So What About 2023?

 2022 was a rough year if you invested your money in the financial markets. What about 2023? We'll get to that

For 2022, pretty much all assets (with the exception of Gold), were down significantly. We don't need to harp on the numbers here. You're already aware of what transpired, or should be if you monitor your investments in any sort of responsible fashion.

As for Gold, it was the "least worse." If you had money in Gold to start the year, your stake was pretty much the same when it ended, in US dollars. If your home currency is non-USD (e.g., Euro, Yen, Aussie $, etc.) you made some profit. Why? The USD wound up being strong for much of the year, compared to other currencies, so it's value relative to Gold was stronger. Because the other currencies were weaker, that was reflected in their relationship to Gold: You can now buy more of your currency with the same amount of Gold than you could at the beginning of last year.

But let's not get tangled up with this. If you don't understand the effect of our current monetary system of floating fiat currencies on your investments, maybe consider getting up to speed in 2023. It couldn't hurt.

Now, for 2023, what can we expect? Frankly, who really knows? Forecasts are notoriously inaccurate. Most are way off, no matter the year, with a few exceptions. Even our best Brain Trust folks aren't always spot on. So we take all with a grain of salt. Indeed, given our past experience, we've cut down even on those grains by saving ourselves the time and trouble of perusing all the forecasts offered over recent days and weeks. 

But you can always make an educated guess, right? So what might that be?

Take stocks for example. They hardly ever go down 2 years in a row. The last time was 2000, 2001, 2002. That was three years in a row. And it really did shock just about everyone. In a former life at a large reputable financial institution, I sat in on Monday meetings chaired by our big chief of financial markets. After 1999 he predicted a 10% increase in stocks for 2000. The portfolio managers duly observed his guidance. After losing money in 2000, in January 2001 he predicted a 10% increase in stocks. The portfolio managers duly observed his guidance. After the jolt of losing money again, in 2001, in January of 2022 he predicted a 10% increase in stocks. (Do we see a pattern here?)

And so, after losing money for the third straight year in 2002, in January of 2023 he predicted a 10% increase in stocks. Bingo! (As they say, even a broken clock is correct twice a day.)

This guy was a pretty smart cookie. He was popular at client events. Rich folks would attend partly to hear his prognostications. The client relationship folks and the portfolio managers considered him and all his pronouncements a real asset in their efforts to attract money from current clients and prospects. So give him credit for that. Given his track record, maybe the marketing angle is why he was paid so much.

The point? Predictions of a good year for stocks have already begun to blossom. And Friday's burst upward will only feed this. Among other reasons given, besides stocks not falling two years in a row: The Fed will begin to slow down rate increases. Inflation is decreasing, so the inflation threat is ending. There are other reasons.

Opposing this: valuations. The stock market remains wildly overvalued. Two references here: The Buffet Indicator; the Case Shiller Index.

Then there's the view from the Bear Market itself. And that comes in two flavors.

Bullish: Bear Markets typically don't last very long, not infrequently less than a year. Combine with the above referenced reasons for a Bullish year, a few drops of Wall Street Pixie Dust, shake and pour. It's a delicious cocktail, if you like that sort of indulgence. The trick here is the Pixie Dust. That's where no matter what's going on in the big wide world, Wall Street will always find reasons to invest in stocks. After all, that's where they make a good chunk of their money. So there's never a reason to either sell or sit tight. Sell and sit in cash means no profit. Sit tight means no trading, hence no profit. And if there's one thing Wall Street excels at, it's taking care of their own. (And, in case you didn't know, we're not part of that club.)

Bearish: Valuations being high says the Bear has more room to run. Technical indicators fall into the Bearish camp as well. Then there's the fact that, while most Bear Markets don't last that long, some do. Some go on for more than months and cross over into years. It's happened before; it can happen again.

Oh, and one more item to consider: What if the Big Bull Trend that began in the early 1980s has ended and we're in a totally new world, one that the vast majority of investors and the investment professionals that advise them and/or manage their money have never experienced? This is actually a pretty beefy bearish argument. The thing to remember here, though, is that if we're headed into a Big Bear Trend that goes on for years, even decades, it'll be sprinkled with lesser bull and bear markets, as was the case throughout the Great Bull Trend (or whatever you want to call it).

Well there's a lot more to talk about when it comes to what might be coming in 2023. If we have something to add that's not just our spinning our own time-wasting web of most-likely-wrong speculation, we'll get back on this soon. 

Meanwhile, it's still OK to say...

Happy New Year!