Doing some basic math, the odds continue to favor a strong year for stocks in 2023.
There are some people out there who think the Nasdaq is the stock market. There are others who “only buy growth stocks”.
I don’t know what kind of masochist you need to be to think that way, but both of those are very foolish approaches to life.
The Nasdaq is full of growth stocks. And growth stocks historically underperform and make little progress when interest rates are rising. I’m not sure if you heard, but interest rates have been rising!
Since the Stock Market bottomed in June, the majority of stocks and sectors are up and to the right. It’s only the biggest losers that are down, and there aren’t that many of them. It’s really just those nasdaq / growthy stocks that the masochists are focused on.
From a seasonal perspective, Pre-election years are historically some of the most bullish years we have in the market. Here’s what the 4-year cycle looks like as we head into 2023:
According to Oppenheimer & Co, since 1928 the S&P500 averages an 18% return during Pre-election years following a down mid-term year. That also comes with an 80% hit rate.
Since 1928, the S&P500 has only posted back-to-back losses 8 times. Q4 returns were negative in 7 out of those 8 occasions going into the next down year. With S&Ps up 7% last quarter, the math is once again in favor of the bulls.
Here’s a breakdown of our Cycle Composite for 2023. This includes every year since 1950, all of the Pre-Election Years since then, and of course, every 3rd year for the Decennial Cycle:
From the lower left to the upper right is what I see.
Here’s what the Composite looks like with all of them combined:
Up and to the right.
Are you fighting seasonal trends?
Are you fighting the improving market breadth?
Are you agreeing with all those bearish folks who keep telling me about this epic recession that’s supposedly coming?
(By the way a recession has never begun during a Pre-election year, so if that’s what you’re betting on, you’re making a bet on something that’s never happened before)
And to be clear, I don’t mean the bearish individual retail investors that have little or no impact on market trends. I’m specifically referring to Institutional Money Managers that Prime with Bank of America and Goldman Sachs that are scared to death.
We have the data.
So are you spending your time looking for stocks to buy?
Or are you spending more time looking for stocks to sell?
That’s the question we answered last night on our Live Monthly Charts Strategy Session.
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You CANNOT miss it.