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This is what you should expect from U.S. stocks in Q1 of 2023

on Dec 27, 2022
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  • Greg Sarian expects the first quarter of 2023 to remain choppy.
  • He dubs muni-bonds as better investment than equities for Q1.
  • Sarian explains how to pick stocks for the said volatile period.

Investors should expect the equities market to remain choppy in the first quarter of the coming year, says Greg Sarian – the Founder of Sarian Strategic Partners.

Here’s why Sarian is dovish for Q1

Sarian doesn’t expect much on the earnings front in early 2023.

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On top of that, he noted, the Federal Reserve will continue to move towards the signalled terminal rate of 5.1% – adding to the downward pressure on the U.S. stocks. Speaking with CNBC’s Dominic Chu, he said:

We don’t believe the markets will be in a bottoming process till the spring. When we see the Fed begin to pause, likely in that March to May timeframe, that’s when we think the markets will get some footing.

Sarian quoted resiliency of the labour market to reiterate that the central bank will continue to tighten in the first quarter. Last week, billionaire investor David Tepper also said that he was “leaning short” on equities as Invezz reported here.

Should you avoid stocks altogether?

He dubs municipal bonds as better investment than equities for the first few months of 2023. Sarian particularly cautions against investing in the tech stocks regardless of how much they’ve sold off.

We don’t think tech is coming back till the Fed stops raising rates and credit markets begin to stabilise, which could be several quarters out.

On CNBC’s “Worldwide Exchange”, he recommended sticking only to high quality names with a growing dividend and fortress of a balance sheet.

It is also noteworthy that geopolitical tensions were one of the notable factors that contributed to the downside this year – and that remains at play heading into 2023. For the year, S&P 500 is down about 20% at writing.