Date: January 10, 2023

Markets OK – Jobs & Inflation

Stocks came into 2023 on slippery footing but managed to eke out a gain after the first five days. Yale Hirsch’s Stock Trader’s Almanac had a quaint piece about as goes the first five days of the year, so goes January. And as goes January so goes the year. It all nice and tidy except that it does not stand up to scrutiny this century.

I can’t tell you how many times I have heard the pundits tell everyone, “Don’t Fight the Fed!” In real terms, they are telling you not to buy stocks when the Fed is raising rates and to buy stocks when the Fed is cutting rates. Sounds like good advice, right? Well, the Fed cuts rates from September 2007 through 2008 and stocks collapsed 50%. Fighting the Fed would have worked well then. The Fed also cut rates from early 2001 to early 2003 and the stock market fell almost 50%. Just another example of pundits being lazy and/or ignorant to not do their own homework.

I published my 2023 forecast over the weekend and you can see it below. I will likely add a video on it shortly.

2023 Fearless Forecast

We know that consensus is calling for another challenging year, especially in the first half of 2023. Markets rarely accommodate the masses as you know. As bad as international investing has been the past few years, I am encouraged for 2023 and will look to add to our holdings into the first bout of weakness.

Last Friday the government released the December employment report and we see the economy still adding more than 200,000 new jobs with unemployment back down to 3.5%, tying a 50-year low. That is the one ingredient missing to my scenario for a mild recession in 2023. Everything else is there, including the Purchasing Managers Index which came out right after the market opened last Friday and led to the huge rally because it came in weak. Markets are in that perverse regime of bad news is good news because it means the Fed will pivot. Be careful what you wish for.

Before the open on Thursday we get a glimpse at December inflation. That will be a market mover. Stay tuned.

On Friday we bought HYG, FHLC, levered Russell 2000, levered NDX and more TSLA. We sold levered inverse NDX and Russell 2000. On Monday we bought HD, WHR and more high yield funds. We sold ECH, FHLC, levered Russell 2000 and some levered NDX.


Paul Schatz, President, Heritage Capital