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2023 brings a new opportunity for investors! 🌞

2023 brings a new opportunity for investors! 🌞

Investing4Tomorrow Kaye
January 16, 2023

Only in the darkness can you see the stars - Martin Luther King Jr

This quote is very apt in the current situation. Among all the bad news -recession, inflation, layoffs which will drive economy down, we also see investing opportunities that will upgrade our financial situation in the long run.

As investors we need to remain positive and continue to learn important skills throughout this period. We should keep an eye out for the opportunities that will be presented throughout 2023.

Q1 Outlook

In my opinion, Q1 will remain uncertain and market volatility will persist:

The next FOMC meeting will be held on Feb 1, 2022 and most likely they will raise the interest rate by 0.25% since inflation seems to be slowing down. If this prediction comes to pass, the stock market will most likely rally in the short term. Retail investors should remain careful not to oversize their position as the underlying issues remain unresolved.

Inflation still remains sticky, though the "all items" category came in lower by 0.1%, food inflation continues to be 10%, which is very high considering more layoffs are on the cards. This will continue to keep the markets volatile until we are able to see a substantial reduction in this category.

Earnings season has kicked off and companies like AAPL, MSFT, TSLA will determine how the broader market holds up. Q4 is generally considered great for retail companies but 2023 outlook is what investors are really concerned about. AAPL has mostly held up the stock market but if the future guidance does not instill confidence in the investors, we could see AAPL touching the 200-day MA ($113 level).

Currently the S&P 500 is making lower highs and I expect the trend to continue. The most likely outcome in Q1 would be that S&P 500 hits the 200-day MA (3709 level). This will provide additional buying opportunities for many stocks.

My Thoughts

Markets have and will always remain volatile but here are some tips that you can use to stay ahead of the curve -

Low Risk Tolerance Investor - If you are someone who does not like to take risks, DCA (dollar cost average) into Index Funds like SPY, IVV, etc. during days when the S&P 500 drops significantly. This strategy will allow you to add more share of the index fund at relatively lower price points.
High Risk Tolerance Investor- In addition to adding to index funds, you can add individual stocks on days of significant declines. For me, I always add to "Blue Chip" stocks like AAPL, AMZN, GOOG, MSFT, NVDA, etc. whenever the stock declines significantly (note: only when there is no significant shift to the growth outlook).
Options - For investors that use options, opening covered calls on Green Days & cash secured puts on Red Days generate the maximum premiums.