Two months ago, despite widespread fear that the sky was actually falling, we were predicting a bullish breakout for stocks in this new year. And we’re very happy to see that that call has come to fruition. The S&P 500 is already up 5% year-to-date. The Nasdaq is up nearly 10% – and we’re not even a month into 2023.
In fact, when it comes to the stock market, we think Sir John Templeton said it best: “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” We saw severe pessimism in the back half of 2022, and that outlook has even bled over into the new year. So, it’s no surprise to us that a new bull market is being born on the back of this pessimistic sentiment.
And we believe this bullishness will last. What gives us confidence there? Well, in short, everything. Inflation is crashing, and the economy is remaining resilient. This unique combination sets the stage for a soft economic landing. The Fed can ease on its rate-hiking campaign, allowing for economic reexpansion in the back half of 2023 and beyond.
How about valuations? The current spread between earnings and Treasury yields signals a historically discounted market. And as inflation continues to crash, we should see some significant valuation multiple expansion throughout the year. Plus, thanks to the economy’s resilience, earnings are coming in better than expected.
And don’t forget about all the technical indicators we’re seeing – S&P’s golden cross signal, Breakaway Momentum, Whaley Breadth Thrust, Triple 70 Thrust, a bullish “trifecta.”
Everything is telling us to be confident. And everything is saying this bullishness will last. It’s time to position yourself for the next 12 months – because gains could be tremendous.
(adapted from Luke Lango)
