The key to unlocking better performances for stocks and the IPO market in 2023 boils down to strong execution by the Federal Reserve on its policy actions, according to New York Stock Exchange President Lynn Martin.
"I think the markets will continue to try to find their footing," Martin said on Yahoo Finance Live (video above). "The one thing markets don't like is to be surprised."
Martin, who is coming up on her one-year mark leading the iconic NYSE, explained the Fed has surprised investors a good bit this year with its communications and a steady dose of interest rate increases. Consequently, 2022 is set to go down as a rough year for investors and many public and private companies.
The Dow Jones Industrial Average is down 5% year to date, with 50% of the "people's index" lower on the year amid a broad profit slowdown at the hands of rampant inflation and slowing economic growth. Fourteen of the index's components are down by double-digit percentages on the year, paced by a 42% plunge in chip giant Intel.
The scene for the S&P 500 and Nasdaq isn't rougher — those indices are down 14% and 26%, respectively, on the year.
Strategists aren't expecting much for stocks in 2023, primarily since the Fed looks to stay the course on increasing interest rates.
Goldman Sachs said this week it sees zero earnings growth for S&P 500 companies next year and zero appreciation for the benchmark index.
"We remain relatively defensive for the three-month horizon with further headwinds from rising real yields likely and lingering growth uncertainty," Goldman Sachs strategist Christian Mueller-Glissmann said.
And that weak backdrop for markets has weighed heavily on the IPO market. Only 66 companies have gone public this year, down about 80% year over year, according to Renaissance Capital.
NYSE's Martin says the pipeline for new IPOs is strong despite the dire predictions rolling in for stocks. It's just a matter of market volatility cooling down a bit so as provide confidence to management teams looking to tap markets for new capital.
"You really want the VIX [volatility index] to ultimately be below 20," Martin added. "This year it has been kind of around 30. So that's really what is worrying private company CEOs."