The Contrarian Investor Podcast
Nathaniel E. Baker
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Cyclical Stocks to Outperform as Inflation Drops to 3.5%: Barry Knapp's 2023 Outlook
This podcast episode brought to you by Covey — Covey is designed to find, reward, and train the next top investment managers —from any background—that anyone can copy, so everyone can win. Barry Knapp of Ironsides Macroeconomics rejoins the podcast to discuss his surprisingly sanguine view of the economy in 2023: Why cyclical stocks should outperform the technology and defensive sectors, and why he's expecting inflation to drop to 3.5% by the second half of the year. Content Highlights Inflationary recessions are different from deflationary ones. The last four were the latter. If there is a recession this year, it will be the former (02:18); Earnings downside is limited in this scenario, by 5% based on what happened in similar situations in the past, and earnings should actually go up (5:56); Tech margins should continue to be under pressure but economically-sensitive cyclical stocks should see margin expansion (10:50); The US labor market has actually started to weaken considerably -- and not due to Fed policy (12:18); There have been some big adjustments in the labor market post-pandemic (16:47); The 'wealth destruction effect' from tech stocks selling off is negligible (27:35); One point of concern: the deficit. This is where the implosion in wealth could affect things (32:59); The coming budget battle in Congress is worth paying attention to (34:41); The 'higher for longer' Fed interest rate hike thesis has gained traction. What this means for stocks (43:27); Inflation: Expect 3.5% CPI by mid-year (47:37). More Information on the Guest Substack: Ironsides Macroeconomics; Twitter: @BarryKnapp. Not intended as investment advice.
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