Announcing the 2023 #1 Best Trader Competition!
We are excited to announce the early bird registration for the #1 BEST Trader Competition, with trading kicking off on January 30th. This competition is being sponsored by CobraTrading.com who is one of our direct access trading brokerage firms. This competition has an incredible set of prize offerings from DAS, Benzinga and Cobra! You can win access to Benzinga Pro and Benzinga Trading School, a Trading Computer as well as DAS Trader Pro access. Be sure to check out the prizes here.
Be sure to sign up soon as the early bird pricing is in effect and the entry ticket is only $100 and you get instant access to the DAS Trader Pro platform to practice before the competition starts on January 30th.
Wall of Worry to Continue into 2023
There are always two camps: the bulls and the bears. What actually happens is generally somewhere in between.
The Bullish Narrative
Let’s go through the bull story first: Inflation has peaked somewhere around June according to the CPI. Although it is no longer rising it is decreasing slowly. There has been no significant job loss in the U.S. economy. Employment levels remain high and the economy continues to be strong. This will encourage the Federal Reserve bank to pivot, meaning that they will no longer be raising interest rates drastically. In fact, interest rate hikes will slow and peak somewhere at around 5.25%, helping to orchestrate a soft landing for the economy overall. This will encourage companies to start to spend again but it will probably take at least 6 – 9 months for inflation to get back to the 3 – 4% level. Inflation being at 2% might be a thing of the past, instead the Fed might modify its inflation target to 3% as the U.S. government generally has to deficit spend and print money to pay its debt service obligations. This constant increase of the money supply has a simple fix: set the new inflation guideline to 3% which allows the U.S. to keep its A-1 credit rating by always meeting its obligations and enabling the U.S. to orchestrate a soft landing so that it can slowly digest the massive stimulus spending of the past three years.
The Bearish Narrative
Oil prices will drastically increase and jumpstart inflation once again, this is due to an abnormally cold winter and continued supply constraints caused by the Russia/Ukraine war. Some variables that the bears often throw into the mix are a negotiated peace between Russia and Ukraine coming this February, and of course no increase in the price of oil due to the fact that oil generally goes up seasonally and that has already been factored in. But let’s say oil prices do rise and inflation starts to creep up again, then we would expect the Federal Reserve to continue to increase rates all through 2023. There are generally six meetings of the Federal Reserve’s Open Market Committee. If the Fed were to increase rates 50 basis points in each meeting, then interest rates would rise 3% over the course of 2023. Currently at 4.25%, this would force the Fed to increase rates to get as high as 7.25% in order to finally get inflation under control.
Reality is Usuall Somewhere in the Middle
If we are not already in a recession, there will be a recession that everyone will be able to agree with in the first or second quarter of this year, maybe even lasting through 2023. It will most likely not be as bad as the bearish narrative implies it will be. Historically, the Federal Reserve will not pivot early as it will overshoot.
This is of course not considering something that is unforeseen. Items that are currently on the “wall of worry” include: China’s COVID problems, China’s possible aggression towards Taiwan, and the War in Ukraine which can support the bullish or bearish narrative. If they find a peace agreement is made between Russia and Ukraine then that would support the Bullish narrative. If the war heats up or expands in some way, that would support the bearish narrative. The most immediate item in the “wall of worry” are corporate profits. January 15th starts the earnings season. How the markets interpret the 2022 results, and more importantly how corporations set expectations for 2023 will set the tone for the rest of the year.
Whatever plays out this year, caution is always best in volatile markets.
Market Research and Analysis provided by Michael DiGioia, Director of Educational Services
What’s New from DAS
During the month of December, we released beta version 184.108.40.206. Please review the list of updates here.
If you haven’t upgraded your software recently, then we highly recommend that you review the release notes here.
Please be sure to install the latest version of the DAS Trader Pro platform. You can do this very easily from DAS by clicking Tools > Auto Upgrade. You can learn more about the Auto Upgrade feature in our Knowledge Base.
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