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TL;DR
- US GDP grew at an annualized rate of 2.9% in the fourth quarter, higher than the 2.6% that had been forecast
- Despite the positive news, two-thirds of economists at the World Economic Forum in Davos believe a recession will occur in 2023
- At a time when themes are becoming increasingly important to investors, factor investing can offer investors exciting opportunities to ride the waves.
- Top weekly and monthly trades
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Major events that may affect your portfolio
The US economy continued to show resilience in the face of numerous economic headwinds in the fourth quarter of 2022, with GDP growing at an annualized rate of 2.9%. That’s down from the 3.2% growth rate in the third quarter, but ahead of the 2.6% that had been forecast by Reuters economists.
The two consecutive quarters of positive growth split the year in half, with the first and second quarters both posting negative GDP figures. Although this is traditionally considered the definition of a recession, the National Bureau of Economic Research has yet to announce that we are in one.
A tight labor market and relative strength in consumer spending are two of the main reasons they haven’t made the call yet, but that doesn’t mean we’re out of the woods just yet.
The fourth quarter figures were supported by growth in consumer spending (the holiday season is certainly contributing to this), increased government spending at the federal, state and local levels, higher spending on health, utilities, housing and mining.
This is perhaps the strongest result we have seen in quite some time. Fed Chairman Jerome Powell said the economy has yet to feel the full effects of the rate-tightening cycle. This means that the pressure of higher borrowing costs should start to hit businesses and consumers, which will surely dampen growth.
It now looks very likely that we will see some sort of recession in 2023, with two-thirds of economists polled at the World Economic Forum in Davos expecting a recession.
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Big Oil is expected to report record profits for 2022, despite louder protests from environmental activists. Most of the world’s largest energy producers, including Exxon Mobil, BP, Shell, Chevron and TotalEnergies, are due to announce their annual figures in the coming days.
According to consensus estimates from Refinitiv, the figure should be significant. Like, $190 billion big.
This figure is expected to be the highest on record, amid record high energy prices and war-related supply issues in Ukraine. As we all pay a lot more for our energy and gas, it’s easy to understand a negative knee-jerk reaction to the news.
But there is an important point to keep in mind. These companies are all listed on the stock exchange.
This means that, in many cases, it is ordinary people who will benefit from these outsized profits. This can be a direct result of being individual shareholders in companies, owning ETFs that include energy producers, or even as beneficiaries of a pension plan that invests in them.
For many investors, the stock prices of energy companies were one of the only bright sports of the year to overlook for portfolios.
Ahead of earnings calls, the oil giants are expected to reward shareholders for their bumper year. Dividends are expected to be higher than usual and it is also possible that share buybacks will be implemented.
This week’s flagship theme from Q.ai
In 2022, we have seen a major shift in the markets. For more than a decade prior, growth-focused tech stocks largely outperformed the rest of the market, as companies in the sector grew to become some of the most valuable in the world.
Prior to 2008, financial companies offered some of the best returns to investors. In 2022, energy producers have taken over in investors’ portfolios.
The key point is that the same types of businesses don’t succeed all the time. There are cycles where certain factors work better than others. Wouldn’t it be great if there was a way to use these factors to generate investment gains?
We have what you need.
Because our Smarter Beta Kit does just that. It is made up of five different factor ETFs:
-ETF iShares MSCI USA Value Factor
-ETF iShares MSCI USA Momentum Factor
-ETF iShares MSCI USA Min Vol Factor
-ETF iShares MSCI USA Size Factor
-MSCI USA iShares Quality Factor ETF
Every week, our AI analyzes massive amounts of data to predict how these factors are likely to perform over the coming week. It then automatically rebalances the kit based on those projections, to ensure it’s always up to date with the latest information.
In an investing environment where markets react so strongly to themes (Web3, AI, meme stocks, NFTs anyone?), it’s a way to ride the waves without needing to predict them yourself.
Best Business Ideas
Here are some of the best ideas our AI systems recommend for the week and month ahead.
Pact Logistics Group (CVLG) – The shipping company is one of our Best buys for next week with an A rating in quality value. Revenue increased by 16.3% in 2022.
Laredo Petroleum (LPI) – Energy exploration company is our Next week crop top with our AI giving them an F in quality value and low volatility. Earnings per share are up 5.07% over the last 12 months.
Greenbrier Companies (GBX) – The transportation manufacturing business remains our Best buy for next month with a B rating in Techniques and Low Momentum Volatility. Revenue increased by 68.2% in the 12 months to November 2022.
Permianville Royalty Trust (PVL) – The catering company is our Next month crop top with our AI giving them a C in volatility and low momentum techniques.
Our AIs Next month’s top ETF trades is to invest in US healthcare, industrials and stocks, as well as Taiwanese stocks and technology. Best buys are the Invesco DWA Healthcare Momentum ETF, the Vanguard Industrials ETF and the Vanguard Total Stock Market ETF. Top Shorts are iShares MSCI Taiwan ETF and iShares Global Tech ETF.
Recently Released Qbits
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