It’s been a tough year for investors, but the bear market hasn’t relented much just because we’re nearing the end of 2022. That said, all of this pain is driving investors to seek out the biggest investment opportunities in next year.
Will things be better in 2023? In some ways, yes, as some assets should benefit from more upside. However, there is likely even more pain on the way in many asset classes.
Even when we only look at the stock market, some industries and sectors continue to do well, while others have been wiped out. Tech is in employment recession and stocks have been pummeled while defense and energy stocks continue to roar.
Considering all sectors and asset classes, one can see how the greatest investment opportunities may not be what they seem.
The biggest investment opportunities: Treasury bills
Having a global vision of the market is very difficult, and it is not easy to navigate. There are endless moving parts and considerations, so bear with me.
In just ten days, we will likely have confirmation that the 10-year Treasury bond just had its worst year in over a century. Since 1990, the worst one-year performance for 10-years was an 8% loss in 1994. This year? He is low more than 15%.
the iShares 20 Plus Year Treasury Bond ETF (NASDAQ:TLT) is gearing up for the worst one-year performance in its history.
This makes me think that 10-year bonds and other medium-term bonds can rebound next year. This is especially true as we enter 2023 with a very hawkish Fed and now central bankers around the world acting in a coordinated and hawkish way to crush inflation.
Even if it will eventually work, it will likely plunge us into a recession, forcing buyers to buy Treasuries.
The biggest investment opportunities: The Invesco QQQ ETF (QQQ)
There are two caveats here with the Invesco QQQ Trust Series (NASDAQ:QQQ).
First, the safest alternative would probably be the SPDR S&P 500 ETF Trust (NYSEARC:TO SPY). Second, the QQQ could very well reach new lows in 2023 before the bottom is reached.
My personal opinion – and it’s just that, an opinion – is that the market could bottom out in March/April before rising.
With a hawkish Fed and a probable recession, there is no reason for the market to avoid hitting fresh 52-week lows. It may have already bottomed out, or it could bottom out in September 2023. No one knows – and I’m no exception.
However, the S&P500 rallied 80% of the time over the past 80 years. Until recently, the QQQ has been a monstrous outperformer against the SPY. Like bonds, these types of years are not common, and I expect we will get back on track over the next 12 months.
If so, I expect QQQ to take us out of those depths, and the reasoning is twofold: First, QQQ is heavily exposed to mega-cap technology, which has some of the best finance in the world. world. . Second, this year technology has been disproportionately affected and the rebound may be stronger than some of its market peers.
Bonus points: The 60/40 Portfolio is set for one of its ten worst performances since 1900. In 9 of the 10 previous scenarios, the 60/40 portfolio rebounded the following year while averaging a double-digit gain. The only year it didn’t, 1931, was during the Great Depression.
The biggest investment opportunities: profitable growth stocks
Maybe a little controversial, but I can’t look away from growth stocks at this point. These are the names that create outsized long-term gains when bought at the right time. Buying lower has been a breeze this year as investors continue to think these stocks won’t go down.
Instead, I like the idea of watching profitable growth values. Those that have been shot are now getting cheap on a price-earnings basis. It’s hard to lean on others – those without free cash flow and positive earnings – because they have no financial backing.
A small list in no particular order includes:
Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGLNASDAQ:GOOG), Nvidia (NASDAQ:NVDA), Advanced micro-systems (NASDAQ:AMD), PayPal (NASDAQ:PYPL), DigitalOcean (NASDAQ:DOCN), You’re here (NASDAQ:TSLA) and The trading post (NASDAQ:TTD).
That doesn’t mean all of these stocks are a buy right now or won’t hit new lows. But these are names to watch in 2023 as potentially worthwhile long-term buys.
As of the date of publication, Bret Kenwell held a long position in NVDA and PYPL. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.