(1:00) - What Is The Jobs Report Telling Us Right Now? (10:30) - How Should Investors Be Positioning Their Portfolios For 2023? (21:15) - What Kind Of Market Environment Will We See In The Coming Months? (28:20) - Episode Roundup: LLY, PFE, XOM, JPM, ULTA, QQQ, XSD, VO, Podcast@Zacks.com
Welcome to Episode #340 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is joined by Zacks Chief Equity Strategist, and economist, John Blank, to talk about their favorite end of the year topic: will the US economy be in recession next year?
In 2022, with the Fed raising rates aggressively and many of the recession indicators flashing red, many believe that a recession is inevitable in 2023. But is it?
Tracey and John again look at the important economic data, including the jobs data. One thing that is clear, is that the US economy is currently not in a recession, despite many in the media harping that it is. The US is averaging monthly payroll gains of 392,000 in 2022 through November.
And the weekly jobless claims data has yet to show much slowing.
Where Should You Invest in 2023?
If a recession IS coming next year, where should an investor be hiding out?
1. Eli Lilly ( LLY Quick Quote LLY - Free Report) and Pfizer ( PFE Quick Quote PFE - Free Report)
The drug stocks have been popular with investors over the last few years due to the pandemic.
Eli Lilly shares are up 32% year-to-date and are breaking out to new 5-year highs. However, analysts have been cutting earnings estimates at Eli Lilly recently. Earnings are expected to fall 4.7% in 2022.
Eli Lilly may be popular with investors, but it’s not cheap. It is trading with a forward P/E of 47.
However, the reverse is true of Pfizer. Pfizer is dirt cheap, with a forward P/E of 7.9 but shares have also fallen 17% this year.
While Pfizer earnings are expected to be up 46% in 2022, analysts expect them to fall 25% in 2023.
Are Eli Lilly and Pfizer the wrong place to be in 2023?
2. JPMorgan Chase ( JPM Quick Quote JPM - Free Report)
With the Fed raising rates, you’d think that banks like JPMorgan Chase would be a place to hide out in this year, and next.
Shares of JPMorgan Chase are down 17% year-to-date, which is mostly in line with the S&P 500, but they have rallied 15% in the last 3 months. John owns JPMorgan Chase in his Large Cap Trader portfolio at Zacks.
Yet shares of this big bank are cheap, with a forward P/E of 11.2. JPMorgan Chase also pays a dividend, yielding 3%.
Is JPMorgan Chase a deal?
3. Ulta Beauty ( ULTA Quick Quote ULTA - Free Report)
Ulta Beauty is an American beauty retailer, with both brick and mortar and online sales. Beauty has been hot in 2022, even with inflation, because there are many ways customers can trade down, if necessary.
However, both prestige and drugstore make-up are doing well this year as people attend events and experiences like weddings and prom.
Ulta shares have bucked the negative trend in 2022. They are up 16.4% year-to-date and are at 5-year highs.
But Ulta isn’t cheap. It trades with a forward P/E of 20.5.
Is the Ulta rally nearing an end or there still time to get in in 2023?
4. Invesco QQQ ETF ( QQQ Quick Quote QQQ - Free Report)
John believes in buying some of the beaten down ETFs for next year, including the Invesco QQQ ETF, which is simply known as the QQQ. It tracks the NASDAQ.
The QQQ is down nearly 30% year-to-date. John believes investors should be dollar-cost-averaging into it next year.
QQQ pays a dividend, yielding 0.7%. It has an expense ratio of 0.2%.
Are you brave enough to buy the QQQ in 2023?
What Else Do You Need to Know About the Possible Recession Next Year?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of ULTA in her own personal portfolio.]