Happy New Year.
There is no question about the fact that we have been in a Bear Market, certainly in the Growth, Biotech, and Technology Sectors for virtually all of 2022. The year 2022 may go down as the worst year of overall returns since 2008, considered by many to be the worst year since 1929-1931. Even bonds stunk.
There were, however, winners in 2022 and we have them in many portfolios. Energy was the top sector followed by many commodities, which we also own in portfolios. Even with these winners, however, they could not overcome the heavy decreases of America’s darling growth companies held by most Americans.
For example, in 2022:
Tesla was down by more than 60%. Amazon was down by 50%. Google was down by 37%. Netflix was down by 49%. Apple is down by 27%. Disney was down by 47%. The Nasdaq QQQ Index (the top 100 Nasdaq companies, mostly technology in some form) was down by 35%. Peloton, the darling stationary bike company during the Covid lockdown, was down a whopping 78%.
What are our projections for 2023? Here you go.
- We see the first quarter, and probably the second one too, continue to be up and down, relatively soft, but still with some winners.
- We believe that the year’s second half will improve significantly, and you will want to be positioned properly for this.
- We believe most of the bad news is the economy and the Federal Reserve tightening rates are already well-known and baked into the formulas.
- We believe that we have seen the worst of inflation and will look at cautiously buying back into the corporate bond (not junk) markets in February.
- We believe that the first quarter results coming out for companies in late January will most be soft, but not negative.
- We believe that quality companies who pay dividends will fair better for the first half of 2023, followed by a conservative rotation back to technology and growth as they return.
- We continue to believe that Energy and Commodities will be outperforming sectors.
- We believe that if China decides to take back Taiwan or Russia, and it spreads its localized War with Ukraine to another country, then we will experience severe short-term volatility.
- We believe China is preparing to eventually take over the world using its incredible war machine.
- House buying will become more affordable as the markets soften all year. Interest rates will move back to the historical average of 5%.
Will the first half of this year be regarded as the best buying opportunity since 2009 or will it have been 2022?
Only time and tenacity will tell. I am always more bullish than bearish.