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Market Insights

Stocks To Watch for 2023

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The end of another year approaches. It’s certainly been one for the history books! What surprises does 2023 have in store for us? Have a read of our stocks to watch in the New Year…

Tesla: Finally running out of road?

Last week we noted how the Tesla selloff was moving into oversold territory. It definitely wasn’t time to buy that dip, as the share price just kept on dipping!

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The big question for the year ahead is if Tesla can recover investor confidence. There are so many factors to keep an eye on here. How much is really the cult of Elon, and how much is simply the end of Tesla as a market leader in the EV space?

Established car companies are now matching Tesla’s EV numbers and they already have the ability to scale up production. So, further pain ahead for Tesla in 2023?

The (big) Apple story

Apple is considered one of THE safest stocks out there. A huge brand, customer loyalty, cash on hand, consistent revenues. Lots of reasons to own a company like that. Just ask Warren Buffett. Apple is the largest holding in Berkshire Hathaway’s portfolio.

However, 2023 could be a tougher year for the iPhone maker. Smartphone demand has been falling throughout 2022, and there are question marks over just how much demand was pulled forward during the pandemic. Once everyone in the house has an iPad, how many more need to be bought?

Key support levels have been broken on the daily chart:

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The biggest of big questions… Will disrupted production in China become a more common theme? The CCP is pushing to increase domestic demand and consumption, which likely means higher wages for workers. China was once thought the safest of regimes for cheap production. Will that change?

For Apple, slowing demand on one side of the scales with potential supply disruptions on the other is a very difficult balancing act, and a challenge the company has rarely faced in recent years.

Weakness for Apple could also spell trouble for the Nasdaq. Apple’s stock is weighted at over 11% of the index.

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ARKK of the covenant

Many lessons have been learned over the past 12 months. One big one is being very wary when any investor is being hailed as the next big thing…

So it’s proven for Cathie Wood’s ARK funds, especially the flagship ARKK innovation ETF.

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After falling by 23% in 2021, this year has been even worse. ARKK is down by 68.5% YTD in 2022. There were two big problems for ARKK to face up to. Firstly, sky-high valuations brought on by the pandemic. Secondly, the transition from low interest rate policy to rapidly rising interest rates globally.

See, the kind of innovation companies in ARKK holdings usually don’t turn a profit. That’s the price of innovation. No profits until the products can scale. While rates are low, investors are far friendlier to these types of projects as they seek yield. In the current higher rate environment, the opposite is true.

ARKK is one to watch in 2023 if the economy turns and inflation drops rapidly. Investors could anticipate a return to the old low rate monetary regime and ARKK, or the companies ARKK owns shares in, could benefit.

Not investment advice. Past performance does not guarantee or predict future performance.

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