The Compound: Will Investors Get Rug Pulled in 2023?
With the year closing, investors are looking forward to 2023. Most expect the market to have a better year than 2022’s double-digit loss.
2022 even got off to a rough start. Despite setting all-time highs on January 3, by the end of the month the market had declined over 5 percent. The market had some strong returning months, including a summer rip higher. Nevertheless, stocks continued to set lower highs and lower lows.
Those looking for clues for the market’s performance moving forward should bear that trend in mind. Until it changes, it suggests that investors should take some positions off the table on any move higher. And to expect further moves lower.
The mantra for 2022 has been “don’t fight the Fed.” The central bank announced in late 2021 that it would raise rates. And it’s done so aggressively. With the bank still raising rates, 2023 will continue to follow 2022’s moves lower.
Last year also saw investors shift away from speculative stocks the most. SPACs were a popular way to make a quick and profitable trade during the last market rally. But these stocks lost most of their value as markets declined.
Investors will need to be more cautious about valuations that they pay going forward, no matter what the company. And to expect markets to trend lower until interest rates stop rising.