My 2023 Stock Market Outlook Is Sending A Lot Of Investors Into Hiding
(Editor’s Note: I shared this writeup a few days ago with my close friends and business partners. I don’t send out messages very often, but thought you should be warned too…)
2023 Looks BLEAK
I keep looking at the stock market, and the economy, and I’m hunting for a bright spot. (I’m not seeing it.)
We all know the old market wisdom – “Don’t fight the Fed.”
The Fed is showing their hand of continued rate increases for the next few months, if not year.
It means continued downward pressure on the stock market in 2023 – and a push to slow the economy (or drive it to a recession).
I don’t see them stopping rate increases until inflation softens… driven by the following in my mind:
1) The housing market corrects… (affordability has been crushed with rising rates and I see housing prices falling – cooling a once super hot part of the market – and easing inflation)
The correction doesn’t need to be sudden – but a slow unwinding is possible. Remember someone moving into an identical house right now will see their cost up some 30%++ vs a year ago… just based on rates alone.
A secondary impact is with falling home prices cash out ReFinance, and using HELOCs to finance lifestyle will be dampened. Home equity is falling…
2) Wages Normalize… a big driver of inflation is wage growth, and we’ve seen the pressures many businesses are facing with hiring. Cooling the economy will help, as will the fall off of government handouts (deserved or not).
Another part of wages is the recent increase in layoffs… We’ve all seen the news. Personally I think there will be more layoffs to come in January… and throughout Q1.
A lot of companies wanted to avoid looking like a grinch by doing layoffs during the holiday season… Plus companies (like Amazon) who are always looking for seasonal workers were not hiring like in the past.
3) Credit Contracts… Easy money has been the name of the game for the last 12 years (Since the real estate blowup of 2009 – and some would argue even before that).
Consumer credit is at an all time high, and in Q3 2022 Credit Card balances jumped 15%.
Back in October a handful of big banks increased their bad loan reserves – with Chase indicating it was due to expectations of a recession. (If that’s not a bad sign, I don’t know what is.)
Credit is tightening… but I think it will get worse as the recession hits. Also payments get more expensive with increased interest rates… feeding on the credit pressures.
We have to see these three things take place BEFORE the Fed stops increasing rates. Then we will see a turn in the economy and the markets.
What does it mean?
Bottom line, I’m expecting a continued economic downturn in 2023 with falling housing prices, tightening credit, and if not falling wages, an increase in unemployment.
It’s not a depression, but a painful recession is – in my opinion – a greater than 80% chance.
I know what you’re thinking… Thanks for pointing out the obvious.
What Should I Do?
Great question.
I’m recommending some basic changes to my family members.
First – cut your costs. If you don’t need to spend money right now, hold off. Having cash in case of an emergency is critical.
Second – stabilize your income. Make yourself invaluable to your employer. Pick up extra hours or overtime if possible… Then start a side hustle to create a little extra income (just in case).
Third – Monitor your finances now. Look at your savings and investments and make moves now. 2022 was rough for the markets. Really analyze your investments and make sure you’re investing the best possible way.
Where to invest in 2023…
Look, 2023 is going to be a wild ride.
The economy, as I outlined above, is going to be rough.
As a result, expect volatility to be higher for the stock market. Simply more wild swings in the stock market.
There’s three simple things to do in this situation.
ONE – Continue investing. If you’re investing in the stock market, don’t stop. Don’t get scared away. Stay strong and continue on with your plan.
TWO – Actively manage with options. If you are actively trading your portfolio (or a part of it) look to options as a way to lock in your returns. With increased volatility, the price of options will be higher, and that leads to some wonderful opportunities to profit.
This report: Create a Regular Income Trading Stock Options is a perfect place to start – if you’ve never traded options before.
If you’re got some experience trading options, consider downloading and reading this report: The 8-Minute Options Trading Cookbook
It’s a much more extensive write up over 40 pages of information about trading options.
If active trading isn’t top of the list for you, you can also check out dividends…
THREE – Invest in dividends. If you’re more of a buy and hold type investor – for all or even part of your investment portfolio – you might want to look at dividend investing.
Here’s a great report: The Top 101 Dividend Stocks
I like it because it also includes a list of premium dividend stocks that have been paying dividends longer than most people have been alive!
You can also check out this report listing the 5 favorite dividend stocks. Full disclosure… I own some of these stocks myself!
Here’s that dividend report: READ THIS Dividend Stocks Everyone Should Own
There you have it. My bleak outlook on 2023, and what to do about it.
Wishing you good trading in 2023…
Happy New Year!
BRIAN
Category: Dividend Stocks, Options Trading, Stocks
