2023 Investing Predictions
2023 Investing Predictions
Who will be the winners and losers?
This installment of The Matt Allen Letter is free for everyone. If you would like to read about stock analysis, stock market analysis, and much more.
Dear Friends,
I hope you have had a great start to 2023! It is always a great thing to be able to spend time with family and friends during the holidays. However, it always takes some time to get back into the swing of things.
For the holidays, I went down to see my family in Thomasville, GA which is right next to Tallahassee, Florida.
One of the things that most people try to do at the beginning of each new year is make predictions on how the financial markets will play out. I have spent quite some time thinking about the market’s and the current state of the world/economy.
Here are my winners and losers of 2023:
1. The Stock Market
My prediction is that the stock market ends the year up +7%.
There will be multiple people that disagree with me on this front, but I believe the stock market priced in a lot of the bad news last year. Stocks are the most liquid asset class, so I believe that investors panicked in 2022 which led to wide-spread selling.
Since 1928, the stock market has only had 5 back-to-back negative years. All 5 times, the world was in the middle of a major crisis.
Do I believe that we will have chop in this market? Without a doubt, it will be another tough year, but I believe we end in the green.
2. Bitcoin
My prediction is that bitcoin will end the year up +15%
Historically speaking, Bitcoin has ALWAYS bounced back after a red year. I do believe that we will see bitcoin end up in the green.
Keep in mind, Bitcoin has correlated with the S&P 500 so the stock market needs to have a good year for bitcoin to have a good year.
3. Real Estate
My prediction is that real estate will finish the year down -10-14%.
Unlike stocks, real estate is a very illiquid asset. This means that there are not enough buyers and sellers during tough times which will send prices down.
The fed is expecting to keep raising rates which will make mortgages cost even more.
In 2009, the economy was in shambles but the stock market finished up the year at +23% while real estate finished down -32%
I believe that we will see something similar to 2009.
4. The Economy
My prediction is the economy goes into a mild recession that is nowhere near as bad as anticipated. However, a mild recession is still a recession.
One of the things that I have realized while studying finance is the economy/stock market is never as good as it seems or as bad as it seems.
Every single financial crisis was caused by wide-spread panic due to an un-foreseen event that only a few people saw coming. There has been tons of talk about this upcoming “major-recession” and how it will be worse than 2008. I just do not think that will be anywhere near the case.
5. Biggest Business Winner
My prediction is that the biggest winner will be DeepMind which is an A.I. company that is owned by Google.
I am sure that you have heard of OpenAi which has gone absolutely viral in the last month.
DeepMind is the competitor to OpenAi.
Google paid ~$650 Mn to acquire DeepMind in 2014. OpenAI is currently "valued" $29 Bn. OpenAI's revenue is "tens of millions". DeepMind's 2020 revenue was $1.13 Bn and was profitable. (although Google is probably the main customer).
I believe that Google will unveil a “secret project” that they have been working on that makes DeepMind much more valuable than OpenAi.
6. Best Sector
I believe the best sector of 2023 will be a tie between treasury bonds and the pharma industry.
Whenever we have interest rates at 5%, investors will flock to have their money in bonds because it will be a risk-free guaranteed return.
In terms of the pharma industry, people still need their meds no matter what the economy is doing.
7. Worst Sector
I believe that the worst performing sector of 2023 will be a tie-between energy and cynical stocks that have consumer products like travel stocks.
Energy stocks had a wonderful 2022, and they are very overvalued right now. On top of that, if people don’t have the money to drive/fly then people don’t need gas.
Cynical stocks will struggle because consumers won’t have the money to spend on things like vacations or a new car.
8. Hot Take
My hot take for 2023 is that the relations between USA-Ukraine turn sour.
President Biden and President Zelensky are starting to have a different vision for how the war in Ukraine should end.
Biden has started to suggest that we should negotiate a peace-deal while Zelensky wants to go on the counter-offensive to take back Crimea.
In my opinion, there is no way possible that the Biden Administration will support Ukraine trying to take back Crimea.
If you have any questions, feedback, or just wanna say hey, email me at mattallenletter@gmail.com
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Stay Hungry, Stay Long,
Matt Allen