It is always half full for the sell-side analysts. The famous optimism bias almost always stays. If you want to know how bad things have shaped, look no further than the 2023 market strategy reports by the top brokerage houses. All but one sound cautious – which is a rarity. A note by brokerage Ismail Iqbal Securities tells you sell-side analysts will always feel optimistic about the year ahead – and religiously fall short (often miserably) of the target by the year-end.

But that does not usually stop them from being optimistic for the next year. But this time is different. The crisis feels real. The all-time highs and all-time lows are plenty – and those around for the 2008 crisis will remember the market confidence is probably the lowest since then. So, is the street consensus telling a negative return for KSE-100 this time around? That would be a first in many years, but that is not the case.

The average annual return estimate for 2023 is around 25 percent. Not a typo. The optimism seems to have stayed. Oh wait – but that is based on only one brokerage house, going as far as giving a target market return for the year. All other leading houses have shied away this time, going as far as calling index targeting “irrelevant”. Surely, 2022 stung.

The cautiousness seems to have stemmed from the never-ending uncertainty, which is close to being the only variable showing any semblance of consistency nowadays. If you are one for the multiples, the trailing and forward earnings multiples hovering around 3-3.5 times – are the lowest in 15-17 years. The infamous discount to regional markets is also the highest in a long time. That should ideally entice investors, but the times are far from ideal. The market consensus is that a re-rating should almost be ruled out, regardless of what the multiples have to say.

All other asset classes posted significantly higher returns last year, from gold to property and from the money market to government bonds. There is an emerging consensus on the street that inflation will stay higher, the currency will eventually adjust, and negative real interest rates leave ample room for further hikes in interest rates in 2023. And if there is one indicator that the stock market reacts to, almost religiously, is the interest rate. It only makes sense now that most brokerage houses fell short of giving a target. Saying you expect negative annual returns does not sound all that good.

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