A repeated question in 2023 is how to win on the stock market. Several investors after the bear market of 2022 have reduced the loss from the minimums of October. Goldman Sachs shows two keys for good investments during 2023.
It’s important to know the fundamentals of the market and the moments when stocks get their best value. The high interest rates should revert the conditions that brought the market to one of the longest stock performance periods of the recent years.
Stock market in 2023
Since the financial crisis the growth stocks have been favored by a low growth and companies benefits. The capital cost is also unusually low and the value of long term companies stocks increases disproportionately.
In the last time the income growth sectors of the economy such as technology in USA has been extraordinary. The value sector has received low returns because of strict regulation and the fall of raw material price. Value traps and dividend payments suffered.
The new postmodern cycle
Goldman considers that we have entered a new postmodern cycle. The capital cost is higher and impacted disproportionally in growth stocks. The benefits of great technological companies started to decrease and value traps appear as opportunities.
The high interest rates and higher raw material prices drives the old economy companies benefits. The free flow of cash makes dividends from value companies look attractive and trusthworthy.
This shift in the value market affected more those companies near the inflation source (raw material) or those who take advantage of higher interest rates (banks). Long term stocks are on the loss side of the coin.
The two revenges of the old economy
In this scenery the old economy has produced two revenges. First, traditional companies such as Wallmart are in a better position than newer leaders, such as Amazon. Secondly, the physical industries and traditional ones have taken the relief in market leadership instead of growth and technology. The most clear example is Exxon Mobil and the absolute fail of Meta, the mothership of Facebook and Instagram.
Goldman Sachs highlights the correct way to invest in 2023 by betting for companies with high and stable dividends, solid balances and high and stable margins.