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How to Play 2023’s Market Conditions

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Three plausible market paths in 2023 … snowballing anxiety … what Louis Navellier, Eric Fry, and Luke Lango are recommending … a free stock recommendation today

There’s a wide range of potential paths the market could take in 2023, and a reasonable case to be made for each.

At one end of the spectrum, there’s a bull case…

Inflation is showing clear signs of easing. If it continues, lower inflation will take pressure off corporate earnings, family budgets, and stock price valuations (as bond yields continue to fall). Plus, history suggests that markets tend to soar in the three years following a single-year market decline of 20%+.

Then, there’s a bear case…

Earnings estimates remain too high. If inflation does not come down close to 2%, the Fed will keep rates elevated too long, pushing the economy into a recession. At the same time, the U.S. consumer is on the verge of running out of savings. Put it all together and a “hard landing” is in the cards for 2023.

But there’s also an emerging mega-bear case…

The combination of deteriorating global (and domestic) economic conditions, an inability to return to 2% inflation, and ham-fisted Fed policy will result in something breaking in our economy. This will result in a crisis that forces the Fed to slash rates and flood the economy with liquidity. While that means we’ll get a “Fed Pivot,” it will be out of necessity to stave off a greater economic collapse.

To help investors navigate these different scenarios, last week, Louis Navellier, Eric Fry, and Luke Lango sat down to discuss what’s coming in 2023 at their event, Early Warning Summit.

Here’s how they just described the confusion and fear swirling around next year:

People are fearful of everything… both good news and bad.

November’s better-than-expected jobs report managed to send markets sharply lower despite a historical correlation of low unemployment with high market values.

Steady 3.7% unemployment, at least today, is a bad thing for stocks.

Squint hard enough and it’s possible to see the logic. High employment raises the risk of inflation, which will force the Federal Reserve to raise rates further in 2023.

These are the same things many investors told themselves in late 2000 and early 2001 just as then-Fed Chair Alan Greenspan was tapping on the proverbial economic brakes.

Our analysts go on to point toward how inconsistent some of the fears and market narratives are becoming. Here’s one example:

Do you know anyone who’s afraid of both inflation and falling home prices in 2023? I certainly do.

Yet, if you think about it hard enough, you’ll realize that housing and shelter costs make up 42% of the Consumer Price Index (CPI).

In other words, housing and inflation are almost one and the same thing.

While the future for the broad market in 2023 isn’t clear, it doesn’t mean there aren’t pockets of opportunities for investors

First, here’s Louis, Eric, and Luke’s caution about the broad market:

We believe that index buying is a strategically poor choice.

Market cap-weighted indices like the S&P 500 will likely underperform as its largest members (i.e., large-cap tech stocks) struggle to regain their former prominence.

The dot-com era saw the same thing, with the S&P 500 finishing the 2000s decade down -1%.

But that doesn’t mean investors should ignore the market in 2023.

Louis, Eric, and Luke note that today’s topsy-turvy facts are creating a massive opportunity not seen since the early-2000s dot-com crash. They even go so far as saying that the buying opportunity seen after the 2007-’09 crisis doesn’t compare to today’s opportunity.

The challenge is identifying specific stocks that are capable of growth next year, even if the bear and/or mega-bear scenarios unfold.

At their Early Warning Summit event, our analysts gave away three stock picks – totally free – that they believe will perform exceptionally well next year.

Let’s give you a Christmas present early by revealing one of them: Sociedad Química y Minera de Chile (SQM). It’s the world’s lowest-cost miner of lithium metal.

Now, why would this stock be poised to perform well next year, even if there could more pain in store for the broad market?

It boils down to massive demand for lithium thanks to the critical role it plays in powering tomorrow’s technologies.

Here’s what legendary investor Louis Navellier recently wrote about lithium and its influence on the electric vehicle megatrend:

Automakers are accelerating their move into producing mainly electric-powered vehicles.

The Biden Administration is also making efforts to accelerate mass adoption of EVs, awarding $2.8 billion in grants for EV battery projects.

Analysts from S&P Global recently argued that annual market demand for lithium-ion battery capacity is expected to rise from 0.29 to 3.4 Terawatt hours (or TWh) by 2030.

All of this points to lithium prices remaining well above prior year levels.

SQM stands directly in the path of our global transition toward electric vehicles. But that’s just the start. Any technology requiring a lithium-based battery will help support SQM’s earnings growth. This is hardly just a play on electric vehicles.

Best of all, despite this tailwind, today, you can buy SQM for a price-to-earnings ratio of less than 8. For context, even after bleeding all year long, the S&P still trades at a price-to-earnings ratio of 20.1 today, according to Multpl.com.

I should also mention that SQM’s dividend yield clocks in at an eye-popping 9.2% as I write.

At last week’s event, Louis, Eric, and Luke rolled out a portfolio of hand-selected stocks they’re confident will grow your wealth in 2023

As we noted in last week’s Digest, the stocks in this Power Portfolio 2023 have passed all of Louis’, Eric’s, and Luke’s strict selection criteria. It’s a “best of the best” portfolio, presented all at once as a batch, rather than dripped out “one per month.”

Think of it as a holistic, diversified portfolio, engineered to grow your wealth in 2023, despite the most challenging market condition in decades.

As of last Tuesday’s launch, the Power Portfolio held eight stocks. But this past Monday, Louis, Eric, and Luke added another pick to the portfolio. Without giving away too much, I’ll add that it too will benefit from the growth of the electric vehicle megatrend

To watch a free replay of the Early Warning Summit and to receive the two other free stock recommendations beyond SQM, click here.

We’ll end today with Louis, Eric, and Luke’s bottom-line about next year:

To succeed in the wake of 2022’s bear market, we don’t need thousand-point IQs…

… or any Wall Street quant system…

… or even to get particularly lucky.

(Although all three are nice to have.)

Instead, we only need to be brave enough to buy high-quality growth stocks just as markets are at their most pessimistic.

Have a good evening,

Jeff Remsburg