock market to reach all-time highs by the end of 2023 and remains bullish on the economy, despite the recent pullback in stocks and ongoing recession concerns from others.

Prospects for a possible government shutdown and an auto workers’ strike don’t cloud Carson Group’s outlook either.

“We’ve been overweight equities all year, we’ve seen better times coming, and we don’t think that’s going to change,” Detrick told ThinkAdvisor in an interview Wednesday.

“We think this recent lull in August and September is simply the market catching its breath after one of the best starts to a year for equities.” The Nasdaq index experienced its best first six months ever, and the S&P 500 saw its best first seven months since 1997, he noted.

“We’re quite optimistic that we can still make new all-time highs … before this year is over with a strong fourth quarter for equities led by an economy that continues to surprise, with a strong labor force and strong consumption and improving manufacturing,” he said.

Carson has been stressing to its financial advisors daily that a little third-quarter pause is “perfectly normal,” he added. “We’ve been saying for a month now, ‘This is normal. Don’t get too worked up,’ we’ve had about a 5% correction on the S&P back in August, now we’re just chopping around, again, perfectly normal.”

That doesn’t mean there aren’t economic trends the firm is watching closely, including the U.S. dollar’s nine-week rise, which could be a worrisone sign for investors. A strong dollar historically signals risk-off times, Detrick said, adding, “if the dollar continues to strengthen, that’s one thing that could upset things.” For now, the market seems to be taking it in stride, he said.

Detrick outlined several reasons for his upbeat view.

Rate Hikes Likely Done

Carson doesn’t expect the Federal Reserve to implement another rate hike after raising interest rates 11 times this cycle.

“We think the Fed is done hiking” and will leave rates where they are for a while, maybe into the second quarter next year, Detrick said.

“There’s really no need in our opinion for any more hikes when we see shelter and autos putting a lid on inflation.”

Advisors express concern that the Fed will push the economy to the brink of recession to break inflation, but Carson Group doesn’t expect that to happen, Detrick said.

On Wednesday afternoon, the Federal Open Market Committee left its benchmark interest rate unchanged but signaled one more hike in 2023.

Inflation Probably Waning

Commodity prices, notably energy, are high, which raises inflation concerns, but autos and shelter comprise about 60% of core inflation in the Consumer Price Index, and they’re falling, Detrick said.

“Is inflation going to come roaring back later this year, early into next year, and could that upset the apple cart and continue to open the door for the Fed to continue to aggressively hike interest rates?” he asked. “That’s one worry. … We don’t anticipate that but that’s one worry.” 

Inflation for autos and shelter should continue to calm, “as shelter really could start to put a lid on overall inflation as rent prices are coming back to Earth quickly.”

No Imminent Recession

“We just don’t see any major signs saying a recession is imminent,” Detrick said, noting that economists and analysts have been anticipating one for over a year and a half.

“We still see a strong consumer, we still see a strong labor market, we see manufacturing start to showing bigtime signs of improvement,” he explained.

Earnings Are Strong

“Earnings continue to impress,” Detrick said, citing FactSet data indicating forward 12-month S&P 500 earnings at an all-time high, at $240 a share.

“What we saw the last couple of months when some worries popped up, corporate America still was saying ‘Hey, we see see better times coming and stronger earnings,” and that’s something Carson is stressing to advisors.

“We’re probably going to have record earnings growth next year,” which doesn’t happen in recessions, Detrick said. “This bull market is still alive and well into next year.”

He noted that the S&P 500 and Dow Jones Industrial Average aren’t even at all-time highs. “There’s plenty of gas in the tank,” he added.

In terms of market sectors, Carson is market neutral toward tech stocks, given valuation concerns, and sees opportunity in cyclicals, industrials, energy and financials for the rest of 2023. “Those areas could outperform and do better than technology,” which may take more of a “breather” than the rest of the market, Detrick said.

Negative Sentiment

The market is showing “pockets of negativity” on just the 5% correction, and “we like that,” Detrick said, noting that Carson was “very lonely’ predicting a strong strong market and economy coming into 2023.

“We want to see the weak hands being flushed out, we want to see some negativity,” he said, adding that some long-term market bears threw up their hands in August and increased their  S&P 500 targets.

 Student loans, strikes and shutdowns are causing legitimate concerns in the market, but “we think it’s a positive thing because we think the markets’ pricing some of these things in,” Carson said.

“If we get any better news, like we think we will because the economy’s still on a good footing, (some doubt that’s come in) could be what’s necessary to push markets to new all-time highs,” he added.

In the most recent government shutdown, the S&P posted gains as the market took it in stride, Detrick noted. An with an election next year, a shutdown likely won’t last very long and markets expect it, he said. As for a strike by autoworkers, Detrick expects a resolution, given government involvement, and doesn’t see it causing a major disruption to the economy.

Pictured: Ryan Detrick

Dinah Wisenberg Brin

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