Happy Saturday, team. I’m Phil Rosen. As you could guess from this newsletter, a big part of my job involves speaking to top experts in markets and economics.
I’m always looking to speak with Wall Street strategists, energy analysts, investment bankers, and everyone in between.
Today, I’m sharing my conversation with Fiona Greig of Vanguard’s Investment Strategy Group.
Fiona Greig is the global head of investor research and policy for Vanguard’s Investment Strategy Group. This conversation has been lightly edited for length and clarity.
Phil Rosen: Part of your expertise lies in behavioral trends among investors. What are you observing there to start 2023?
Fiona Greig: In general, when it comes to retail investors, we’re just seeing fewer people trading in general. It’s also true in retirement accounts.
This suggests a “stay the course” posture, meaning yes there’s been volatility, but the longer term outlook they have for the stock market is stable. So unless they have a particular need to liquidate or pull out, investors are really staying the course, and I think that’s good news.
The Fed has signaled rates will keep rising, which in theory should weigh on markets — yet we’ve seen stocks rally. What’s going on here?
FG: One way to read this is that rate hikes are priced in. Look at December’s rate hike, it was a non-event in markets. That suggests to me that markets are expecting a moderation strategy for the Fed.
There’s some lower expectations for stock market returns in the short term, but we see pretty clear expectations and optimism for returns in the next 12 months, and even 10 years.
What trends should investors be cautious of, or capitalize on, in the current landscape?
FG: I would say it’s a bad idea to pull out just because markets are having a bad day. Investors have to accept volatility, and can’t get skittish. So I’d advocate for staying in positions for the time being.
Then, I would make sure to take advantage right now of employer-sponsored retirement plans. Increase your savings rate. People have the opportunity now to start investing and allocating funds, and should think about moving money into the market in a balanced way at a low cost.
And here are the top stories from markets this week:
1. A veteran investment chief is expecting stocks to crash in 2023. He explained that the “perfect bull market cocktail” of the last four decades is about to come to a halt — which means valuations for some of the most popular names could be set to tumble.
2. The top-performing stock-picker of 2022 recommended buying these six stocks right now. This batch of names are his favorites that can protect against high inflation, low profits, and a long-term energy shortage. See the full list.
3. ChatGPT’s creator, OpenAI, has doubled in value since 2021. Not to mention the $10 billion investment from Microsoft, the language bot has gone viral for its ability to answer messages on dating apps and dole out investment tips. It was even a hot topic among the global elite at the World Economic Forum in Davos, Switzerland.
4. The stock market is about to be flipped upside down by an inflation rebound, Bank of America warned, pointing to higher commodity prices stemming from China’s reopening and the ongoing war between Russia and Ukraine. That means secular trends that dominated the market over the last decade will be reversed.
5. Ray Dalio slammed the debt ceiling this week. The billionaire investor compared the politicians who support raising it to binge-drinking alcoholics. In his words: “We all know that there is no real debt limit because what is called a debt limit never actually limits the debt.”
6. Sam Bankman-Fried held $50 million in a tiny rural Washington-state bank. Strangely, the firm had only three employees and specialized in agricultural loans to farmers before he invested in it. Later on, Bankman-Fried’s trading firm, Alameda Research, took a stake in the bank and rebranded it as “Moonstone.”
7. Credit Suisse’s stock chief said investors are piling into all the wrong sectors as they anticipate a recession. In his view, you don’t need to hold defensive stocks if there’s no recession, a scenario he believes is becoming more likely. Here are three areas of the market that he recommends that will deliver the best returns.
8. Morningstar is bullish on these 10 cheap, high-quality stocks. The firm’s strategists said these companies pay out a healthy dividend and can offset stock market losses in a slow-growth economic landscape. Get the stocks here.
9. Russian oil trade remains on solid footing despite sanctions and a price cap, according to an analyst from Kpler. Moscow’s energy revenues may not have been hit as badly as some estimates may suggest, in large part because Asian customers including India and China have kept buying crude. Here’s what else to know.
10. Anthony Scaramucci said he put in a $10 million investment in FTX’s native cryptocurrency and received only $400,000 back. The SkyBridge Capital investor backed the crypto exchange’s token after receiving $45 million in funding from FTX. Yet, Scaramucci said he remains bullish on crypto even though he got burned.
Edited by Max Adams (@maxradams) in New York.