Welcome to 2023

Money Moves to consider and a quick look at the rest of this week

Well, time to get back to work!

Before we get started I want to thank Jules Acree for the very kind words she shared about Rate of Return inside of her Sunday newsletter — and a very warm welcome to the +346 of you who ended up subscribing to us because of it!

We hit 9,000 on New Years Day because of her shoutout — and we’re incredibly grateful. Here’s a recent post that might be helpful for new subscribers!

Next, I want to thank the 197 of you who ended up creating accounts on Quantbase in efforts to subscribe to my Dividend Growth Fund. I’m optimistic about the fund’s future. For those curious, read the bottom of this post.

My $10K is now fully invested and we’re enjoying the journey.


As it relates to the New Year, we’re a lot more optimistic than you may think.

Do we still believe the market will experience another leg lower? Yes.

Do we think that the majority of major names likely haven’t yet reached their bottom dollar? Yes.

But that doesn’t mean we’re not both eager and excited for the opportunities that are coming for level-headed investors in 2023.

 
S&P 500 (SPY)

At time of writing, the SPY is down exactly -20% from a year earlier. Stocks have certainly taken a plunge over the past year, but you can see below — not every recessionary period means the market aimlessly falls for an extended period of time:

S&P500 Performance During Recessions, 1950-2022

It’s also interesting that the two most recent recessions have each been outliers in certain ways:

  • The 2008 recession was by far the deepest (worst stock market performance, the S&P 500 bottomed out at -54% losses) and also the longest at 546 days.

  • The 2020 recession had the steepest immediate sell off, but was also the shortest recession on record at 60 days.

So what’s the takeaway? We’re currently hovering around market losses experienced during the ~average~ recession.

How about we look at what happened in the years following (lighter color tone):

S&P500 Performance During and After Recessions, 1950-2022

A decent amount of “up and to the right” — but also a whole lot of volatility.

For those interested in trying to time the market, 2023 is going to be a lot of fun! Interest rates are poised to remain elevated well into the second half of 2023, the Federal Reserve is forecasting an increase in unemployment, and early signs of an economic slowdown are popping up everywhere.

Of course, a “market bottom” could be on the horizon — but I personally don’t plan on timing it all to a tee. We’ll be buying the weakness — and sharing those “buys” with you all every step of the way.

 

Money Moves for 2023:

 

Quickly touching on things to consider as you assess your 2023 money situation.


  1. Revisit my Bear Market Playbook — linked here (specifically the bottom section).

  2. Create a budget — You can have my free budgeting template sent directly to your email by following this link.

  3. Plan your 401K & Roth IRA contributions — Keep in mind that Congress recently amended (and mostly improved!) many retirement laws. The limit for annual IRA contributions has increased to $6,500 and the limit for annual 401(k) contributions is now $22,500. Here’s a short TikTok video about them.

  4. Consider your portfolio strategy — Here’s my recent investing re-evaluationportfolio reveal post, and a link directly to my portfolio tracker (subscribers-only).

  5. Think about your credit — Difficult economic times could mean you’ll need access to more credit. Better yet, if you’re carrying high-interest credit card debt — pay it off! Paying off debt accruing interest at 21% is a much better “return on investment” when compared to only earning 10% in the stock market. Here’s a link to our Credit Score Explanation.

 

What to Watch the Rest of This Week:

 

A (very) abbreviated Week Ahead before we get back into our regular cadence next week.


Earnings at a Glance

 
The most anticipated earnings releases scheduled for the Week of January 2, 2023 are Walgreens Boots Alliance #WBA, Lamb Weston #LW, UniFirst #UNF, Conagra Brands #CAG, Constellation Brands #STZ, Simply Good Foods #SMPL, RPM International #RPM, Neogen #NEOG, SMART Global Holdings #SGH, and Aehr Test Systems #AEHR

Hidden in what is certainly a quite dull week of earnings are names we’re excited to report back on in this Sunday’s edition of Week in Review.

Conagra Brands (CAG), Constellation Brands (STZ), and Walgreens Boots Alliance (WBA) will provide a quality heat-check of the retail space.


Economics at a Glance

 
United States Unemployment Rate, 1997-Present
  • Wednesday (1/4): FOMC Minutes, ISM Manufacturing Index, Job Openings & Quits

  • Thursday (1/5): ADP Employment Report, Speech by STL Fed President Bullard, Trade Deficit

  • Friday (1/6): Factory Orders, ISM Services Index, Jobs Report (Including Unemployment Rate), Speeches by ATL Fed President Bostic, KC Fed President George, Richmond Fed President Barkin, and Fed Gov Cook

There’s an interesting phenomena going on right now. The unemployment rate is near historically low levels — but the labor force participation rate remains lower than it ever was between 1977-2020.

The Fed has been crystal clear that the unemployment rate is likely to rise with the sustained, heightened rates — but what’s going to happen to the overall labor force? Regardless, make sure you have an emergency fund (parked in a high-yield savings account) worth 3-6 months of expenses in case you lose your job.

Here’s a short TikTok video that explains how unemployment is actually calculated.


The Consumer Electronics (CES) Show

 
Samsung's Flex Hybrid concept folded on one side
The Samsung Flex Hybrid phone concept, Source: Roger Cheng, CNET

CES in Las Vegas is considered to be one of the premier conferences for consumer electronics, retail, and other categories of companies to debut new product offerings, give updates on long-standing developments, and reveal next-generation concepts (such as the Samsung phone shown above).

Some of the key topics that are expected to be emphasized include digital health, mobility, the metaverse, AR/VR headsets, and of course — AI advancements amidst the popularity rise of Chat GPT.

Companies Expected to Showcase Include:

  • Advanced Micro Devices (AMD)

  • Caterpillar (CAT)

  • Cisco (CSCO)

  • Intel (INTC)

  • Nvidia (NVDA)

  • Qualcomm (QCOM)

  • Samsung (SSNLF)

  • Sony (SONY)

  • Stellantis (STLA) — they own Ram trucks


Tesla (TSLA) and EV Deliveries

 
Can Twitter be blamed for the fall in Tesla's stock price? | The Week

While Elon Musk continues to grow engagement on his newly-purchased social media platform — Tesla (TSLA) stock has been getting absolutely crushed.

On the first day of trading in 2023, Tesla closed down -12% — around $108 per share. This notched the stock’s largest drop in more than two years, as the company has now lost more than $950 billion in value since its peak in November 2021.

Image

Despite the company posting its first-ever 400K vehicle quarter and increasing deliveries +40% YoY — Tesla delivered fewer vehicles in 2022 than it initially projected. In total, the EV manufacturer delivered ~1.31 million cars last year — short of guidance that was well above 1.4 million.

What’s more painful in Wall Street’s eyes is the fact that forecasts were lowered to ~1.34 million heading into the data release.

  • Total Deliveries — 405,278 vs. 420,760 expected

  • Model S/X — 17,147 vs. 18,577 expected

  • Model 3/Y — 388,131 vs. 405,597 expected

According to Toni Sacconaghi of Bernstein Research, Tesla may need to cut vehicle prices by $2,000-$4,500 relative to Q3’22 levels — as there seems to be a substantial demand issue.

More Q4 EV deliveries data is expected from LI Auto (LI), Nio (NIO), Rivian (RIVN), and XPeng (XPEV).

Tesla’s next earnings report is set for Wednesday, January 25th.

 

Some of my favorite Twitter threads right now:

 

 
 

If you’re starting your investing journey or want to change to a cleaner, social-focused investing platform, consider visiting Public.com.


Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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