stock strategists say theres a good chance for a santa claus rally next month but the market may not be handing out many gifts to investors in the first part of next year some strategists see a bottoming for stocks in the first part of 2023 but others say the key indexes could avoid breaking down to a new low but remain volatile the s  p 500 rose back above 4000 tuesday and was holding above that level on wednesday its recent intraday low of 349158 was set on oct 13 most strategists are calling for 4100 4150 but theyre also calling for new lows in the first quarter said scott redler chief strategic officer of t3livecom redler follows shortterm technicals and he said the market could run into weakness around earnings in the first quarter after a fourthquarter santa rally i think the fed does stop raising rates in the first quarter but it has to leave them there for an entire year thats why the next year could be so bad for stocks he said the federal reserve is expected to raise its fed funds target rate by a half point in december and increase it again until it reaches 5 until things break they have to keep it up there said redler he said one thing that could break would be if there was a big stock market selloff that would concern the central bank the fed funds rate range is currently 375 to 4 recession warning sam stovall chief investment strategist at cfra research said there is a high level of uncertainty about whether a recession is coming in the first part of 2023 for that reason the outlook for stocks is also unclear i dont know thats the concern that i have he said i think the fed is going to be ending its ratetightening policy fairly soon  in the first quarter of next year i think the fed might end up lowering rates by the end of the year but with the yield spread being as wide as it is it makes you say a recession is coming and i question whether the market is predicting correctly a recession stovall was referring to the steep inversion of the treasury yield curve meaning that shortend rates like the 2year treasury yield are well above the longer term like the 10year that is viewed as a recession warning with the 10year at about 373 wednesday that socalled inversion was more than 75 basis points a basis point equals 001 of a percentage point bank of america strategists cite that inversion and expectations for a mild recession next year as a reason behind their negative call on stocks for the first half we stay bearish risk assets in h1 likely turn bullish h2 market narrative to shift from inflation and rates shocks of 22 to recession and credit shocks in h1 23 they wrote in a note following that they expect the bullish peaks of inflation fed funds bond yields and the dollar to take hold in the second half and potentially trigger a new bull market finding a strategy to survive stovall said the earnings outlook is already negative he said analysts forecast a decline in s  p 500 earnings for the fourth quarter followed by more choppy weakness in the first half and then higher growth in the second half ibes data for refinitiv has a forecast of a 04 fourthquarter decline in s  p 500 earnings were concerned in terms of earnings but its not like the doubledigit declines we saw in 2020 or 08 when it was down 32 year over year stovall said stovall said there has been no big selling crescendo in the current bear market we did not get the capitulation we normally get in bear markets however we could sidestep that capitulation if this bear market is only 25 he said if it ends up being deeper we will get that capitulation stovall said investors need to find a strategy to weather the first half dollarcost averaging for instance involves investing a set amount of money in regular intervals over time regardless of prices because the first half is so uncertain its probably a better period to dollarcost average in a dollarcost average first half with an expected recovery in the second half he said