Wall Street appeared friendly last year. But investors who miscalculated could also incur enormous losses.
• US stock market rally in 2023
• However, various pharmaceutical producers collapsed
• Heavy losses also in oil stocks
At the beginning of 2023 it was difficult to predict what a good year investors would expect on the stock market. Key interest rate increases, bank failures and fears of recession were just a few of the crises that investors were faced with. Nevertheless, the S&P 500 index, which reflects the broad stock market, rose by an enormous 24 percent in 2023. That’s more than double the index’s typical annual performance.
Over the course of the year, however, several price drivers emerged: declining inflation, the hype about artificial intelligence, increasing optimism about a soft landing for the US economy and, above all, the hope of a series of key interest rate cuts by the US Federal Reserve in the coming year. A number of market experts are already expecting one for the Fed meeting in March 2024 Interest rate cut.
Pharmaceutical companies under pressure
Despite all the joy about the US stock market rally, it should not be overlooked that the gap between losers and winners was particularly large. “The S&P 500’s stellar returns this year have been concentrated in just three Big Tech-heavy sectors,” said Nick Colas of DataTrek Research, according to Investor’s Business Daily. For example, both Microsoft and Apple managed to increase their market value by almost $1 trillion each in 2023.
On the other hand, those investors who bet on the wrong stocks suffered heavy losses. What stands out is that several large pharmaceutical companies experienced price drops. Pfizer shares, for example, have almost halved (-43.8 percent). According to Investor’s Business Daily, the company overestimated how profitable its COVID-19 vaccine would be after the pandemic ends. As a result, market observers assumed that Pfizer would only generate earnings per share of $1.53 on an adjusted basis in 2023, a decline of more than 76 percent compared to 2022. Things are hardly looking any better in the longer term either: it is expected that that Pfizer’s earnings even in 2027 are expected to be less than half of 2022, it said.
Two other COVID vaccine manufacturers, Moderna and Johnson & Johnson, were noticed with huge price discounts. Here the shares lost 44.6 or 11.3 percent in value last year. The pharmaceutical company Bristol-Myers Squibb also suffered heavy price losses, with its shares losing a full 28.7 percent in 2023.
Weak energy companies
The sharp price declines in oil stocks were also striking. The fact that the price of a barrel of oil fell by more than 27 percent from its 52-week high to a 52-week low in 2023 also dragged down the shares of oil producers.
Chevron shares, for example, lost 16.9 percent. Analysts fear that consolidated earnings will likely collapse by 29 percent in 2023 and will even be 31 percent lower in 2027 than in 2022. Meanwhile, the shares of competitor Exxon Mobil fell by 9.4 percent. NextEra Energy is not an oil company, but as an electricity supplier it is also part of the energy sector. Its share price fell by a huge 27.3 percent in 2023.
Given this, it becomes clear how important it is to select the right stocks.
Editorial team finanzen.net
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