The following is an amended version of the Jan. 3 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack or Supercast.
Last year was ugly. Stocks got beat up, bonds were bludgeoned, and the way markets limped through the last few weeks of 2022 was particularly disconcerting.
So far 2023 is looking no better. Economic concerns are paramount. Two-thirds of sell-side economists are now predicting a recession in 2023. While one can be forgiven for wanting to treat this as a contrarian indicator, the issues they cite are real: Americans are spending down their pandemic savings, the housing market is slowly falling apart, and banks are tightening lending standards.
These would normally be the necessary ingredients for a recession, but the labor market remained strong through 2022 — and may be the one thing that has kept the economy from rolling over. How much longer? Our last podcast guest says this can continue for a while. He may be right seeing as he has primary data to support the argument — hiring practices of his firm’s clients.
This is little consolation as stocks continue to drop. The selling has been especially pronounced in tech, with the Nasdaq now down 1% on the day at the time of this writing.
Buying opportunity? Fortune favors the brave, but it’s extremely hard to make this case right now. Buyer beware, more like. Besides, stocks aren’t even particularly cheap yet.
Maybe the next couple of days will provide some clarity. We’ll get crucial readings on the labor market tomorrow (JOLTS) and Friday (non-farm payrolls). Not much in earnings this week.
Below the free audio: