When we look back at 2023, what will we see? I think we will see a year in which the pros got it all wrong, and the amateurs got it right. It was a year in which the pros doubted the Federal Reserve chair’s abilities and his toughness. It was a year in which the amateurs didn’t pay all that much attention to the Fed and, instead, looked for good companies and bought them. It was a year in which the pros used their old handbook that forecasted a recession, millions thrown out of work and a horrendous number of bankruptcies, just like the inverted yield curve told us. It was a year in which the amateurs decided that companies could withstand the Fed’s moves — and when those moves hurt the stock market they would just buy more of their favorites and not be held back by all the noise around Treasury yields. The pros hated the market all year, whether it be because of the banking crisis, the huge number of rate increases or inflation that seemingly couldn’t be tamed. The amateurs, on the other hand, believed that these crises weren’t systemic and would be handled by the authorities. And guess who was right? You were — we were. We had faith that the Fed knew what it was doing and that Chair Jerome Powell would crush inflation without crushing our portfolio. It required a leap of faith, but we had no trouble taking the leap because everything the man had done seemed pretty reasonable — both at the time and in retrospect. We believed in him because he gave us no reason not to believe in him. He did not let us down. When you think of all of the sell-offs we had, almost all were because institutional investors and strategists doubted Powell that the economy was so strong and thought he wanted to sink us with endless interest-rate hikes. He was just trying to protect the working person from inflation and vowed to take rates up as high as necessary until the back of inflation was broken. He succeeded. And that’s why we’ve seen this incredible seven-week rally . Our portfolio is uniquely set up for this moment in time when the Fed is now poised to cut rates next year . We have a nice mix of tech and cyclicals, with very few staple stocks. We are built for an acceleration without inflation. However, I have no illusions about what could happen next, as a further rally of 2023’s proportions seems unlikely. We have had a frantic headlong dash of professional investors pile into all sorts of stocks in desperation because they didn’t want to miss this move. But the move may have, in large part, already occurred. The market is overbought, according to the S & P 500 Short Range Oscillator , and has stayed overbought for some time. The next earnings season doesn’t get underway for a month. But what we do have are gigantic gains, many of which will not be taken until the beginning of next year. That’s why we carry an above-average cash position. It’s why we have been slightly scaling back some of our positions, as we did Monday with Broadcom following its 20% gain last week. Why not press the bet? Because we have decided not to be greedy. We see no reason to be heroes when we have done so well. We like our positions. We like how the Fed has positioned us. We like our companies’ earnings projections. They all seem beatable. We aren’t saying, ‘let the good times roll.’ We are saying that the good times have rolled, and it pays to be careful when so many institutions that didn’t look at things the way we did are now searching for anything to buy that moves. Let them take us out of our positions at higher levels if they want. We are where we want to be — and we will enjoy our amateur status while the professionals demonstrate, once again, an orthodoxy that just doesn’t cut it. We take profits, while they can’t afford to do so. We are in the catbird seat, they are in the untenable seat. We trim on a parabolic move, expecting a quick decline. Others just keep buying. But we can’t allow our selves to fall into that trap. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Stock market information outside the Nasdaq MarketSite in New York on March 23, 2023.
Stephanie Keith | Bloomberg | Getty Images
When we look back at 2023, what will we see?
I think we will see a year in which the pros got it all wrong, and the amateurs got it right.
