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As the New Year Rolls In, So Do the Prognosticators

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It probably happens every year, but I cannot recall a time when so many pundits had so many opinions on how the market will perform in 2023. The funniest headline about the market’s near-term future was JP Morgan’s, “The End of the Affair.” It probably was written to catch attention, and in my opinion would have been more appropriate a year ago, referring to the bull market prior to last year’s downturn.

How do you think the market will perform in 2023?

Many of the headlines about the new year are positive and include such language as:

  • “Three Scenarios that Could Surprise Markets (on the upside) in 2023”
  • “Is a Stock Rebound in the Cards?”
  • “Inflation will Crash Much Faster than Expected”
  • “Comeback for Fixed Income”
  • “Economy will Avert Deep Recession”
  • “Fed Pivot Could Push Stocks Up by End of Year”
  • “Second Half of Year will be Up, Up and Away”
  • “S&P will Soar at Least 20%, Nasdaq at Least 30%”
  • “Fed will Pause Rate Hikes Sooner than Everyone Thinks”
  • “The Stock Market will have an Excellent Year”

But there also are naysayers:

  • “Wall Street, Meet Mud”
  • “A Strange Day is Coming to America”
  • “More rate hikes are coming”
  • “Stocks will continue their lows in 2023”
  • “Continued Volatility Ahead”
  • “Markets May Continue to Face Choppiness”
  • “Challenges Abound for Dow”
  • “A Stock Market Crash in 2023”
  • “Millionaires Predict the Market Will Get Much Worse”

With so many divergent views, what’s an investor or issuer to think, or more importantly, to do? Who should be believed?

I just counted the number of bullet points above, and there was one more positive than negative. A good sign, although I am not an analyst and my research was cursory at best. However, the sources are good and professional.

If you really want a forecast for 2023, you could always flip a coin.

Friederike Fabritius and Hans Hagemann wrote in in their book, The Leading Brain: Neuroscience Hacks to Work Smarter, Better, and Happier, that if you’re satisfied or relieved by a decision the coin made for you, then go with it. On the other hand, if the coin toss leaves you uneasy, then go with the other choice instead. “Your ‘gut feeling’ alerted you to the right choice,” they wrote.

So please, flip a coin if you will, but at least think positive thoughts. Good luck, and have a healthy, happy and prosperous new year.

Roger Pondel, rpondel@pondel.com

Investor Relations in a Bear Market

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Every great story deserves an engaged audience.

It’s a philosophy we deeply believe in at PondelWilkinson – So much so it’s splashed across our website banner and written on the back of our business cards.

And it rings true regardless of market conditions, even in bear markets, when the value of equities or other investments dip 20 percent or more from recent highs.

That happened around mid-June on the S&P 500, and while there’s little companies specifically can do to calm market forces, taking a proactive, non-promotional stance is the best course, according to PondelWilkinson CEO Roger Pondel.

“Retreating or staying purposely quiet is not a strategy that works,” he asserts. “Astute investors have their antennae up now, looking for good companies.”

In a bear market, investors go into safer stocks, explains PondelWilkinson Vice President Judy Lin Sfetcu, who adds some historical context to highlight her point.

During the dark months of the financial crisis of 2007 and 2008, when the S&P sank nearly 52%, investors flocked to companies with solid financials and established track records, abandoning companies teetering on insolvency.

“If a company has a good balance sheet, they should be messaging that to investors and Wall Street,” Sfetcu says.

Managing Director Laurie Berman views this bear market more as a reflection of investor sentiment, than company specifics, and a recent tally by FactSet provides some data points to back that up.

Through July 22, 2022, 68 percent of S&P companies in Q2 reported a positive EPS surprise, while 65 percent of S&P companies reported a positive revenue surprise.

Granted it was a small sample size (21 percent of total company results), but undoubtedly good quarterly metrics by several publicly traded companies.

Yet, as of press time, the S&P was down just over 13 percent for the year. The tech-heavy Nasdaq, down 21 percent this year, closed with the worst six month start on record, losing nearly 30 percent of its value through June, according to Yahoo Finance.

“If a company is being negatively impacted by macro issues, that company should be honest about what that means for its future, and importantly, what steps are being taken to try to insulate it, or use the macro issues to their advantage,” Berman suggests. “Highlighting certain areas that may give investors more confidence can be helpful.”

Analysts and other finance experts contend bear markets typically last between nine months and a year, so settle in for some continued volatility, especially as inflation, pandemic-led labor shortages, related supply chain constraints, and rising interest rates present ongoing challenges.

In the interim, here are a few more dos and don’ts to ponder:

  • Think responsiveness and transparency.
  • Message the company’s strengths: cash flow and balance sheet; client/customer relationships; resilience and history in prior down markets.
  • Message if and how current economic conditions are creating change for the company, positive or negative, including decision-making.
  • Be certain that investors hear regularly from c-suite executives, sometimes more than the CEO and CFO, on conference calls, non-deal roadshows (NDRs) and conference presentations.
  • Court and know key investors and their concerns, not just about your company, but about their portfolios.
  • Give investors reasons to hold your shares, or buy more.
  • Don’t feel defensive about a falling stock price, particularly if the company is still performing well. Investors know the reason.

“Resist the temptation to over-promise about the future,” says Pondel. “Be proactive about reaching out to new investors and participating in NDRs and conferences. They are not a waste of time, even in a bear market.”

Consider this blog entry a primer to a larger discussion on investor sentiment, a key topic we’re aiming to further develop into a whitepaper this fall, with insightful take-aways to help public companies improve communication and messaging during volatile times.

Chris Casacchia, ccasacchia@pondel.com

Market Volatility Got You Stressed? Try Laughing … And That’s No Joke

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Remember Henny Youngman? He was an American comedian, famous for his mastery of the one-liner, whose best-known quip was “Take my wife … please.”

Here’s another one-liner, not Youngman’s, but not bad, at a time when so many investors these days recalibrate their portfolios: My trusted wealth manager just started working on a retirement plan. He doesn’t know it yet, but unfortunately, it is his!

While having a good sense of humor can’t cure all ailments or make the stock market go up, a good laugh during stressful times can do positive things.

Take my wife, Fay, please. No! I mean listen to my wife, Fay, a psychotherapist who knows a thing or two about laughter and the positive things it can do.

“Laughing has great short-term effects on one’s mood, as well as on one’s body,” Fay told me over dinner the other night, on the day that the Dow dove more than 1,100 points. “Laughter stimulates the heart and lungs and increases endorphins. It decreases blood pressure, creates relaxed feelings and even improves the immune system.”

Thank you, Fay. While the stock market these days is no joke, there are many jokes to be found about it. These below may not be quite as funny as Youngman’s one-liners, and certainly rank very high on the cheesy factor, but hopefully will ease a little tension among those that follow the market as we all plow through these tenuous times:

  • How do you find a small-cap fund manager? You find a large-cap fund manager … and wait.
  • Enduring the current stock market decline is worse than a divorce. You lose half your money, but your spouse is still around.
  • Why are nudists bad for stocks? They are associated with bare markets.
  • I figured out the secret of how to make a million bucks in the stock market. Invest $2 million.
  • Recently, I started to invest heavily in penny stocks. It seemed to make a lot of cents.
  • My friend is smart, honorable, and exudes old-school charm and chivalry, but he hates the stock market. When I asked him why, he said, “Gentlemen prefer bonds.”
  • Why was a stock trader recently electrocuted? He shorted Tesla.
  • In the stock market today, Procter & Gamble, maker of Charmin tissue, touched a new bottom, and millions of investors were wiped clean

Gallup’s 2022 Economy and Personal Finance Survey, conducted in April, found that 58 percent of all Americans own stock. With the market declines we have been experiencing lately, that’s no laughing matter. But it does pay to laugh, at least a little.

Roger Pondel, rpondel@pondel.com