Stock market: 3 expert takeaways on the start to 2023
Yahoo Finance Live’s Brian Sozzi discusses why investors are picking up 2022's underperforming stocks and other headlines that have moved stocks to kick off 2023.
JULIE HYMAN: Well, the first month of 2023 is in the books. And despite the bombardment of seemingly bad news, stocks have clocked in some impressive stats. So what could possibly bring this upbeat action to a screeching halt? Ah, Soz has got a downer for us today.
BRIAN SOZZI: Yeah, I'm just running through some stats here that come compliments of our friend Keith Lerner over at Truist. Really, it's been an amazing start to the year. First at number one-- and our full story on this now on our home page. But Keith noting the 50 worst performing stocks of last year are up an average of 20.1% this year. The 50 best performing stocks from last year, meanwhile, are only up an average of 1.9%. Just I think also ties back to what we wrote in the "Morning Brief" early in the week, it is a bizarre time to be an investor. Just giving stats like that is just pretty interesting.
Number two, a lot of these stock gains have been driven by higher price-to-earnings multiples. Keith notes that earnings estimates for the S&P 500 have ticked down to an 11-month low. But valuations, through the-- looked through the prism of price-to-earnings ratios, about 18 times. That's at the high end of the range seen over the past decade of about 18 times to 18 and 1/2 times. So very interesting to see that as well.
And then lastly here, Keith noting there's indiscriminate buying happening across the board. Remarkably, all 50 of last year's worst performing stocks are up this year. So just again, the market's out of the gate very strong this year, some zany, wacky moves, especially in the context of earnings season not necessarily going great for a lot of companies.
JULIE HYMAN: But that's not unusual. Like, every start to a year, you see--
BRAD SMITH: You see a rebound, yeah.
BRIAN SOZZI: So every start to the year is up?
JULIE HYMAN: I mean, I don't know if it's quite as universal. But I think that happens-- like, I feel like that happens at the beginning of most years is that you see a flip at some of the narrative from the last year. I don't know. Maybe I'm just relying too much on my own faulty memory, which, you know, admittedly--
BRIAN SOZZI: I think it's just--
JULIE HYMAN: --is not the best source.
BRIAN SOZZI: It's just the magnitude. I mean, to see the 50 worst performing stocks last year, I imagine those are companies that have been fundamentally damaged, or even, of course, some tech names, too, looped in with a lot of these layoffs. But a 20.1% gain is just mind-blowing. And to his point, not to rain on anyone's parade here, the fun time-- and the take is, the fun times could be crushed by the Fed.
You know, obviously, all these moves, to Keith's point, has been very speculative here, I think, based in large part that we do get that pivot in rates, maybe some rate cuts later this year. But the Fed could really, I think, crush a lot of these folks out of these stocks very, very soon. And it could happen this week.
BRAD SMITH: We never like to see the sad Soz graphic there on the screen.
BRIAN SOZZI: Oh, I didn't even notice that. That was good. Oh, that was cool. I like that, yeah. I don't like being sad. I'd rather be happy.
BRAD SMITH: Everybody wants to be happy.
BRIAN SOZZI: Yeah.
BRAD SMITH: All right, well, let's stay happy here for a hot second here. I think with-- actually, no, it's not what this story.