Prediction from a Wall Street Guru

What’s In Store for 2023?
Prediction from a Wall Street Guru

January 11, 2023

Weekly Market Outlook

By Keith Schneider and Donn Goodman

Happy 2023 Gaugers. We are pleased to start another year with you all, especially after the ugly investment climate during 2022. Should you desire, we will be making all of our 2022 weekly Market Outlook’s (written by me and Keith) available in one PDF.

I am confident that we delivered some meaningful lessons including: putting on hedges; using disparate strategies for better outcomes; using inverse ETFs for protection; how to watch volatility indices to know when it is more favorable to invest; selling big winners to protect capital; utilizing cash as an asset class; finding new advisors; and blending stock, bond and commodity investment strategies together (we offer this to our MGAM clients) to name a few of the topics we touched on during 2022.

Click here to get your copy of Mish’s Outlook for 2023

The Balanced Approach

More Americans, through retirement plans or their own directed 401k plans, have money allocated in 60% equities (stocks) and 40% bonds or fixed income funds. This is the widely held Balanced Fund approach.

Most advisors who manage client money with a plain vanilla allocation and without investment alternatives (hedge funds, private equity, real estate, etc.) manage the preponderance of client assets this same way. For balanced investors, 2022 was a disaster.

Historically, most investors have used fixed income to offset the negative returns from stocks given that “flight to quality” and an accommodating Fed cause bonds to rally when stocks do poorly. Reread the last sentence. For this strategy to work, it requires an accommodating Fed that allows interest rates to fall to keep the economy humming in a bad stock market year. Not so this go around.

Given the Fed’s persistence to fight inflation, they are not accommodative. They are doing anything possible to tighten rates by raising the Fed Funds rates (overnight lending to banks) or draining liquidity out of the system (selling their bond and mortgage securities in the market). This hawkish action is to get inflation down.

As a result, the bond portion of balanced accounts WAS NO HELP whatsoever to stock investors, especially those holding balanced funds, in 2022. The 60/40 portfolio was down more than 15%. Performance this negative has only occurred five other times in the last 94 years.

Interestingly, the last time this balanced portfolio suffered mightily was back in 1972 and 1973. What was occurring back then? High runaway inflation. See chart below:

At MarketGauge Asset Management (MGAM) we have assembled our best investment strategies (some new ones we don’t currently sell) in an optimal method to produce a Balanced or Moderate portfolio that has produced outstanding performance. If you have a $100,000 managed investment portfolio in these strategies, you’ll receive the trading signals for it FREE. If you’d like detailed information about how these strategies trade and their returns, please email [email protected] or me, [email protected].

Click thru to read more about the following relevant 2023 topics: