There's still too much risk in stock and bond markets. Earn this easy … – Morningstar

By Barbara Kollmeyer
Critical information for the U.S. trading day
Ahead of major tech earnings later, Meta results are lighting up the Nasdaq Composite for Thursday. The S&P 500 is also up as investors take a glass-half full view of the Fed meeting.
Worried that investors are in the clutches of another Fed misread is the founder of, Samantha LaDuc. "The market is not pricing either higher terminal rate or growth slowdown or recession. One or more of these assumptions is wrong. My bet: Fed goes higher for long. They don’t cut in 2023, unless they have a reason to," she says.
MarketWatch last spoke to LaDuc, who specializes in timing major market inflections, last May when she predicted the S&P 500 would finish 2022 around 3,800 — it finished at 3,859. Another call she nailed was her early 2022 warning of a coming "tech wreck," predicting a 20% Nasdaq slump in 2022 — it ended the year down 33%.
In our call of the day, LaDuc says cash is the place to be and that investors are "being paid to wait. They’re getting very favorable 4.5% on their sitting cash."
Even though the dollar has lost 8% in the last 12 weeks, "the money you put in money-market funds is earning 4.5% right now, whereas before it was earning 0.4% or 0.5%," she said in a Wednesday interview.
"So the Fed hiking has motivated a kind of paid-to-wait while the market stabilizes. I don’t think Treasurys are a safe bet for this year. I really can see no outperformance in bonds, and I think equities have more risk to the downside than upside," said LaDuc.
She’s specifically worried about tech, saying the Nasdaq likely has one leg down left to go before the selloff is all over.
Read: ‘Won’t get fooled again’? Nasdaq jumped more than 10% in January. Here’s what history shows happens next to the tech-heavy index
She explains that analysts are predicting an earnings recession through the fourth quarter of 2023, and not an economic recession. "They literally expect Q4 to pop up about 10% in earnings because of favorable comps– comparisons for the prior year.
"The problem with that is that the earnings analysis does not in any way, shape or form consider a recession, and it absolutely assumes moderate growth," says LaDuc. "So we still have Goldilocks all priced in equities and priced into earnings."
A growth to value rotation has been a key prediction for LaDuc since July 2020 when she started to call for "things over paper," predicting a shift to oversold commodities, cyclicals and large-cap value plays with rates bottoming.
While that rotation "absolutely outperformed" in both 2021 and 2022, she says it will trade less well this year because inflation expectations have come down.
The bottom line? Rather than buy that stock market dip, investors should short the rip higher, she says.
Her last observation is tied to gold — and she says she’s not a gold bug, but that her trend indicators are now "firing" for the precious metal for the first time in years.
Gold can be a tough call because it has to be "timed perfectly" and typically isn’t an outperformer, apart from a 1970s ride higher as an inflation hedge. What has changed is that last year central banks bought the most gold last year since 1967
"It’s the lack of counterparty risk that is driving the central bank desire for more control of gold that bears watching right now," said LaDuc.
The markets
The Nasdaq Composite is surging on Meta boat-lifting, with the S&P 500 also higher, but the Dow industrials slightly lower. Bonds are steady, oil is flat, with gold , silver and other metals up.
The pound has bounced off lows after the Bank of England hiked interest rates by 50 basis points as expected. The European Central Bank made the same move, and said it will repeat that hike in March.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily
The buzz
Meta shares (META) are up 19% after the Facebook parent missed earnings, but gave upbeat 2023 revenue guidance and promised more buybacks.
Opinion: Zuckerberg and Intel are shipping the proceeds from their layoffs straight to Wall Street
And big names will report after the bell — Apple (AAPL), Alphabet (GOOGL) and (AMZN) , Ford (F), Gilead (GILD), Starbucks (SBUX) and Qualcomm (QCOM).
See previews for:Apple , Alphabet and Amazon
Merck (MRK) stock is down after profit disappointed, Honeywell (HON) is falling on a revenue pullback, Eli Lilly (LLY) is falling for the same reason and Bristol Myers (BMY) said it expects a revenue fall, but shares are steady..
Baidu stock (BIDU) is higher after climbing in Hong Kong on Thursday’s news that BlackRock raised its stake in the Chinese internet-search giant to 6.6% at end of 2022.
Adani Group companies market cap losses are up to $105 billion after the Indian conglomerate canceled a $2.5 billion share sale, as fallout from a scathing report from U.S. short seller Hindenburg Report continues to take toll.
Weekly jobless claims came in at a lower-than-expected 183,000, while unit labor costs rose 1.1% in the fourth quarter, under expectations for a 1.5% gain. Factory orders are coming at 10 a.m.
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The chart
Get used to companies shedding workers?
The tickers
These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:
Random reads
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-Barbara Kollmeyer
(END) Dow Jones Newswires
02-02-23 0939ET
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