Our January 2023 stock and ETF watchlist with entry points, sector analysis, and market outlook.
Market Overview
Happy New Year! Welcome back to The Wealth Catchers' watchlist. The month of December was a bloody one for the market. Sadly the Christmas Rally never showed up to the party. All we had as a form of optimism was that small bull run from November that trickled into the early weeks of December. Some key things that happened over the past few weeks were that China eased lockdown restrictions and allowed incoming travelers to enter without needing to quarantine. This could be viewed as a positive sign for global production but this could quickly get reversed. There have been reports of surges in covid cases. As for semiconductors, the industry has too many chips on hand now due to the demand the pandemic caused, causing a shift in strategy for chipmakers. As you can see things are getting flipped around from a year or two ago, there wasn't enough chips back then, now there's too many. Oil prices still continued their climb and you'll see below how well this sector performed for two consecutive years.
Fed & Monetary Policy
In the bond market, 2022 saw the worst year in two generations, with the Bloomberg Aggregate U.S. Bond Index down 13.1%. Remember the bond market is usually a safe place for investors to flee to during market downturns, but even this part of the market suffered greatly. And the good old Federal Reserve's decision to raise interest rates by a cumulative 4.25% in 2022 led to a rise in yields across the Treasury curve and weighed on prices in government and private bond markets. Rise in bond yields = decrease in asset prices. The Fed's efforts to fight inflation hurt tech and growth stocks, while energy names and cyclical and defensive sectors like health care, industrials, materials, and staples performed well. February 2022 Watchlist mentioned the impact interest rate increases would have on tech and growth stocks. The yield curve even inverted, with the 2-year yield above the 10-year yield, which is a worrying sign for the economy in 2023. The yield curve is essentially a sure sign that there will be a recession. I mentioned the inverted yield curve back in the April 2022 Watchlist. Looking ahead to 2023, it's expected that the Fed will cool on its rate hiking plans, but geopolitical risk and COVID concerns may make the fight against inflation a multi-year affair, feels like we've been in this forever but realistically it's just a blip in time. Always zoom out. The market may see more of a downward move in 2023, as investors will still try to find safety and protect their capital by switching to cyclical and defensive sectors. Always pay attention to what was the worst performing sectors in the prior year, they have a great chance in providing great returns after they bottom out. Remember if no one is talking about it or running away from it that might be an opportunity. This is because of sector rotation. You can see how this played out in the energy sector (XLE). They were one of the worst performing sectors in 2020 and now they are the best performing sector over the past three years. Also some strategists expect the S&P 500 to make a new cyclical low in the spring of 2023 before bottoming out to end the year higher than it is currently is. JPMorgan, RBC, Morgan Stanley, and BMO also predict a choppy market in the first half of 2023 with a potential retest of October lows and periods of heightened volatility. In other words, get ready for more of the same. Enjoy the roller coaster, it's part of the journey. Best & Worst Sectors in 2022:*Top Three:1. Energy: 44.86%2. Consumer Staples: 6.28%3. Industrials: 4.42% *Bottom Three:1. Information Technology: -19.34%2. Consumer Discretionary: -24.75%3. Communications: -26.19% Companies: NKE (2022 Performance: -28.94%): $110-$117 (Daily Chart)(50 SMA Crossed the 100 SMA = Bullish)$83-$96(Weekly Chart) ABNB (2022 Performance: -50.49%): $82-$91 (Daily Chart)$65-$101 (Weekly Chart) MSFT (2022 Performance: -28.36% ): $225-$247 (Daily Chart)$214-$245(Weekly Chart) AAPL (2022 Performance: -28.61% ): $130-$137(Daily Chart)$123-$137 (Weekly Chart) Z (2022 Performance: -49.23%): $28-$32 (Daily Chart) (50 SMA crossed the 100 SMA = Bullish. Resistance is the 200 SMA...this still applies, touched the 200 SMA three times and got rejected.)$21-$40 (Weekly Chart) SQ (2022 Performance: -61.69%): $54-$70 (Daily Chart)$54-$76 (Weekly Chart) PYPL (2022 Performance: -63.47%): $67-$80 (Daily Chart)$60-$78 (Weekly Chart) MCD (2022 Performance: -1.88%): $242-248 (Daily Chart) $231 (Weekly Chart) WMT (2022 Performance: -1.98%): $129-$138 (Daily Chart)$118-$138 (Weekly Chart) (Stalled out after hitting a RSI of 67 and slid back into the Mother Bar from the week of 5/16/22) TSLA (2022 Performance: -69.20 %): $98-$102 (Daily Chart)$60-$95 (Weekly Chart) (Broke below the 253 SMA the week of 12/19, could continue to spiral downward.) SBUX (2022 Performance: -14.98%): $72-$80 (Daily Chart)$72 (Weekly Chart) V (2022 Performance: -6.17%): $187-$211 (Daily Chart)$176-$217 (Weekly Chart) PG (2022 Performance:-6.96 %): $123-$139 (Daily Chart)$124-$137 (Weekly Chart) WM (2022 Performance:-3.60 %): $155-$159 (Daily Chart)$139-$161 (Weekly Chart) CHPT (2022 Performance: -52.04%): $8-$10 (Daily Chart)$6 (Weekly Chart) IIPR (2022 Performance: -59.28%): $89- $103 (Daily Chart)$79-$125 (Weekly Chart) SHOP (2022 Performance: -74.54%)$31- $51(Daily Chart) $20 (Weekly Chart) ADBE (2022 Performance: -40.37%): $275-$345 (Daily Chart)$256 (pandemic low)-$353 (Weekly Chart) (Still stuck inside "Mother Bar". Expect price to be range bound between maybe the $260's-$390's.
Index Performance
| Index | Performance |
|---|---|
| Dow Jones (Dec 2022) | -3.63% |
| S&P 500 (Dec 2022) | -5.82% |
| NASDAQ (Dec 2022) | -8.85% |
| Russell 2000 (Dec 2022) | -6.40% |
| Dow Jones (Full Year 2022) | -9.40% |
| S&P 500 (Full Year 2022) | -19.95% |
| NASDAQ (Full Year 2022) | -33.89% |
Top Sectors
Bottom Sectors
Stock Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| NKE | $110–$117 | $83–$96 |
| ABNB | $82–$91 | $65–$101 |
| MSFT | $225–$247 | $214–$245 |
| AAPL | $130–$137 | $123–$137 |
| Z | $28–$32 | $21–$40 |
| SQ | $54–$70 | $54–$76 |
| PYPL | $67–$80 | $60–$78 |
| MCD | $242–$248 | $231 |
| WMT | $129–$138 | $118–$138 |
| TSLA | $98–$102 | $60–$95 |
| SBUX | $72–$80 | $72 |
| V | $187–$211 | $176–$217 |
| PG | $123–$139 | $124–$137 |
| WM | $155–$159 | $139–$161 |
| CHPT | $8–$10 | $6 |
| IIPR | $89–$103 | $79–$125 |
| SHOP | $31–$51 | $20 |
| ADBE | $275–$345 | $256–$353 |
| AMZN | $87–$109 | $66–$82 |
| CRWD | $120–$125 | $98–$137 |
| NVDA | $117–$139 | $96–$137 |
| COST | $449–$466 | $376–$390 |
ETF Entry Points
| Ticker | Daily Entry | Weekly Entry |
|---|---|---|
| ARKK | $32 | $20 |
| VUG | $205–$220 | $190–$200 |
| VGT | $314–$343 | $277–$328 |
| VOO | $335–$351 | $295–$315 |
| SMH | $164–$181 | $142–$154 |
Key Takeaways
- →Full year 2022: Dow -9.40%, S&P -19.95%, NASDAQ -33.89%. Bond market worst year in 2 generations.
- →Energy (+44.86%) was the only major winning sector; Consumer Discretionary -24.75% worst.
- →Fed hiked rates 4.25% in 2022; inverted yield curve signals 2023 recession risk.
- →Strategy: 10% correction buffer to be added once new highs are reached.
- →Expect continued volatility in H1 2023; potential cyclical low in spring before recovery.
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