Volatile Start to 2023: Here's What to Expect
Stocks are off to a rocky start to kick off the new year, as early gains appear to have evaporated with markets beginning to trend lower. The Nasdaq shot up over 1% in the first few minutes of the trading day, but has since moved sharply lower and is now down more than 1%. The tech-heavy index is still trading near its bear market lows, down more than 35% from its November 2021 peak.
The drastic price movement came early on Tuesday following broad declines last week, a fitting end to the stock market’s worst year dating back to the Great Recession. Bolstering the bearish sentiment, shares of Tesla TSLA plummeted more than 13% today after the electric car maker missed delivery expectations. While TSLA reported record production and deliveries, figures fell short of estimates.
TSLA is a Zacks Rank #4 (Sell) stock. Shares have lost nearly 75% of its value from their peak. In December, Tesla delays at Chinese factories along with mounting worries surrounding production pushed the stock to annual lows. And even with the substantial decline, Tesla’s market capitalization still serves as a big drag on the major capitalization-weighted indices.
While we may be in for some more selling in the short-term, there’s reason to believe this year has potential upside. We have positive seasonality on our side, highlighted by the historically bullish third year of a president’s term. Dating back to 1950, under new presidents, stocks have soared an average of 20%, with the first quarter of the third year sporting an average 7.4% gain.
Still, the economic outlook remains gloomy heading into this year. Fears of an impending recession and lower asset prices have put a damper on investor sentiment. But if economic fears are overblown, even slightly better-than-expected outcomes can trigger powerful upside momentum. Remember - when the crowd thinks they know an unknowable future, they are usually wrong and the opposite occurs. So while selling pressure has accumulated in recent weeks, it may be creating a golden opportunity for astute investors.
Speaking of gold, precious metals are an area that have been holding up well recently. With both gold and silver trading at multi-month highs, many individual mining and related stocks have shown relative strength while the market continues to hover deep in a correction.
The recent downturn in the U.S. dollar has also helped metals rally. Over the last three months, silver has rallied more than 16%, while gold has climbed nearly 8% on the heels of the greenback’s weakness.
One company that seems to be humming to the upbeat tune is Wheaton Precious Metals WPM. WPM sells gold, silver, palladium, and cobalt deposits. WPM boasts a portfolio of interests in 23 operating mines and 13 development projects. Wheaton Precious Metals is one of the largest precious metals streaming companies in the world.
WPM is part of the Zacks Mining – Miscellaneous industry group, which currently ranks in the top 36% out of approximately 250 industries. WPM has staged a new uptrend and is breaking out as we move into the new year.
Image Source: Zacks Investment Research
Investors are eagerly waiting for this bear market to come to an end. But it pays to remain patient while markets do their thing, as stock gains and renewed optimism may be just around the corner.
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