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Morning Commentary

HAPPY NEW YEAR (I HOPE)†

By Charles Payne, CEO & Principal Analyst
1/3/2023 9:33 AM

Investors will enter 2023 a long way from the emotions of a year ago.

The last trading session of 2022 was a perfect proxy for a year that just could never get it together – peaking on the first day of trading, then lurching lower, and never looking back. According to the Center for Financial Research and Analysis (CFRA), it was a brutal year and the fourth worst since WWII.  

Fewer Gyrations

One thing we hope for in the New Year is fewer gyrations, which picked up even more in December.

Interestingly, the CBOE Market Volatility Index, also known as the “Fear Index,” didn’t reflect the wild gyrations but was a great contrarian indicator for the market.

Value versus Growth

The final Heat Map sees hits in the once unstoppable mega-cap growth names that are hard to understand. Sure, there are comparisons to the tech bubble, but these are the richest businesses in the world, not ideas written on a napkin a week ago.

One year ago, there weren’t many folks picking value stocks while dumping growth stocks and bonds over stocks. But as 2022 unfolded, investors rushed for safety. It was the right move for the year, but how much longer will it work with value names not being cheap?

I’m looking forward to a year of transition. However, I do not think the Fed will hike rates as much as their forecast and ‘dot plot’ suggest. But they are data -dependent, so it’s all predicated on how quickly the data turns. 

We will get a big answer on Friday with the jobs report. It’s become more flawed than ever with all the adjustments. But the Fed takes it at face value, so outside of honest discussions about the state of the labor market and the future of America, it has to be modeled the way it’s printed. 

Portfolio Approach

There are no sector weighting changes this morning in our Hotline Model Portfolio.

Today’s Session

Hope everyone had a great New Year.  Looks like the market still has some holiday cheer in it, as the futures have been positive all morning.  

Yields on US Treasuries are down a bit with the benchmark 10-year trading at 3.760% and the 2-year is down to 4.345% as investors remain uncertain about inflation and fed interest policy.  The greenback is up however today, while oil has retreated, with WTI trading at $78.66 per barrel.  Natural gas is also down significantly, 8.4%, which should help with those heating bills.

Let’s see how things go this morning.

 


 

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