From The Year of Inflation to The Year of Disinflation
Good Ridens to 2022
Goodbye to 2022 and hello to 2023. It was a rough year and everybody is happy to see it go. From inflation to the Russian war, it seemed like there was no hope for equities at the beginning of the year. And it absolutely turned out to be a terrible year for equities. If you took major losses then I have been there and I feel your pain but and there is hope in 2023. Never let the market bring you down. The best buying opportunities follow a big downturn. Usually after a major correction there can be a strong rally where there is potential for substantial profits to be made. If you made gains this year then congrats to yu for good trading and lets look toward 2023 so we can rinse and repeat.
This was one of the most difficult years in my investment journey. I started investing during one of the longest bull markets in S&P 500 history. So the past 12 years have been very easy for myself like most investors. For long-term investors you could have confidently held on to your investment for consistent gains. For traders you could buy just about any dip and be very profitable over the years. This year was exactly the opposite. Could it be a great dip buying opportunity this year?
This could be one of the best buying opportunities since the pandemic crash. For the long-term investor this more than likely was a very difficult year. If you did not rotate your capital properly then you likely suffered losses. This is never a good feeling.
I've suffered major losses before in the past. I felt completely devastated bordering depression because I lost almost every penny to my name. I did not have much hope for my financial future. I was determined to get my money back so eventually I learned what I was doing wrong, corrected the mistake, and began to invest correctly. I have recouped all my losses plus more since then.
If you are feeling like I felt in the past then remember that in the stock market, just like in life, after a major downfall the only direction to go form the bottom is up.
Luckily I was more prepared this year. I rotated my capital out of my long-term equity portfolio. It was basically a flat year for my retirement account. At least it's performance was better than the S&P 500.
There is always a silver lining in a crisis. The glass is not half empty yet. This very red year could possibly present us with one of the best buying opportunities of 2023. The dip could very well continue but one thing I want to point out is how major trends in the price of the S&P 500 often change near January or the end of year. You can see some examples of this in the pictures below.
I am definitely not suggesting going all in at this point because things still do not look perfect for equities. I'm especially worried after what Federal Reserves' officials have been hinting towards in 2023.
One positive note about this bumpy year is that it was one of the best learning opportunities I've ever had. The fact that this year was such a difficult year, unlike the past, I was forced to learn as much as possible about the world markets so I could understand why my long-term investments were suffering so badly. I have learned more about the financial markets this year than all other years of my investment life combined.
All of the major markets around the world are systemic as they affect one another. Everything from forex, equity, and bond markets are all linked in one way or another. The knowledge I gained about the interdependencies of global markets will be very valuable in the future.
What to Watch in 2023
Economic data will be just as important in 2023 as it was last year. Bad news is still good news so far. The FED is still hinting towards higher for longer interest rates. So, in theory, bad economic data releases should bring down treasury yields and the dollar which will be good for equities.
The narrative has switched from the year of inflation to the year of disinflation. The Federal Reserve's efforts appear to be working. Inflation is on a downward trend so far. This has been good news for equities but disinflation is very bad for an economy. So just as Jerome Powell hinted towards at the last publishing of the Federal Reserve's meeting minutes, any very negative surprise and economic data could spur a sharp recession. Basically bad news is good news until it's too bad.
The China reopening trade could last quite a long time. It appears as if China is truly reopening as they have continually decreased travel restrictions as well as covid restrictions. And at the same time China has been stimulating their economy. This sounds very bullish for Chinese equities.
Global recession fears are still at the Forefront. Pay close attention for any major deterioration in earnings or very bad economic data. This could spur a recession.
Pay attention to any escalation or de-escalation in the Russian war.
So what are your predictions for 2023?
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$TENCENT(00700.HK$ $SSE Composite Index(000001.SH$ $CSI 300 Index(000300.SH$ $CSI 300 Index(000300.SH$ $FTSE Singapore Straits Time Index(.STI.SG$ $NIO-SW(09866.HK$ $NIO Inc. USD OV(NIO.SG$ $NIO Inc(NIO.US$ $BILIBILI-W(09626.HK$ $Bilibili(BILI.US$ $Baidu(BIDU.US$ $BIDU-SW(09888.HK$ $XPeng(XPEV.US$ $Li Auto(LI.US$ $BYD COMPANY(01211.HK$ $BYD Company Limited(002594.SZ$ $S&P/ASX 200(.XJO.AU$ $FTSE Singapore Straits Time Index(.STI.SG$
$Chevron(CVX.US$ $Phillips 66(PSX.US$ $Valero Energy(VLO.US$ $Devon Energy(DVN.US$ $Occidental Petroleum(OXY.US$ $W&T Offshore(WTI.US$ $United States Oil Fund LP(USO.US$ $United Sts Brent Oil Fd Lp Unit(BNO.US$ $Imperial Petroleum(IMPP.US$ $Houston American Energy(HUSA.US$ $Indonesia Energy(INDO.US$ $BP PLC(BP.US$ $Exxon Mobil(XOM.US$
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Trade the trends via technical, fundamental, and macro analysis. Day Trades, swing trades, and long-term investments.
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Red__Bull : So far your 2023 predictions have been spot-on and I think you're analysis of things to come is a rational outlook. Our biggest risk in 2023, IMO, is man-made disasters such as Ukraine/Russia escalation, continued reckless Congressional spending (we now sit at a record 130% Debt/GDP ratio with national debt interest costs skyrocketing).
I suffered some losses in 2022, mostly on paper, a few realized. But -6% vs. S&P 18%. As you said, rotation from high growth into value investments has been key, and I think keeping a healthy balance of the two in 2023 will still be the best plan. I'll also add that I've increased positions in high yield stocks with healthy balance sheets with stable long term NAV. Some examples $XOMA CORP 8.625% CUM PERP PFD SER A (XOMAP.US)$ $Owl Rock Capital (ORCC.US)$ $Global Partners (GLP.US)$ $GLP-A (GLP-A.US)$ $GLOBAL PARTNERS LP 9.50% FIXED RATE CUM RED PERP SER B (GLP-B.US)$
Also, keeping a healthy cash position is wise IMO. Interest rates on cash and equivalents are high, provides the opportunity to buy dips and rebalance w/o selling a good long term stock at a low. $Apple (AAPL.US)$ is an example from my portfolio. When it was at a 52 week low at $ 125 and bears were predicting lower, I didn't have to sell and worry about the 30 day wash sale rule in order to buy or add to other investments that were on the rise (energy stocks for example). AAPL has risen back into the $ 150 range in less than 2 months. You can't time the market, but you can strategize around it's unpredictability and come out ahead.