Investing in stocks: 7 tips from a legendary Wall Street guru

With 2022 behind, world stocks await a return to their upward path that has been clearly affected in recent times. At the beginning of the negotiations on Tuesday, the papers challenged the rebound in the dollar and showed increases due to the investor bets turned to riskier assets such as equities and commodities.

Market analysts such as those at NatWest Markets they expect interest rates to peak at 5% in the United States, 2.25% in the EU and 4.5% in the United Kingdom, and that they remain that way throughout the year; a dynamic markedly different from that registered the previous year.

However, in the equity market, fears continue for a recession that will further affect the performance of shares, given the 19.4% decline that it maintained during 2022, the worst performance since the 2008 financial crisis.

Interactive Brokers’ chief strategist, steve sosnick, he stressed through a note in Business Insider that he does not seek to predict where the shares will go or recommend where to invest. Instead, it seeks to orient itself about the markets pulse studying trends that might go unnoticed.

On the premise that the world economy is not experiencing a “soft landing,” Sosnick believes there is seven key trends that will determine the markets during the current year. In a recent interview with Insider, he shared where he thinks his teammates are right or wrong.

1. What will happen to interest rates and the dangers of recession

Sosnick remarked that the The performance of the actions will be tied to the policies that the Federal Reserve decides to implement. He recalled that during the pandemic an “addiction to liquidity” was encouraged and that it was compensated with a subsequent phenomenal adjustment.

The analyst prepares for a year of volatilityas the Fed is content to risk a recession to squash inflation, adding: “If they can engineer the proverbial soft landing, we’ll be fine.. But do I see it as the base case, as the base scenario? No, that’s kind of hard to design. Don’t get me wrong. “Hope is not necessarily a great investment thesis.”

2. There may be disappointment with the GDP data

“There is no bigger mystery in the markets than how US economic data, including GDP, has remained relatively strong despite the increasingly tough monetary policy conditions of the Federal Reserve“, Insider brand.

sosnick not only he lacks confidence in the ability of the US economy to avoid a recession, but he is also not convinced that a recession would be as “soft” as many experts have predicted. “I think the market sees a soft landing as a market that can evade the definition of a recession or, if so, have only the mildest of recessions,” he said.

3. Spending should start to slow

“The US economy will sink or swim based on consumer spendingwhich drives about 70% of the nation’s economic activity,” he said, while expecting consumer spending to deteriorate modestly as people scale back major purchases such as cars and homes.

4. It can increase unemployment

Sosnick was surprised by the robustness last year of the working market. However, he believes that this dynamic could change soon.consolidating a reversal as the Fed continues to raise interest rates.

He emphasized that this cleavage may continue to affect the technology sector to a greater extent, which had its first shocks during the last quarter with massive layoffs in companies such as Twitter or Meta (Facebook).

5. China may be a wild card but there are risks

Sosnick believes that the biggest wild card for global markets in 2022 is how China reopens after their lockdowns as a result of the “COVID-19 zero” policy.

“In it bullish caseChina pushes past its pandemic restrictions like the rest of the world and keeps the virus in check as its economy soars yet again, allowing the nation’s battered stocks to soar higher. The other face of the coin is whether another resurgence in COVID-19 cases, possibly due to a new variant, leads the government to arreverse its reopening entirely”he emphasizes.

6. The oil supply is fixed

Investing in stocks: 7 tips from a legendary Wall Street guru

The energy stocks They have had an unforgettable period of two years, being one of the sectors with the highest performance worldwide. While in 2021 there was a resurgence in demand and in 2022 the supply shortage was highlighted, Sosnick indicated that in 2023 demand will determine oil prices and the dynamics of the energy sector.

“The problems on the supply side seem to be resolved,” he says. Thus, he predicts that a continued economic expansion would cause a boom in oil prices, but that the 30% drop of the raw material in the last six months could produce a recession end the lawsuit.

7. Bonds: Faith in the Federal Reserve or recession

“Like stocks, lBonds have been crushed this year when the Federal Reserve raised interest rates,” he recalls.

“The yield curve of late suggests that interest rates will fall after the Fed finally reins in inflation, or that rates will crash as the United States slips into a severe recession. If we go into a really nasty recession, it will really get worse.” can see rates drop,” Sosnick said. “But right now, the bond market tells you we’re going to have a rough sleigh over the next two years.”

Source: The Chronicler

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