January 2023 Newsletter | Our Income Investing Playbook For 2023 | Plan For This Service

Summary

The S&P 500 finished the worst year since 2008 down nearly 20%.  Value stocks did markedly better with the Dow falling just 9%.  Tech stocks far worse- Nasdaq down 33%.

We think 2023 isn't going to be much better and that with the economy at risk for falling into a recession, defensive in portfolios should be priority.

Equity markets are NOT pricing in a recession at the moment but a slowdown.  That is the risk investors face in 2023.

Interest rates and the bond market are giving investors a golden opportunity to increase quality.  If the 1-yr treasury offers 4.7%, then multi-asset portfolios should return >5%.

We introduce a new Active Allocation portfolio that aligns with our Model of Models approach.  The Core CEF Portfolio will continue as always.

Before we begin, I wanted to send a sincere thank you to all our members for sticking with us during these challenging times.  I always said that I would never compromise my values when managing this service and if CEFs were not a good investment, I would tell you, despite the fact that it is highly negative for my business. 

For most of this year, it has been the view of this service that the environment for CEFs has been highly negative.  We have been underweight CEFs by the most amount, ever.  

In this report, we will detail where we want to place those assets that would have otherwise been in CEFs, and our strategy for getting back in.

This tweet is so telling.  And I would say this is 100% correct.  But we can say that rates are likely to go lower, inflation is likely to go lower, and the US economy is likely to enter a recession.  Given that, we want to position our portfolios for such an eventuality.  

That means, lower equity exposure, lower low-quality credit exposure, high cash/dry powder, and taking advantage of the yields in high-quality bonds.