US Recession in 2023 ? APPL TSLA NIO BABA - Buy or Sell ?
Have you been keeping up with your readings ?
If you have, you would've realized that most of the chiefs of Corporate America, have been humming the same tune - Recession is Coming to the US.
Take a look at the compilation ? LOL !
Corporate US - CEOs say - Recession is coming !
What is Recession ?
In layman terms it is a period of temporary economic decline during which trade & industrial activities are greatly reduced and generally identified by a fall in GDP in two successive quarters.
If we adhere strictly to the qualifier, technically US is not in recession. This is because...
US Consumer Price Index (CPI) for Yr 2022 - Q1, Q2 & Q3
Looking at the US Bureau of Economic Analysis's CPI index report, US was in recession for first half of 2022 when the CPIs were -1.6% (Q1) and -0.6% (Q2) respectively.
When Q3 CPI index was out on 30 Nov it registered a +2.9%. Could we conclude that US is out of the woods and no longer in recession ?
Let's not forget that the Personal Consumption Index (PCE) that the Fed depends on when formulating their interest hike policy.
US PCE - Yr 2022 - Jul to Oct
With PCE index coming in at +6.00% in Oct 2022, a country cannot be having inflation & recession at the same time right. Whahahahah...
Confusing ? I know right ! Whahahaha
Still, what are the Signs of Recession ?
- Economic shocks. An unpredictable event that causes widespread economic disruption, such as a natural disaster or a terrorist attack. Covid pandemic & Russia-Ukraine war qualifies !
- Loss of consumer confidence. No visible signs yet. If you spot any, share in Comments section. Tks.
- High interest rates. For year 2022, after 6 rounds of interest hikes, the Fed has for the first time in the longest time raised US Interest Rate to its highest ever. There will be one more for the road on 14 Dec 2022.
- Deflation. No visible signs of prices of good & services falling across the board. Just the recently ended Black Friday alone, online purchases raked in $9.12 Billion in sales alone, excluding brick & mortar stores' sales.
- Asset bubbles. With the continuous interest hike, economist at Fannie Mae predicted that US home price will fall -1.5% in 2023 and -1.4% in 2024. Unlikely asset bubbles forming any time soon.
Recession - cause & effect
Recession's Business Impact.
As an investor, we need to know what to watch out (a) to detect Recession and (b) re-balance our portfolio before its too late right ?
Below are some possible signs :
- Declines in sales and profits. Q3 earnings report is over and Q4 is coming. If we haven't been paying attention; now would be a good time before 2023 arrives - no ?
- Cut costs. Tech firms have massive layoffs recently. Do they know something and are not telling us ? Refer to table below !
- Cuts in Capital spending.
- Cuts in Marketing. We only need to look at Media stocks to know this is true eg. $Meta Platforms, Inc.(META)$ , $Snap Inc (SNAP), $ Alphabet (GOOG) revenue from advertising is slowing due to budget revision..
- Cuts in Research. APPL has halted its EV development until further noticed. Hmmm.....
- Curb credit access, slow collections.
Tech firm - massive layoff. Info last updated as of end Nov 2022.
Recession Impact on businesses
Recession - Business Most Affected.
If you own any stock/s in such Industry, is it time to (i) review latest Quarterly earnings report (ii) forecasted Q4 earnings, (iii) items not mentioned in the earnings report ?
- Retail. Eg. $Lululemon Athletica(LULU)$ , $Nike Inc (NIKE)
- Restaurants. Eg. Chipotle Mexican Grill Inc (CMG),
- Travel / Tourism. Eg. $Carnival(CCL)$
- Leisure/hospitality. Eg. $Hilton(HLT)$
- Service purveyors,
- Real estate. Eg. All REITS; especially if the REITS has huge borrowings - there is a need to know owing to the high interest rate thats set to get even higher as mentioned by the Fed.
- Manufacturing. Eg. $Tesla Motors(TSLA)$ $Apple Inc (APPL).
Recession - what stocks to invest ?
Conversely what stocks would a rational investor have in his/her portfolio. Enclosed are some references (only) from US News in Oct 2022.
PS : remember, always perform your due diligence before making any investment; even if its adding to existing portfolio.
- Consumer Defensive. Eg. Walmart (WMT). A rational consumer will return to basics when belt tightening is to be exercised to tide over a rough patch.
- Consumer Cyclical. Eg. Home Depot (HD). There's alway a roof to fix, a leaky faucett.. Time to roll up one's sleeves and get wet.
- Communication Services. Eg. T-Mobile (TMUS), AT&T (T). The telecomm space will gather pace soon as US is expected to complete 5G rollout by end 2023.
- Entertainment. Eg. Disney Inc (DIS)
- Healthcare. Eg. Abbot Laboratories (ABT), Abbvie Inc (ABBV).
What about the Big Boys ?
Below are mine and (only) mine view on these "crowd favourites".
- Apple (APPL). Sales revenue may stagnant or dipped a bit. Demand for basic models of l iPhone 14s may taper. However demand for higher end models 14 Pro & 14 Pro Max, remains tight.
- Tesla (TSLA). Shanghai Giga factory production is to be trimmed by > -20%. Steep discounts offered in China; must be really bad. Weekly delivery has fallen by -27.61%.
- NIO (NIO). Barring any unforeseen circumstances, if NIO keep pace with its current delivery, they are poised to achieve a +315.28% in delivery; YoY comparison.
- Alibaba (BABA). This stock did not recover to its former glorious state; after being forcefully stopped from listing its affiliate company ANT Group. Despite all the positive assessment etc.. it remains a toxic stock that no one dares to take a major stake in (for now!). Interested ?
With 3 more weeks to ge before 2023 arrives, there are still plenty of time for all sort of events to take place that maybe impactful enough to change the course of inflation, recession or stagflation.
Similarly there are many other stocks that offers equally good investment value out there. We just have to do our homework more diligently to unearth these "hidden" gems.
Most important, we must be brave to walk away from a stock { that we have hawked over }; in a runaway stock price situation.
Always remember the other investment adage "what goes up, must come down" !
Just look at Amazon Inc (AMZN) and Alphabet (GOOG) now. Oops ! Wanna get some now ? Hahaha !
Feedback or Personal views are welcome. Leave them at Comments section below ok. Thanks.
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Matching song ? Into The Unknown (Frozen II theme) by Idina Menzel. Dunno ? YouTube it...
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
1) ensure we have steady stream of income, be it a main job or several side hustles. sustainable living first.
2) prepare emergency fund and war chest in event of major dips or black swan events, given the Covid19, russia war is ongoing... things might still go south...
3) understand the business we are investing in, only then can we make informed decisions and enter the trade when others are fearful as well as take our profits when everyone else is bearish.
just my humble opinion 😊
Pls "Like" the post ok. Tks.
The rating is important to me! Tks.
能吗