2022 has been a real rollercoaster of a year, especially for the markets. But I think 2023 will have much more in store for us. This doesn’t mean what will come will be a complete surprise though, I think by presidents day 2023 we will have a solid grasp on what 2023 has potential for.
Energy
It is my best guess that energy will have a banner year next year. I think stocks like XOM and CVX will be the real market leaders as this Green Agenda gets shoved through regardless of what market forces are saying. This coupled with OPEC continuing to cut production and domestic production in the gutter, is a recipe for sky-high oil prices. The way I would look to play that is through some of the smaller names in the oil industry: BTU and ET being at the top of my watchlist. If these don’t fit your risk profile then I would look for utilities to buy as they are often hedged against rises in energy costs.
The Fed
I think the largest factor in the year ahead will be the folks at the Fed. They have their first meeting at the end of January and these are released on February 16th. I think that these will be a crucial release for the markets because they will be a concrete example of the policy the Fed is looking to pursue next year. With Presidents day 2023 being February 20th I think that after that we will know what to expect in the year ahead. It will give the markets a few days to digest the meeting minutes and we will have all of the numbers from the Christmas Season. If by the 20th we are down, I think that we will continue to see that as an overall trend for the year. If we are flat compared to where we closed 2022 I think we will see some Chop, and If we are up I think it’s possible that we could see some relief. The only plausible reason I can think of for us being up is the Fed has pivoted back to QE. This is honestly the thesis behind the title. By Presidents day 2023 We will know what the year has in store.
Housing
With rates on the rise, I think housing will also be a theme for 2023. Credit could continue to tighten and this will mean housing should start to cool. Building starts have already slowed so now it will just be a function of supply. If the housing supply remains constrained then prices could remain elevated longer, but what I think is the more likely scenario is we will start to see foreclosures as variable-rate mortgages start to default.
While I would never wish that upon anyone, I, unfortunately, see it as a potential outcome of the frenzied buying at the peak of the housing boom in Covid. I hope I am genuinely wrong on this, housing is something it is never fun to write about because it means that someone is losing their place to live, and on the precipice of a recession/depression I hope that does not happen.
