5 Charts to Shape 2023Inflation, rate hikes, the US dollar and bond yields all shaped how things traded in 2022. What will shape investment strategies and sentiment this year? From mine, look no further than what we see with employment, wage inflation and economic growth. And from there - how this dictates the pace and duration of Fed tightening.
Foolish Forecasts and Questions Worth Asking It's the last trading day for 2022 - which means it's time for some 'foolish forecasts'. The S&P 500 booked a 19.4% loss this year... its 4th worst since 1945. My foolish forecast is the lows are not yet in... however 2023 will represent opportunity.
A Challenging Year – What Did We Learn?It was a difficult year for traders and investors alike. The Index is on track to lose at least 19% - it's worst year since 2008 and 4th worst since 1945. However, this year also offers us valuable lessons. What worked? What didn't? What could we have done differently? And what can we take into 2023...
What Will Lead in 2023?What sectors will lead the market higher in 2023? Tech? Financials? Healthcare? Industrials? Tech was the right play for the past decade - with rates anchored at zero and the Fed printing money. That has now changed. Tech will unlikely act as strong as it did... which requires a shift in asset allocation by investors.
Powell’s Single FocusDuring 2022 - the market obsessed over one thing - inflation. How high? How fast? And for how long? That concern is now largely behind us... however investor's gaze is about to pivot from CPI worries to employment (specifically entrenched wage growth). If Powell is to be successful in winning the war against structurally entrenched inflation - he needs to bring wage growth down to 2%. Today that figure remains above 5.0%. That's going to take time... and is the market potentially caught offside?
PatienceTraders (and investors) are wise to remain patient through this tightening Fed cycle. And whilst it is maturing... there's still more to go. Here I take a look at recent recessions... and some lessons to draw from. Don't be in any hurry here - we are likely to be headed lower
Excited About the Opportunity Ahead!I bring good news and bad news. The good news? We have done a lot of the heavy lifting. The rate rise cycle is maturing. Inflation is falling. And China appears to be re-opening. Now the bad news... rates are not about to repeat what we saw the last decade. And the Fed is sucking out liquidity. What's more - corporate earnings are about to contract. Put that together - stock prices will likely fall. And that will represent opportunity...
Is the Market Fighting the Fed?The market and the Fed are at odds. In short, equities don't believe what Powell is saying. The market is betting the Fed is wrong and will be cutting rates by the second half of 2023 - where the 'dot plot' of 5.0% is a dream. My take: choose to fight the Fed at your own peril. Typically it doesn't work out well.
The 40-Year Tectonic Shift2022 will be remembered as an important turning point. Not because the S&P 500 surrendered 15% to 20%... it will be remembered for the tectonic shift in monetary policy. For the first time in over a decade - interest rates are finally trading at closer to "normal levels". What's more, we are not going back to 0% to 2.0% rates for a long time. And that has many implications for how to choose to invest...
A Textbook ReversalWe've experienced a 16% rally off the October lows. And it's happened in short time. Why? Traders see a far more dovish Fed on much lower inflation / coupled with a mild recession. I'm not buying it... not yet.
