If you are looking for ideas about the stock market or any other market next year, avoid the smartest guys in the room. Last year, Wall Street analysts predicted that it would be higher.
I remember in the Spring of this past year when I heard analyst after analyst come on CNBC and say that “by the end of the year, the market will be higher than it is today”. Well, we know that didn’t happen. What we had was a classic bear market succeeding stream of lower highs, and lower lows.
The odds that the market will be lower than it is today on the same day next year are 9%.
Permabear Tim Knight of Slope of Hope fame pegged the market bottom at 340 in the S+P. It came within 2% of that. I had it lower, 320. It never really sniffed 320. One thing that technical analyst chart watchers always tell me is “gaps matter”. Knight, Brian Lund, JC Parets, all are big chartists that I follow. No one has said if they think the market will be lower or higher at this time next year yet to my knowledge. I know Knight hopes it is lower because that’s always his framing.
Hope isn’t a strategy.
Here is what I think will happen next year in the market.
The first quarter for stocks is going to be awful. Pay attention to that 320 level. I do think there was a lot of piling on selling the last month of the year as the Grinch stole the Santa Claus rally being promised to us on the mainstream television networks. But, I can’t look to one sector of the economy and hang my hat on it to say “buy it”. I do think the first week of January might see a relief bear market rally. It will stop, and then turn on a dime confounding the experts. Keep 320 in your sights. If it trades there, all bets to a continuing bear are off.
My guess for the stock market the entire year is it is range bound. There isn’t really a reason to buy it. But, there isn’t really a reason to really sell it unless the Fed gets overly aggressive and raises interest rates a lot more than the market expects. Should be a good year for premium sellers.
Commodities rally in general but you have to pick your spots. It won’t be metals. They are dead. Look for grains and meats to carry the load. We are in an El Nino, not a La Nina. Growing crops is harder in El Nino weather patterns worldwide.
I think the US Treasury market will be the place to be if you want to be an active nimble trader just like it has been this past year. I think the Fed has one more raise in it but then will need to take a breather. Inflation has not been tamed yet, but my guess is demand destruction will happen post the first quarter of 2023. It takes a while for interest rate rises to filter into the actual market.
I have seen supposedly really smart financial advisors who are on television a lot talk about demand. The actual truth is if you go to any reputable business school in the United States, there are no degrees in “Demand Chain Management”. There are degrees and actual courses in operations and supply chain management. There are actual jobs in businesses for supply chain management.
Do you understand why?
The reason is that you can calculate statistical variance on the supply side. Once you know the inputs and can calculate the variance, you can try to manage those inputs to provide greater certainty and decrease the variance improving business efficiency and increasing profit margins.
You can’t do that with demand and that’s why supply-side economics trumps the charlatans that play in demand-side economics every single time. Our government and our mainstream press are littered with people that have a megaphone touting demand-side economics. For what it’s worth, it would be nice if the supply-siders adopted a more forceful and combative tone to make their points. I don’t expect that to happen but it would be nice.
WE ARE IN A RECESSION. We aren’t maybe going into a recession. We are in one and have been ever since we recorded six months of negative GDP growth.
The way the Federal government sort of massages the inflation numbers gives an untrue reading of where inflation really is. When you go to the grocery store, you don’t really care that your new phone is the same price as the old phone and can do more stuff. The Joe Biden Economy is taking money out of your pocket every single day. He is one of the worst Presidents in my lifetime and it’s not close.
One thing Fred Wilson pointed out on his blog today is that while a lot of crypto collapsed, the bright spot is that decentralized pieces of crypto didn’t collapse. Everything that collapsed spectacularly, like FTX, was centralized. The cleansing that took place last year was actually a good thing. Anything that survived ought to have some part of it left that should be able to build an actual business. I don’t think we will see anything earth-shattering in crypto in 2023, but I do think we will finally see some meaningful baby steps taken that will help the entire sector. My guess is the “killer app” we have all been waiting to see since crypto was introduced with great promise, fanfare, and speculation, will be in a specialized B2B sector.
As the Republicans take control of the House, expect lots of animosity and gridlock. Biden is girding himself for investigation. He deserves a close, transparent and very public examination. We are in a climate where if Democrats were self-aware, Biden might be up for impeachment given the grift he engaged in. But, we are in a Cold Civil War and no one is self-aware in a war.
The release of the Trump tax returns set a dangerous precedent. I think the WSJ did a good job outlining it here. It should be no surprise to anyone that an international commercial real estate entrepreneur had bank accounts in lots of other countries. It should also be of no surprise that a person who’s entire income stream comes from commercial real estate pays almost nothing in taxes. That’s how the tax code is structured.
An aside, if you earned a huge sum of wealth from starting a business, take Mark Zuckerberg as an example. A prescient financial advisor will tell you to diversify your wealth into two buckets. The first is traditional banking and finance. Those companies don’t go away. The second is commercial real estate. There are scads of ways to hide/shelter income and get write-offs written into the US tax code.
I am all for changing the US tax code. Maybe Congress will get religion and enact a simple 18% flat tax with no write-offs. Maybe Jack will plant magic beans for a beanstalk too.
Speaking of wars, the hot one in Ukraine will drag on through the whole damn year. The only thing that can stop it is if Premier Putin comes down with a mysterious illness or lead poisoning in his brain. The world will be better off without Putin.
The problem with Ukraine is the Biden’s engaged in a huge grifter scheme there to enrich their family. As a taxpaying US citizen, you don’t mind sending military materials to a country to defend itself against a tyrannical enemy like Putin, but because of the past, you wonder if the money is really going to what it’s supposed to go to. Much better to send equipment than American troops, or NATO troops which are really mostly American troops. I don’t know about you but I am sick of war. America needs to be engaged internationally but cannot be the world’s policeman.
It would be nice if the Republicans investigated the cozy relationship between the Democratic financial arm Blackrock ($BRK) and Ukraine.
Socially, I think you can expect 2023 to be more of the same at a higher and higher pitch. I see now that men are shoving tomato paste into themselves to mimic a female menstrual period. Every time you think you saw peak crazy, it gets crazier. Twitter might have a lot to say about pricking that crazy bubble but we will see.
I am looking forward to more Twitter Files releases and hope that the mainstream media will actually report objectively about them. The Democrats engaged in crimes against the US that were far worse than Watergate. I think the D in Democrat ought to stand for Discrimination instead. The party was an ardent practitioner of Jim Crow and discrimination is in its DNA. The new Jim Crow targets Christians, Conservatives, and anyone who disagrees. Marxists do not go quietly so I expect a huge amount of angst to be spilled.
Companies have been mulling their move out of China and in 2023 will make preliminary moves out. Red states with good labor laws and low taxes will be beneficiaries as will Mexico.
My guess is 2023 will be a year of back and forth. Stasis. A transitional type year.
I’m going long on the death care industry. Caskets and flowers. It’s the wave of the future…
I'm sticking with overweight oil. It may not do much but I don't think it has the downside risk of the other sectors....