Samuel Goldwyn, one of the founding moguls of Hollywood, was famous for his malapropisms. He once said: “Never make forecasts, especially about the future.”

Despite Goldwyn’s mangling of the English language, he had a point.

In the investment world, many academic studies have shown that it’s impossible to forecast the path of the financial markets a year ahead with accuracy.

Consider recent examples. In 2021, Goldman Sachs (NYSE: GS) analysts predicted that the S&P 500 would close out 2022 at 5,100 points. Morgan Stanley (NYSE: MS) predicted a more modest 4,400. The S&P 500 actually closed out 2022 at 3,839.50.

I provide interpretative analysis of empirical data, to help investors align their portfolios with demonstrable trends. I leave the Magic 8 Ball to others.

As we head into the second quarter of 2023, what do the fundamentals tell us? Last week’s decline notwithstanding, the stock market year to date has been defying headwinds and gathering strength.

However, recent gains in stocks have been mostly driven by valuation expansion, as price-to-earnings ratios move higher. Meanwhile, expectations for corporate earnings growth have been decelerating.

The new earnings season kicks off on April 14. For the first quarter of 2023, the estimated year-over-year earnings decline for the S&P 500 is -6.6%, according to FactSet.

The stock market has performed well so far in 2023, but the road ahead will be more difficult, as the economy loses strength and earnings growth declines.

Last week, we saw signs of an economic slowdown, with weak readings in employment, manufacturing, and housing.

Rising interest rates are cooling the labor market, as the Federal Reserve intends. The Labor Department reported last Friday that employers added 236,000 jobs in March, fewer than in February. Average hourly earnings also fell from February to March.

Amid the multiple signs of impending recession, the major U.S. equity benchmarks mostly slipped into negative territory last week, with the DJIA eking out a slight gain, as the following table shows:

However, for patient long-term investors, opportunities abound. The bear market over the past 15 months already has priced in much of the anticipated recession.

The tech-heavy NASDAQ has outperformed year-to-date and with good reason. We’re nearing the end of the Fed’s tightening cycle, which means growth stocks will feel less pressure from rising interest rates.

Despite its decline last week, the S&P 500 remains above its 100- and 200-day moving averages.

WATCH THIS VIDEO: Stocks End Q1 on a High Note…Can it Last?

Keep in mind, the market cycle and economic cycle don’t move in lockstep. Markets often begin to gain traction months ahead of the economy. As Wall Street starts to anticipate an economic recovery, history shows that equities are likely to embark on a sustainable upward trajectory.

The encouraging trend for diversified investors is that the bond markets this year have performed well. Yields recently have declined as investors increasingly turn toward safe-haven assets. Bonds should continue to provide balance for portfolios in the year ahead, especially during bouts of equity volatility.

The week ahead…

These are the salient economic reports on the docket in coming days:

Homebuilder confidence index (Monday); housing starts (Tuesday); Fed Beige book (Wednesday); existing jobless claims, existing home sales, U.S. leading economic indicators (Thursday): S&P flash services and manufacturing PMIs (Friday).

The data this week are expected to show a continued softening of the economy, which in turn should encourage the Fed to lighten up.

A cloud on the horizon is the decision announced last week by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to cut crude oil production, which is an inflationary development.

The cut in production was spearheaded by cartel leaders Saudi Arabia and Russia. Not surprisingly, crude oil prices ended last week significantly higher.

However, the keffiyeh-wearing oil ministers in Riyadh and the kleptocrats in the Kremlin wield declining influence over international oil markets. If the global economy tips into a recession, oil prices are likely to fall despite OPEC+ machinations.

Another factor mitigating OPEC+ policy is the propensity of many cartel members to cheat on their voluntary quota agreements. As Sam Goldwyn put it: “A verbal contract isn’t worth the paper it’s written on.”

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John Persinos is the editorial director of Investing Daily.

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This article originally appeared on Investing Daily.