Our Outlook For 2023Jan 09, 2023
Every Friday we host a live 1:1 discussion at 12pm EST.
This gives YOU the opportunity to ask US any questions you have on the markets, the economy, crypto, and more!
Here are the 4 key things we went over for this week:
How the markets will react to the Fed's upcoming policy changes
Why this month's inflation report could change everything
Our 2023 outlook for stocks and crypto
Our favorite stocks, sectors, and more for the next decade
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Meanwhile, instead of a full transcript, here's a more compact summary of what went down last week and what we're looking forward to in the week ahead.
To get all the juicy details, just listen to the entire podcast!
After a brutal 2022, 2023 is looking more volatile and hard to parse.
On one hand, we have a decent chance of seeing the economy recover after peak inflation was hit back in June. But on the other hand, the Fed is still raising rates, pushing the markets down, and soft-circling an end date through December.
However, last week reflected the true amount of fear the market has for the Fed as a few conflicting jobs reports initially tanked the market before the payroll report gave analysts a lot of confidence that the Fed may not need to raise rates quite as much to keep the market under control.
Basically, while more jobs were added to the economy last month, overall payrolls declined by almost 5%.
Essentially, workers are leaving their jobs to take lower-paying positions, which is exactly what the Fed is trying to get folks in our economy to do.
This is a strong sign that this week's CPI report may bring us even more good news.
Other than that, it's important to look into all the small macro trends we're seeing (especially with EVs and commodities) and try to parse where capital will flow during this period of ongoing volatility so we can lock up as many gains as possible.
There's a lot more detail to comb through, so let's dive into what you need to know for the week ahead 👇
This is a HUGE CPI Report:
Inflation came in at 7.1% YoY last month, signaling a broad reversal in where inflation was going.
The CPI print this Thursday will hopefully continue that trendline demonstrating that inflation peaked last summer. Energy prices are going to be a huge part of that moving forward, as will food.
Natural gas prices are finally lower than they were when Russia began its invasion of Ukraine -- so that's very encouraging.
Meanwhile, we're expecting a broad-based reduction in rental prices to accelerate this month and continue for a quarter at least. If we see that, combined with payrolls continuing to stabilize, we can basically declare inflation under control.
If that's the case, then the main wildcard is Jerome Powell and how long the Fed wants to continue raising rates. If the Fed meeting this month comes back with a more dovish stance, the market will go ballistic with hope.
All in all, one of the main questions of 2023 is can the Fed achieve a soft landing or at least mitigate the recession they are intentionally creating. We're still 6 months away (minimum) from knowing for sure about that.
2023 Is Going to be Hard to Predict:
While we can game out a few simple scenarios based on how the Fed acts, the rest of 2023 is going to be pretty wild.
For example, traditional growth plays like EVs are already spending the first few weeks of 2023 getting brutalized on reduced prices and ongoing concerns that competition will make these cars too expensive to produce.
As every automaker on earth throws its weight around and tries to compete with Tesla -- the rare materials needed to manufacture batteries and EV motors are going to get more and more expensive.
Can Tesla keep up with the competition, or will this whole space become prohibitively expensive before anyone achieves escape velocity? More on that: here
We're also watching capital flows.
One big question is: will the narratives that brought us success in the back half of 2022 also bring us success in 2023? We've been really excited about our pharma portfolio outperforming last year.
But was that due to strong innovation or due to capital fleeing big tech and landing in "safer" markets?
While we're confident Eli Lilly and Merck are going to keep popping off this year, can they pull off another year of double-digit growth?
We're watching these stocks closely to ensure we get confirmation that investment in these risk-ff assets is here to stay.
Is Inflation Here Forever?
Another key trend we're looking at for 2023 is the idea that inflation is here to stay over the long run.
That's because, while the Fed may lower inflation soon, they ultimately will need to start decreasing rates again and pumping more money into the economy in order to "wake it back up".
And if the last decade+ taught us anything, it's that an environment of low rates and accommodative fiscal policy leads to rampant inflation.
Pair that with the fact that rates have been decreasing since the 1980's and it feels like the world can only run on cheap debt.
Therefore, has the Fed put us in a position where inflation will always be a recurring problem?
If they did, there are a bunch of investments that will always be a good inflation hedge. Listen to the podcast for more details on this!
Wrapping this Up:
2023 is definitely off to an interesting start.
The markets finished last week up and are up again this morning.
But we won't really know where this year can take us until we get the CPI on Thursday and the beginnings of Q4 earnings season start to trickle in on Friday.
We'll keep a close eye on retail, labor, and tech this week as these threads develop.