Why are markets moving up to start 2023?
Kids, behold… the
January Ron Swanson effect.
Nearly every corner of risky assets are up to start the year:
- The S&P 500 ($SPY) is up 3%.
- The Nasdaq ($QQQ) is up 5%.
- Bitcoin ($BTC) is up 25%.
- Chinese stocks ($PGJ) are up 13%.
There are several factors helping drive up the market:
1/ China has shifted its zero-COVID policy stance to reopen at all costs — easing fears of a global recession.
2/ The US Dollar Index ($DXY) has fallen over 10% from a high last September (compared to a basket of major currencies).
3/ Inflation is trending lower, as shown by the December CPI and PPI reports.
But a recession is still in play. Investors are hoping for a soft landing — interest rates rising without triggering a recession. Too early to say, but companies are preparing for the worst.
- Tech giants continue making significant layoffs that are already running into the hundreds of thousands.
- Analysts are expecting corporate earnings to fall this earnings season.
- Early reports from major banks show preparation for a potential recession.
Remember this equation: The stock market ≠ the economy.
We’ve said it many times, and we’ll continue pounding this into your heads. Markets are forward-looking, and current prices reflect future expectations.
While this could turn out to be a temporary bear market rally, a potential market bottom in 2023 seems like a real possibility. Locked and loaded.
The Average Joe: Investors, under our tutelage in 2023, we shall turn you from gladiators into Swansons.