1st Half Recap & 2nd Half Outlook
Predictions and performance update
As the first half of the year concludes, I wanted to look at where my portfolio is as well as how my three stock picks for 2023 have fared against the major indices.
Dow: YTD +3%
S&P 500: YTD +16%
Nasdaq: YTD +32%
My Portfolio (Actively Managed): YTD +58.96%
My 3 Stocks For 2023:
Nvidia NVDA 1.42%↑ YTD +189.4%
Amazon AMZN 1.48%↑ YTD +55.2%
Deere DE 1.33%↑ YTD -4.5%
Here is a link to my December stock picks post, Investing Update: 3 Stocks For 2023. If you are interested in seeing where performance was at after Q1, I wrote about it here. Investing Update: Q1 Recap.
Two of my three stock picks are in the top 15 in performance through the first half of the year. Nvidia is 1st by a wide margin. Amazon is currently 15th. My third pick Deere is down so far YTD.
I’m proud to have two stock picks that high out of the 500 S&P companies at the midway point of the year. But even a broken clock is right twice a day. Maybe I should press my luck by taking a trip to Vegas. We will see where things finish at year’s end. A lot can change. But so far so good.
In addition to owning positions in Nvidia and Amazon. I also own a sizable position in Tesla. That wasn’t one of my stock picks for the year but it’s currently sitting 4th in overall performance in the S&P 500. Had I picked 5 stocks for 2023 that was my fifth. Alphabet was my fourth pick. I went back and forth in December (Investing Update: 3 Stocks For 2023) whether to pick Amazon or Alphabet as my third.
My third stock pick came down to Amazon or Alphabet GOOGL -0.01%↓. With both still under $100 a share these both are great long-term buys. I do own both and the final deciding factor was what stock was down more in 2022. Amazon was down 50% while Alphabet was down 39%.
With the massive run up and questions that followed from readers asking what my plans were for my Nvidia stake, I decided to write a post addressing what my plans are. My Nvidia Plan Moving Forward
Now to address my laggard pick, Deere. Even with it being down 4.5% YTD. I’ve added to my position twice since I started my position in January. I talked about the buys in Investing Update: What Recession? and Investing Update: Panic Creates Opportunity. This is one of the stocks that is near the top of my buy on dips list.
Here is a chart that shows where all the 30 companies in the Dow have fared at the halfway point. It’s always interesting to see what’s on top and what’s lagging. There are some intriguing names that are in the red so far this year.
As 2022 saw all the major asset classes with the exception of cash and commodities lose money, in 2023 it’s the opposite. All the major asset classes have made money in 2023 except for commodities.
The start to the year has been very good for the S&P 500 but it isn’t that big of an outlier as the below chart illustrates. This shows the path of the S&P 500 in each year since 1928.
What About the Strategists?
To start 2023 the S&P 500 sat at 3,840. To end the first half of 2023, the S&P 500 now sits at 4,450. It’s up 16% in the face of basically everyone being bearish.
So what did the strategists predict to start the year? These were their 2023 S&P 500 price targets.
I wrote about this and also made my S&P 500 prediction of 4,350 in Investing Update: 2022 Recap & 2023 Outlook. Here were some of my thoughts from that post.
Things are as bearish as I can remember for such a long stretch. Everyone I talk to seems to be bearish and negative about the stock market. Friends and family have told me they’re putting their money here and there instead of in the stock market.
The last time these conversations came up was 14 years ago. It was the same people at the same time of the year as I recall it well during the holidays in 2008. As we now know it turned out that the stock market had already bottomed in September of that year.
Consensus and seemingly everyone being on the same side of the boat looks good and sounds good until it isn’t. If you’re looking at investing in months sure you can be bearish and skittish to invest. But my investment horizon is many years out. If your horizon is measured in years, this is what you want if your putting money to work.
I’m expecting a tough start to the year. I think we retest the October lows of 3,577 on the S&P 500. I think it will hold and then things take off to have a positive above average return for 2023. I’m calling it a rock n’ roll rally. We’ll rock backwards and go down, but then that momentum fuels us to the upside as a new bull market begins. For a number as I know many of you’ll ask, I’ll say 4,350.
My bullish view and this side of the boat has a lot of empty seats. I’m fine with that. In my next investing update on 1/21, I’ll share what buys I’m going to be making to start the year.
This is a great chart showing how much the S&P 500 has already eclipsed the year-end price target projections by strategists. It’s quite a large gap six months in.
What do you think Wall Street strategists are doing now with their second half predictions after one of the best first halves in market history? They’ve actually responded with the most bearish second half outlook ever on record for the S&P 500.
Talk about doubling down! It made me think of this from Seth Golden.
Outlook Forward
In looking back at the start of the year we were in the longest bear market since 1948. Everyone it seemed was bearish. We were assured that the economy was headed into a recession. The only question was, how long would it last.
Were we waiting for a fatter pitch? We wanted things to get even lower for longer? If you’re still in cash and didn’t move that money back into the market, you got greedy.
The S&P 500 closing all-time high was 4,796 in January 2022. It fell to 3,491 in October 2022. A fall of 27.21% from peak to trough.
The most hated stock was META META 0.00%↑. It’s currently the 2nd best performing stock in the S&P 500, up 138.4% so far this year. The second or 1A most hated stock was Tesla TSLA 0.00%↑, that’s the 4th best performer up 112.5%.
Now in July 2023 the S&P 500 is already back within 8% of eclipsing the 4,796 closing all-time market high.
I bring this all up because you can’t follow or listen to everything in the news. The “experts” and “influencers” on television, TikTok and YouTube don’t know what’s going to happen. All the professional hedge fund managers and investment banks don’t know what’s going to happen. Nobody does! I wrote an entire piece on this subject, You Don’t Know, I Don’t Know, Nobody Knows. It’s one of the most read posts ever on Spilled Coffee.
You have to form your own opinion. Do your own research and take your own view of things. The problem with following everyone else’s opinion or view is that you don’t know their exposure, timeline, objective, agenda, political, monetary or economic motivation to what they’re saying. These influences always play into what someone says.
Form your own conclusions and think for yourself. This year for example, I was different and had a different view and opinion on things. I’m glad that I didn’t listen to or follow the prevailing sentiment.
The prevailing sentiment from the strategists is now even more bearish for the second half of the year. They could be right. I don’t know. Again, nobody does.
We’ve already seen big gains for the year at the halfway point. S&P 500 is up 16% at the midpoint of the year. That would be a huge outperformance if that was an end of the year return. The Nasdaq is up 32%! The best start to a year since 1983! I highly doubt we see a repeat of that level performance.
There is some wind at the stock market’s back though. The S&P 500 doesn’t go up by over 7% three quarters in a row in bear markets. This has happened in Q4 2022, Q1 2023 and now Q2 2023.
It’s clear we’re in the midst of a new bull market. The S&P 500 needs 8% to reach new all-time highs. I think we do get over that in the back part of the year minus a black swan type event. With only 25% of stocks beating the S&P 500 at the halfway point of the year, I think the broadening participation by the other 75% of stocks help fuel the market higher. At some point yet in 2023 we will see the new all-time high news headlines.
The Coffee Table ☕
After I wrote my post Business Dad, I had a reader send me the following quote and figured I would share it with you. It’s so good and so true!
One day the mess will be gone. The kids will be grown. And there won’t be anyone there creating the messes anymore. Enjoy it now, for one day, you will miss it.
Seth Godin wrote just an absolute hit the nail on the head post, Customer traction is the hard part. Business success really does come down to one thing. Short and to the point in as few words as possible, which is a staple of Seth’s writing.
I read an essay from Paul Graham called How to Do Great Work. This is quite long but it’s the best piece of advice related writing that I have read this year. The collection of thoughts and advice from his years of experience are just timeless. I have this saved and will definitely be coming back and reading this more times. It should be required reading for anyone in high school and then in college again. Yes it’s that good and that important.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion. Do your own research.