My bias/view on markets on longer time frames has been bearish, but my execution plan provided inside the Community has kept me and members in markets heading into and after FOMC given that certain downside thresholds did not trigger. Now, I do not agree with today’s valuations but it will take some time for this froth to play its course.
I will discuss more execution and strategy in Feb. Part 2 released tomorrow.
We have Apple, Amazon, and Google earnings tomorrow after the market. Fundamentally speaking, those earnings reports are more important than today’s FOMC event.
Inside our Community, I wish to help you capture as much of the market’s upside remaining as safely as possible with thoughtful strategy and risk management. Read my piece below.
Side Note: There are many impersonators on social media always randomly messaging my followers. Please recognize that it’s not me unless it’s my official handles on Twitter and Instagram.
From BofA… Five of six cyclical sectors saw big outflows last year, worth $22bn in total. In energy and tech, flows tell the opposite story of returns.
Tech buyers unfazed: Technology was the second worst performing sector in 2022, down -28%. It was also the only cyclical sector to avoid outflows as investor sentiment turned positive in Q4, driving fresh inflows.
Energy buyers in hiding: Despite stellar returns in 2022 (+65%), energy sector ETFs still saw -$1.6bn in outflows. We have a favorable view based on valuation, light positioning, and strong commodity & equity fundamentals.
Financials get no credit for quality…yet: The sector is cheap, under-owned, and high quality. Yet, financials saw -$9bn in outflows.
Macro Chart In Focus
Analyst Team Note:
While the Fed believes they are going to get to a 5.25% terminal rate and maintain that rate for a while, the market is currently projecting that rates likely top out at 5% at the highest. By the end of 2024, the market believes the fed funds rate will only be 2.8% —that is about 150 bps lower than what the Fed expects (4.3%).
The number of available positions climbed to a five-month high of just over 11 million in December from 10.4 million a month earlier. The increase was the largest since July 2021 and mostly reflected a jump in vacancies in accommodation and food services.
The figure exceeded all economists’ estimates in a Bloomberg survey that had a median projection of 10.3 million.
Chart That Caught Our Eye
Analyst Team Note:
“Exhibit 4B shows the rise in household consumption expenditures for the three countries for comparative purposes. Despite the rise in consumption of the elusive emerging market consumer, even combined, China and India together account for only half the consumption base that the U.S. offers. It’s not about how many people a nation has but rather the purchasing power of the population.
The bottom line is, contrary to various media headlines hyping head count, less (population) can be more (higher per capita incomes). We believe the China reopening story, regardless of the demographics-in-decline backdrop, offers investors a unique opportunity in 2023.” - BofA Chief Investment Office
Sentiment Check
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