Headwinds:
• The Fed-induced earnings recession, analysts lowering forecasts late in 2023
• Labor, energy (Russia), and computer chip shortages (China) prolonging the 2023
recession into 2024 with inflation running at 5%
• Money supply decline (Quantitative Tightening) by the US Treasury with a moderate
housing correction in 2024
• Crypto, the SEC’s reluctance to regulate, more criminal activity ahead
Tailwinds:
• NATO’s containment of Putin – Oil price decline, green energy fashionable
• China’s not quite Zero Tolerance easing chip supply, and Chinese consumer spending
• Corporate profits benefiting from: pricing flexibility, moderating U.S. consumer demand,
and productivity gains through AI, work-at-home, and on-shoring
• Professional market forecasts almost universally bearish “Stagnant earnings”
• Slowing interest rate hikes and the 10-year Treasury Bond Yield pivot.
Strategy:
• Defensive equities in the 1st quarter, add mid-Cap growth in the second half
• Lengthen bond maturities from 3 months to 3 years to intermediate.
• Buy the dips in mid 2023.