The Best Way to Understand the Markets in 2023

To outperform, you need to find stocks that will grow at a higher rate than the market expects. This is especially important to understand this year... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [DailyWealth] The Best Way to Understand the Markets in 2023 By Jeff Havenstein, analyst, Retirement Millionaire --------------------------------------------------------------- If you're a new investor, you probably make this mistake. Heck, if you're a seasoned veteran, you may still make this mistake from time to time... You think that a growing or profitable company always makes for a good stock. After years in the markets, I have learned this is simply not true. The problem is that growing profits are already reflected in the price of a stock. It doesn't matter what a company has done for the past 10 or 20 years... or even what it's doing today. All that matters is what a company is going to do. This is especially important to understand this year. Let me explain... --------------------------------------------------------------- Recommended Links: [Here's What You Missed Last Week]( The man who nailed the 2020 and 2022 crashes explains why a rare event is coming to stocks this year and how it could open the biggest moneymaking opportunity in 20 years. You could have doubled your money 34 times with his picks, so be sure to grab his FREE recommendation for 2023 while it's still online today. [Click here to watch now](. --------------------------------------------------------------- ['This Is What I Just Told the Pentagon']( While everyone's worried about inflation, cryptocurrencies, and a looming recession, professor and forensic accountant Joel Litman just delivered an even more surprising warning when he met with top military brass at the Pentagon last month. [Here's what Joel says will happen to the market over the next 90 days](. --------------------------------------------------------------- You see, the market is priced on expectations of the future. To outperform, you need to find stocks that will grow at a higher rate than the market expects. Take Apple (AAPL)... It's one of the most profitable companies in the world by net income. Everyone knows Apple makes gobs of money. But this month, Apple warned its suppliers of weakening demand for some of its key products. According to news outlet Nikkei Asia... In a sign of the gloomy outlook for consumer electronics, Apple has notified several suppliers to build fewer components for AirPods, the Apple Watch and MacBooks for the first quarter, citing weakening demand. Of course, this is troublesome for an Apple shareholder. You want to see demand increasing, not the other way around. But this doesn't mean Apple is losing money. Far from it... The company will still earn around $110 billion in free cash flow – the purest measure of profits. It will also pay the same dividends and buy back the same number of shares as it has in past years. Even so, shares fell about 4% the day of the announcement. The company shed $77 billion worth of market value... all because the outlook for future earnings had dropped a bit. Nothing has fundamentally changed about Apple. It's still one of the best businesses in the world. And, as I pointed out, it will still make lots of cash and reward its shareholders. But sentiment has changed. The collective feelings of market participants have assigned Apple a different price. In August, investors would pay about 28 times current earnings for the future of Apple. Today, they'll only pay 22 times earnings. It's the same with stocks in general. The S&P 500 Index has reduced its valuation from 21 times earnings to 19 times earnings. Right now, markets are pricing in recession. They're scared... And those expectations have shown up in valuations. Manufacturers are also expecting contraction ahead... You see, heavy industrial businesses aren't like consumers. They don't buy more or less in a given month because of their optimism, tax refunds, bonus season, or the weather. Industrial corporations plan months to years in advance. They carefully weigh potential returns and capital costs. They only start expanding when they're highly likely to be profitable. To measure how the industry is doing, we look at the Institute for Supply Management's ("ISM") Manufacturing Purchasing Managers' Index. The Purchasing Managers' Index ("PMI") surveys executives in manufacturing. A reading above 50% means growth and expansion. A reading below 50% means contraction. The December reading came in at 48.4, the lowest since the start of the COVID-19 pandemic. Take a look... With so much negative sentiment in the air, strong companies may find it easier to beat expectations. The market is already pricing in a recession... And any surprises to the contrary could be extremely bullish. If you're going to navigate this market in 2023, make sure you're aware of expectations. It's one of the best secrets to investment success. Here's to our health, wealth, and a great retirement, Jeff Havenstein Further Reading As an investor, you don't want to follow the crowd. The popular outlook is often wrong – especially at critical moments for the market. Our colleague Greg Diamond says right now is one of those times... [Learn more here](. "Mom-and-pop investors want nothing to do with stocks," Brett Eversole says. One measure from a major brokerage shows just how fearful folks are today. And importantly, history suggests this is an incredibly bullish sign for contrarians... [Read more here](. --------------------------------------------------------------- [Tell us what you think of this content]( [We value our subscribers' feedback. To help us improve your experience, we'd like to ask you a couple brief questions.]( You have received this e-mail as part of your subscription to DailyWealth. If you no longer want to receive e-mails from DailyWealth [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberrycustomerservice.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [www.stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.