Ready - Set - Go! Welcome To 2023

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by Erik Weir Contributor
January 04, 2023
Ready - Set - Go! Welcome To 2023

What can we expect from markets in this new year !

As we bid farewell to 2022, January launches with a bit of an uptick for the markets. These winds of positive change are driven by fresh starts and the hope that inflation may be slowing.

We can’t forget that the Federal Reserve increased interest rates at a record pace during 2022. As we begin the new year, the Fed has indicated that they may give us two to three more interest hikes. Much will depend on the rate of inflation. But at some point, the blood letting will stop and interest rates will go the other direction. Expect the market to anticipate such a reversal and begin to rally.

It’s still unclear to what extent, if any, we will experience a recession in 2023. On the other hand, we do expect an increase number of layoffs in the first quarter of the year. Typically, people respond to negative employment trends with market fear.  In the midst of this, it is reasonable to expect continued pressure on equities. Markets are forward-looking, but sometimes they go to extremes before correcting. One possibility is that things could get worse faster in the new year, but offer a correction in the Fourth Quarter, ending 2023 on a positive note.

A Winning Investment Strategy

When it comes to stocks, invest in proven companies. One of the best approaches is to think of yourself as a fractional owner of the business. The momentary up and downs of the stock market shouldn’t dominate your investment strategy. Looking at anything daily can cause euphoria or disappointment. Worry less about the day to day progress of these stocks and more about their overall direction as companies. Make sure they are growing in value over time with good leadership and defensible business models. Investing in equities is owning a piece of America for the long term. This is a growth strategy that continues to create more wealth than any other asset class.

Remember also that success often requires the kind of thinking which is counterintuitive to our emotions. When things are down, you may want to sell or get out, but often this is the very best time to buy. If you look back when bitcoin was above $60,000, experts all over the world were saying it was going to hit $100,000 or $150,000 by the end of the year. Now it’s well below $20,000 per coin. With asset prices and bubbles, things tend to move far more than you thought they would, often in both directions.

Conclusion

Market success requires long-term perspective. It requires mindset. If you’re in a position to invest monthly, quarterly, or at least annually, do so.  By continuing to put money into the markets, it creates an automatic cost averaging which allows you stability through both good times and bad.

Over the long term, companies grow. They create more profits. If you look back to the year 1900, the DOW was 1000. By 1999, it was well above 10,000. If you look at what happened in markets this last decade, we’ve had a tremendous amount of ups and downs, scares, wars, and rumors of wars. Even so, companies continued to prosper as they continued to grow. Long term market confidence should be your investment mindset.

Recognize market weaknesses and setbacks of this moment in time and use them as opportunities. As things bounce back, be grateful. Never lose sight of the fact that the market operates in cycles. Those who keep a cool head and understand the times can prosper in bull and bear markets.


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Erik Weir

Contributor

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