Thoughts for today

January 31, 2023

January 30, 2023


I often say that when it comes to investing you have to swing at the pitches that are being thrown at you. Using baseball as a metaphor, when you step up to bat you don’t know if the pitcher will throw you a curveball or knuckleball. Juicy fastballs right down the middle (i.e. 2020 – 2021 market environment) are easy to make contact on. We are currently in an economy in which the economic data flutters and dances all around in a seemingly random method (like curveball and knuckleball pitches). Some economists say we were in a recession, some say we are and some say we are yet to enter one. Some declare that inflation was bad and is getting better. Others prognosticate that inflation is only going to get worse. Some see GDP having peaked others having bottomed. As for jobs, everyone is grasping at straws guessing that the job market is getting better or worse. We just do not know.

What is making matters worse is that never in the recent history of the United States has there been an internal migration of population from “blue-high tax” states to “red-no or low” states of the magnitude as we are seeing now. Never mind the illegal immigration crossing the southern border. Hence, if you’re sitting in Florida, Texas, Arizona or Nevada, the economy is stable and strong. If you are in Southern New York, New Jersey, Illinois, or California the economy is on the precipice of a major recession. The truth is, as I have been writing for some time, we have rolling regional recessions taking place, but not of a magnitude that should send shock waves through the nation.

The Federal Reserve Open Market Committee meets Tuesday and Wednesday this week. They will likely raise the Fed Funds rate ½ point but signal that they will slow down and end their tightening cycle this year. Furthermore, these next two weeks are busy for larger capitalization corporate earnings reports.

Industries that typically bottom after a recession are beginning to sprout green shoots such as semiconductors (except memory chips),technology, healthcare and consumer discretionary. However, don’t expect that the technology stocks of old will be the leaders in the next bull phase. As an example, social networking stocks will become, if they have not already, economic dinosaurs.

A little taste of what we have been buying lately is Boeing (BA), Nvidida (NVDA), Albermarle Corp. (ALB), and Nike (NKE). In some strategies we have also added to positions in Tesla (TSLA) and shaved off some Apple (AAPL). We are not getting cautious on Apple, it’s just that the position was too outsized and was a source of funds for other purchase. As I eluded to earlier, beware of that curveball and knuckleball.

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