ASX May Increase Despite Wall Street’s Demise in 2022

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The US stock markets have weathered their worst year in over a decade. Many US investors are expected to cut their losses by selling their underperforming stocks before the year’s end, which may boost the ASX 200.

The horror year for US stocks may drive investors to sell their stocks before the end of 2022 to take advantage of the tax offsets it offers. This is similar to Australia’s ASX, where losses can be deducted from other income taxes owed.

According to Peter Essele, head of portfolio management at Commonwealth Financial Network, the US stock markets have lost significantly this year compared to the past. The selling pace could reach record levels. Essele also noted that equities could enjoy a strong rebound in early 2023.

“This is the first time investors are looking at double-digit declines in about 13 years, and we’ve never seen this level of tax-loss selling before. That could result in a pretty strong first couple of months as people start re-entering long-term assets,” Essele noted in an interview.

Jeffrey Gundlach, the founder of DoubleLine, agrees with Essele. He predicts that risk assets will rally in January 2023 after retail investors complete their tax-loss selling. He and other experts conclude that according to history, if the S&P 500 starts the year with a strong run higher, it can be expected that ASX 200 investors will enjoy rewarding tailwinds.

Kylie Purcell, investing expert over at Finder, “What happens in the US often has a direct impact on Australia’s market. Analysts say there’s a good chance Australia will be able to avoid a recession next year.” She also added that the treasurer’s commentary gives 

Australians hope that the government is working on avoiding a recession. “We’re still likely to see economic challenges because of those high-interest rates, because of the continued high inflation, which isn’t expected to peak until next year,” cautions Purcell.

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