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Monday, January 2, 2023
Today’s newsletter Brian Sotzigeneral editor, Yahoo Finance anchorFollow Sozzi on Twitter @BrianSozzi and LinkedInRead this and other market news on the go Yahoo finance app.
Yes, the market is closed today.
So you may be wondering why I deliver my morning brief newsletter directly to your inbox.
The answer to that question is simple. Every day, even if the market is closed, you can lose in the long run if you aren’t looking to get better as an investor.
And we believe best that people around the world are trying to improve around the clock. Eat or be eaten in the world market.
To that end, I offer a simple investment lesson for those who may be getting ready to go buy battered tech stocks in 2023 right away.
We all know the tech background for the new year.
Break down this exchange that myself and my colleague Brad Smith had with Evercore ISI veteran tech analyst Mark Mahaney on Yahoo Finance Live last week.
Yahoo Finance: Can technology rebound without a Federal Reserve pivot or at least a moratorium?
Mahaney: I am suspending the question of suspension. The answer is no, you can’t. But it’s the magnitude of the movement. And going from zero to 4% plus 4% to 5% expected value is a big move. From here on out, I don’t think the interest rate shock will be as big as last year. That’s kind of the answer to your question. If rates continue to rise and the Fed remains hawkish, I think it will be very difficult for growth tech stocks to outperform materially. I don’t expect them to perform as poorly as they did this year.
It embarrassed Shaw’s friend Mark, emphasizing how difficult it is to pick tech stocks at this time.
Investor sentiment is low for what technology companies can produce regarding top- and bottom-line results this year, as most economists and investors brace for a slowdown in economic growth.
The easiest way to see that concern is to look through the prism of the market. The Nasdaq Composite He Plunges 33% In 2022.
Once-hot tech stocks such as Snap (SNAP) and Tesla (TSLA) ended the year down 80% and 65%, respectively. Earnings cow, safe-haven stocks called Apple (AAPL) lost 27% last year.
Again, current feelings are terrible.
And it should continue until tech companies can re-accelerate growth and prove they can turn more top-line earnings into bottom-line profits for investors.
Tech stocks will continue to suck the wind until the Federal Reserve signals a change in interest rate policy. And everyone knows it.
So the first part of your lesson is to keep an eye out for seemingly “cheap” tech stocks until the Fed gets more dovish.
The second part is that the Fed needs to be ready to act before all is revealed.
And if you think you’ve found a great paper to pair with a heavily discounted valuation, it might be worth taking a nibble.
As Mahaney suggests, one of those names could be Meta Platforms (META).
“I think there will be a significant revaluation of Meta stock,” Mahaney said.
The social media company formerly known as Facebook is nearing the bottom of its valuation as we enter 2023, with billions of dollars in cost savings looming.
These are cost savings that technology rivals such as Amazon (AMZN) and Google (GOOGL) have yet to make, and Meta’s stock price is “relatively” attractive.
And if cost cutting isn’t a topic that gets you excited about tech stocks, you can thank Jay Powell.
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