On January 8th, 2023, when the consensus sentiment that a market crash was imminent, we published a very different viewpoint in this article The Single Most Important Chart Of 2023. In it, we mentioned that we are not bearish for 2023, our forecasts are overall bullish though with some good bumps on the road. That’s what we got so far, much of the bumps have been in the form or sector rotation, making investors feel bad but showing ‘under the hood’ overall improvement against the Oct 13th, 2022 lows! All this bodes well for our favorite sectors: lithium, silver, AI in particular.
This is what we wrote on January 8th, 2023, in the article that featured THE most important chart to track in 2023:
TIP ETF is a proxy for inflation expectations. As seen, inflation expectations crashed throughout 2022. This happened on rising inflation. Odd? Not really, inflation expectations is a looking forward instrument. In 2022, the market was focused on the disinflationary monetary policy of policy makers. What inflation expectations could, should, might be doing right now is ‘sniffing’ for the end of the Fed’s tightening cycle.
The chart suggests that the market believes that monetary tightening is coming to an end, slowly but surely though. That’s how we read the chart. If the long term pattern of TIP ETF is going to hold, it will resolve higher. This will be the driver (leading indicator) for markets and metals to resolve higher in 2023, presumably in the next few months already.
So far, so good, is what we conclude.
TIP ETF, a leading indicator for broad markets but also metals, was able to hold its long term rising trendline. That’s what we identified as the pre-requisite for markets to avoid a crash, a scenario that was dominant in the heads of investors back in January of this year.
Any drop to the long term rising trendline came with peak fear, is what we mentioned on the chart. 2022 was no exception.
Going forward, we believe that markets will continue to creep higher, although immense sector rotation is likely here to stay. Being very selective is key, accepting that not all segments or positions in a portfolio will go up simultaneously is even more important.
After all, as evidenced in the last 18 months, this market cycle puts a lot of stress to investors. It’s a mental game, after all, more than any time in the past, is our viewpoint.
We stick to undervalued high growth stocks, but also sectors going through a secular growth cycle though their stock prices may be going through massive consolidations (basing patterns).
