2022 was one for the books.

The Federal Reserve began raising interest rates in March and hasn’t stopped, only recently moving down to 50 basis points from four consecutive 75-point increases. This contests the quickest rise in history.

That was to combat spiraling inflation, which reached 9.1% in June and wasn’t sub 7% the entire year.

The roaring inflation was created by Putin’s war… supply chain issues from that and the aftermath of COVID lockdowns… Geopolitical tensions with China… Shortages and production delays… and lasting stimulus effects.

2022 was, to put it lightly, the perfect storm.

And that put us in the bear market where we currently find ourselves. The S&P 500 will end the year around 20% lower than the start. The Dow and Nasdaq are close to that.

That downdraft will continue well into 2023, which is why the stocks to watch, buy, and avoid below couldn’t be timelier. To protect and grow your wealth in the coming year, you’ll need to watch very carefully.

Shah Gilani, Chief Investment Strategist
Like most of the experts here, Shah believes that 2023 will be a year of flexibility when it comes to your investing and trading strategy. If you hold onto a single rigid system of making money, it’s likely the market will flip next week and what you’re used to isn’t the reality anymore.

The first of two investments that you should be watching closely is one playing on 2022’s arguably biggest trend: energy.

The outlook into the new year is mixed with Putin’s war still raging across the Atlantic, supply chain issues persistent, Chinese President Xi’s controversial meeting with Saudi officials, and OPEC+ waffling between production increases and cuts.

But one thing is sure: net income for oil and gas companies in the U.S. doubled from 2021 to 2022, and now sits at a record high of $4 trillion. That’s a lot of money, and 93% of O&G executives say their outlook is positive for the coming year.

That leads right into Diamondback Energy (FANG), a $25 billion O&G stalwart headquartered in Midland Texas. In the fertile Permian Basin in West Texas and New Mexico, they control 525,000 acres and hold nearly two billion barrels of crude oil equivalent – which is important while winter hits the U.S.

They sport a 7% dividend yield, which means, without any appreciation, they’re going pound-for-pound for some inflation forecasts and could end up paying the difference to you in cash each quarter.

The other instrument to watch is none other than the Invesco QQQ Trust (QQQ), which is the ETF following technology. For Shah, this is the instrument to use for trading, not investing in 2023.

Technology over the past 10 years was the biggest cash-generating sector on the market, carrying us to new market highs, but all of that cash comes under pressure when the Federal Reserve started raising interest rates – which they’ve been doing since March of this year.

Volatility will be the name of 2023, and interest rates will be one of the most important macroeconomic indicators still, which means the QQQs will be the constant watch here.

Mark Sebastian, Volatility Trading Expert
Mark is our resident volatility expert, having cut his teeth in the early 2000s down in the option pits in the Chicago Board Options Exchange (CBOE).

The two stocks he suggests watching are within today’s most controversial industry: semiconductors. The logic here is straightforward: because of the turmoil in Taiwan this past year and the fact that China is a major global producer of semiconductor components, semiconductor company prices have become depressed.

But semiconductors are essential to a high-tech economy – going in everything from smartphones to advanced military equipment.

And once the economy begins to gain steam again, which Mark believes it will soon, a lot of spending will go back into technology and directly into companies like Intel (INTC) and Advanced Micro Devices (AMD). What’s important is that Biden’s $52 billion chips spending bill passed this past year will start to trickle into chip companies that have plans to expand operations in the U.S. – like INTC and AMD.

The one company that Mark believes you should be avoiding in the new year is Peloton (PTON). The company was all the rage when people had spending power with stimulus and they were all working from home, but now, purchasing power is declining and most consumer discretionaries are coming under pressure.

PTON could be in for a wild – and bad – ride here.

Tom Gentile, America’s #1 Pattern Trader
Tom is unique because he’s agnostic – he doesn’t care how he’s making money so long as he’s making it. So, during the Mistletoe Mania, we’ll do a lightning round where he sees real estate going next year… technology… inflation… commodities… and energy.

But the one stock he suggests watching – doubling down right here – is Intel (INTC).

He’s mixing the fundamentals with technicals and considers it a good play on both fronts. It’s oversold right now, it holds a high, 5% dividend yield, its cash flows, balance sheet, and income statement are solid, and it’s ripe for a rebound when semiconductors gain favor again – which makes this the perfect time to buy in.

Nick Black, Director of Crypto Investing
It’s impossible to talk about crypto right now without addressing the elephant in the room: 2022 was a year of implosion after implosion. But, according to Nick, this is actually good. You need to focus on where those implosions occurred – the Celciuses, Three Arrows, BlockFis, and the most infamous one of all, FTX. It’s the lenders that you want to avoid in 2023 (and probably should’ve been avoiding since day one anyway). They allowed borrowers to over-leverage their bets, and once prices came down, they imploded. It’s easy to see now, so avoid at all costs.

But, for Nick, crypto is still very much the future. We can’t allow current prices to dictate what the underlying technology is capable of. That’s the case with artificial intelligence (AI), which he believes will make monumental shifts in every industry and change the entire global workforce within the next decade. Automation is soon coming.

And that’s why his number one crypto to own for 2023 is Algorand (ALGO).

Currently priced at only around 20 cents per coin, it was up to $2.82 per back just over a year ago – so the potential runup could be huge. But it could go even higher than that because ALGO is a tech that any blockchain project could use (and a lot of them already do).

They speed up transaction times (think things like decentralized finance or loans) at a low cost, so a crypto project could use them to scale up whatever that business entails.

Chris Johnson, Swing Trading Expert
Chris is similar to Shah with the idea that you have to remain nimble in your trading strategy in 2023. He calls it his “hand-to-hand” strategy.

And on that note, he isn’t giving a buy recommendation here.

But a common theme that we’ll go over during Mistletoe Mania is that real estate isn’t doing so well and there are a few issues facing the sector in the coming year.

That’s why CJ believes Airbnb (ABNB) is a tremendous short opportunity.

He lives in Cincinnati, and he told me that one of his neighbors owns 15 properties. She can only fill those properties at most about 10 times per month. And that’s just a microcosm of the entire country right now.

Extra property just isn’t worth it, and with consumer purchasing power down because of inflation, vacations may seem a little less appealing in 2023. (Maybe not if you’re shorting ABNB like CJ believes you should be…)

Garrett Baldwin, Executive Producer
Garrett believes that we’re at one of the most exciting points in investing history – based on historical standards of bear markets. He’ll take us through the three stages during the event on December 20 at 7 p.m. ET, but right now, we seem to be right in the middle – investors and analysts are hyperfocused on interest rates, inflation, production numbers, and earnings.

I’m sure you’ve seen a headline or two mentioning inflation?

Well, anyway, people are focused on that and then we get over the cliff. Towels in, giving up, selling everything, and then we hit bottom.

One stock that you want to avoid now that we are where we are is Tesla (TSLA). He built the empire, Tesla cars are cool, they were forerunners in this electric vehicle (EV) trend… but Elon, what are you doing? Twitter? He needs to focus a little more and stick to what he knows best, not trying to build a profitable social media company.

EV remains a trending topic, so by staying unfocused, competitors are quickly gaining ground.

And Garrett’s number one stock for 2023 is Friedman Industries (FRD). Interest rates are hovering around 5% right now, but once we hit 6% (which we will), you’ll need to adopt an 18-month investment horizon into deep-value stocks – and FRD is a perfect example of that.

It’s a steel company operating out of Texas, and because it’s illiquid and misunderstood, its sub-$10 price tag could hit well above that once mainstream investors catch on.

Kenny Glick, Day Trading Specialist
You know, most people think that 2022 was an off-year. People are worried right now… and reasonably so with all of the macroeconomic issues riddling the U.S. economy.

But Kenny isn’t one of them. Earnings seasons are holiday seasons because they bring in so much liquidity on so many different stocks – no matter which way they’re moving, there’s always a trade. Add on big economic events like Fed announcements and FOMC Minutes, and 2023 will be just as volatile – if not more – than 2022, which means the profit opportunities will be far and many.

That said, Kenny believes you should be taking 2023 day by day – per usual. There’s no specific stock to hold, just hold onto volume and follow to where that takes you.

To avoid, though, there’s no sense in following Chinese stocks. It’s a mess over there. President Xi is now the supreme emperor, COVID cases will probably spike (and be underreported) now that they’re opening up, manufacturing will decline, growth will decline – but even more, their accounting standards are so different from ours that you have no idea what’s real and what isn’t. Fake companies, fake numbers, there’s no sense in it.

— Money Morning Staff

Source: Money Morning