Potential Positive
After a bad year, there is a high probability that the next year may be positive. While we are not expecting this to occur, especially with lingering high interest rates and a hawkish Fed, the statistics nonetheless may bear out. Two negative years in a row is very rare. See the chart below:
For 2023 we remain optimistic. But as someone once shared with me, "Hope for the best but expect the worst." So we offer one positive chart that we hope turns out to be accurate:
A few days ago, one of our avid readers contacted me. He wanted to let me know that our commentary over the past few months had kept him from making some potential big missteps. Especially important was the warning about not getting too exuberant in October when we urged patience and not to be overly aggressive. He mentioned that the Big View bullet points suggesting we were getting close to a "RISK OFF" condition in our Alpha Rotation model were the reason he decided to sit on the sidelines.
I appreciate his candid and sincere comments. However, I want to remind (him) and all of you that we started warning about what lay ahead as far back as in the fall of 2021 and early 2022.
A Look Forward
Personally, I do not feel capable, yet, to make any predictions about the economy and the bond and stock markets. For now, I think we should leave that up to the Gurus like our own Mish Schneider. Mish is putting the finishing touches on her 2023 Outlook. This mini-book is intended to prepare her readers for the economic backdrop we are likely to experience and suggests investment ideas to survive and thrive in 2023.
Just a reminder that Mish absolutely nailed the economic landscape for 2022 over a year ago. Her insights that we would see the emergence of a positive commodity cycle led her to recommend to her Mish's Market Minute Premium subscribers some outstanding picks during the year, including Natural Gas (UNG), Agricultural ETFs (WEAT), Silver (SLV), Copper (COPX) and various other interesting ideas (including EV stocks).
How Will 2023 Play Out? (16 predictions)
I scoured many of my sources for some interesting predictions and came up with a few that I thought were worth repeating (and may differ from what we at MarketGauge think possible):
- The U.S. Economy will grow at a 0.5%-1% pace, a drop from 1.5%-2% in 2022, and there will be a mild recession near the end of the year. (JP Morgan)
- Bitcoin will decline to $5,000. (Standard Chartered)
- Inflation will decline to 4%-5% by May, but it will take much longer to bring down to the 2%-3% Federal Reserve target. (Mihi Desai, Harvard Business School)
- Big brands will begin to push startups out of the cannabis industry. (Venture Capitalist Bradley Tusk)
- Most self-order kiosks at restaurants will be replaced by mobile ordering apps. (Nation's Restaurant News)
- The S&P 500 will decline again, in what is the first negative aggregate prediction tracked by Bloomberg since at least 1999. (Bloomberg)
- The stock market will improve after an early sell-off in the year. (An aggregation of strategists)
- Real estate will be a "nobody's market" with high-priced homes and limited options. (Danielle Hale, chief economist at Realtor.com)
- The NFL will announce two expansion teams, both will be in Europe. (Tyson Webber, GMR Marketing)
- NFTs will make a comeback, but only as a way to authenticate another object. (CoinDesk)
- Investors will stop craving "hockey stick" growth and prioritize profits. (Entrepreneur)
- Self-driving cars will make a real impact, but mainly from the use by local governments. (Venture capitalist Robert Ravanshenas)
- Netflix (NASDAQ:NFLX) will merge with Disney or Paramount to create a mega-streamer. (CNBC)
- Media will untether from Twitter. (Casey Newton)
- Malaga, Spain will be the trendiest travel destination, followed by Sydney, Australia (Airbnb)
- More investors will turn to MarketGauge and Mish Schneider to make their investment decisions. TAD Blends will become the standard to which other investments are evaluated. (Donn Goodman)
Again, we hope 2023 ushers in new opportunities, memorable experiences, and positive investment results for you and your families. Thank you for following us. We look forward to continuing to serve your investment needs in the New Year and beyond.
Here are this week's bullets from Big View:
Risk On
- The 52-week new high-low ratio for the NYSE and NASDAQ both indicate a little improvement. (+)
- Volatility is easing, and even with the market down, the VIX closed in a bear phase which is bullish. (+)
- Value Stocks (VTV) continue to outperform Growth Stocks (VUG). Watch the price of VTV closely. It is trying to establish a bull phase. It made a golden cross and closed exactly at its 50-day moving average (140.37) on Friday. (+)
- The Euro and the Yen both gained against the US Dollar, and the dollar closed at its lowest level since June, but has found support for now at the 50-week moving average. (+)
- Biotech (IBB) remains in a strong warning phase closing at 131.29, only slightly below the 50-day moving average of 131.52. (-)
Neutral
- Three of the four US indices have positive TSI, but three indices are also in bear phases. The only US Index displaying technical strength is DIA which closed on Friday at 331.33, slightly below its 50-day moving average of 331.98 and is in a warning phase. (=)
- The McClellan Oscillator is still in negative territory for the NASDAQ and NYSE. The McClellan Oscillator's overall negative reading has improved marginally. (=)
- Risk Gauges have improved to a weak neutral reading. Stocks outperformed bonds throughout the week, which contributed to the improvement. (=)
- The percentage of stocks on the SPY and IWM above their 200-day and 50-day moving averages fell slightly, while the number of stocks above shorter-term 10-day MA has improved significantly. (=)
- Large Cap (DIA) continues to lead over small (IWM) and mid-capitalization stocks (MDY). (=)
- Foreign equities (EFA) continue to outperform US equities, with EFA's closing price of 65.64 needing to continue to hold above its 200-day moving average of 64.84. (=)
- Emerging markets (EEM) continue to outperform American markets, but EEM is losing ground to EFA. (=)
- Gold has broken out above its 6-month calendar range and 200-day moving average, while Oil has moved into a strong recovery phase and will turn bullish if it can continue to hold above its 50-day moving average. (=)
Risk Off
- This week's volume patterns deteriorated further. During the past two weeks, there have not been any accumulation days on the NASDAQ, and there were more distribution days than accumulation days for all US indexes. (-)
- Energy (XLE (NYSE:XLE)) saw growth of 3.7% over a quiet holiday trading week, while all other sectors were relatively muted. The only sector to have positive returns for 2022 was Energy (XLE) returning 57.6%. (-)
- Precious Metals, Miners, and Oil Services (energy-related) are trending higher, with Natural Resources and Industrials closely following.
- The counter-trend rally in the TLTs appears to be over. (-)
- The yield curve is still inverted but has moved away from more extreme inversion levels. (-)
- Growth Stocks (VUG) are in a bear phase. (-)
- Five Modern Family members remain in bear phases. (-)
- DBA (soft commodities) is still outperforming the S&P 500. (-)