The initial optimism surrounding the US economy and inflation has dwindled, causing the early 2023 rally for stocks to lose momentum. On Friday, the market faced renewed pressure after personal consumption expenditures were higher than expected, leading to a rise in rates and a drop in stocks. As a result, the S&P 500 has only risen by 3% this year.
It seems that investors will need to brace themselves for a few more months of rate hikes and inflation reports, particularly on the services side, where the Federal Reserve is placing its focus. Despite the challenging macro environment, investors may find opportunities to purchase quality stocks with strong earnings outlooks. These opportunities may arise due to the sell-off in response to the macroeconomic conditions.
Buy both Alphabet and Microsoft would make investors miss out on the opportunity of an AI frenzy.
This may be one of the best ways to play the latest AI trend, at least in the near term. Since the launch of ChatGPT last year, Microsoft has seemed to dominate the AI conversation. The investing community lauded its multi-billion dollar investment in the chatbot creator and its plans to bring more capabilities to its Bing search engine.
Still, investors should long for Alphabet, and the company’s longstanding AI history and investments should yield long-term returns. For years, Alphabet has devoted research and development resources to AI and machine learning, launching products such as its Language Model for Dialogue Applications and BERT, a tool that better understands users' search intentions.
Rely on Buffett’s wisdom.
According to the report, Apple remained Berkshire’s largest holding by far at the end of 2022, with a value of $119 billion. Buffett has called Apple the second-most important business after Berkshire’s cluster of insurers and said he’s a fan of CEO Tim Cook’s stock repurchase strategy.
Shares of Apple fell about 27% last year, underperforming the S&P 500, which dropped nearly 20% for its worst year since 2008. However, its business outlook remains robust, according to some surveys.
Apple was the clear winner in Bloomberg Intelligence's most recent US smartphone survey of those Gen Z consumers aged 18-24, with 79% preferring it versus a current market share of 41%, leading some market watchers to believe iOS can become more dominant as these users age. Even if US smartphone units grow just 2% annually over the next decade, this analysis suggests Apple could gain 7% each year.
Meta: More efficient operation in 2023 is largely expected.
Meta is up more than 20% this earnings season, and some analysts see the stock rising about 20% over the next 12 months, according to FactSet data.
The social media giant posted fourth-quarter revenue that beat estimates on 1 February. Analysts also lauded the company for its shift toward efficiency. Analysts now expect 2023 earnings for the company to grow by 11.9%. Before the earnings season, they forecasted a 34% profit decline.
Fullerton Markets Research Team
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