Need to Know: This newsletter editor has been recommending stocks and bonds this year and says the rally has room to run

Read: Investors who aren’t nervous right now should be, says Standard Chartered,

Our contrarian call of the day from founder and editor-in-chief of The Kobeissi Letter, Adam Kobeissi is not buying any of that.

“We have been bullish of equities, gold, crude oil, and bonds since the new year. Our view is that peak inflation is behind us, the Fed will begin cutting interest rates by the end of 2023, despite their previous statements that they won’t, and earnings expectations have come down significantly,” said Kobeissi, in emailed comments.

Kobeissi thinks the Fed will indeed deliver on that interest-rate pivot in the second quarter. “This is why we have been bullish of the S&P 500 from 3900 and have a 4150 target, and we expect more strength in earnings over the next couple of weeks to lead higher,” he said.

Read: Bear market unlike anything I’ve seen since starting on the Street in 1980, says short selling legend Jim Chanos

Despite recession worries and “many reasons to fall,” the uptrend is there for markets such as crude, while stocks are in the same basket, he said. But don’t expect a straight line, rather more volatility ahead and a general uptrend over the next few weeks or so.

“The reality is that markets are looking for a reason to rally. When markets are looking for reasons to rally, they usually find them,” he said, adding that sentiment swung too far in the direction of the bears, which explains that “explosive” year-to-date move for stocks.

He’s had a bullish view on tech stocks recently, but generally just plays the S&P 500. “The reason we saw such a steep drop in the tech sector was on the back of higher rates. If markets can begin looking beyond the current tightening cycle, tech can make a comeback,” said Kobessi.

Last year he said he benefited from a mix of long and short S&P 500 setups, being mostly long crude oil, and a mix of longs and shorts on natural gas.

His main takeaway from 2022 is that the market is extremely technical, so “avoiding a bias is key to being profitable.”

“For 2023, it’s important to begin looking past current headwinds and thinking about where we will be in one year from now. Markets are clearly beginning to look ahead,” said Kobeissi.

The markets

Stock futures
ES00,
-0.28%

YM00,
-0.34%
are dropping, again led by tech
NQ00,
-0.39%,
with bond yields
TMUBMUSD10Y,
3.529%

TMUBMUSD02Y,
4.232%
mixed and oil
CL.1,
-0.90%
down. The dollar
DXY,
+0.13%
is higher and gold
GC00,
-1.16%
is under pressure. Fresh data shows the precious metal saw its strongest demand in a decade in 2022. Asian markets were a sea of red, with the Hang Seng
HSI,
-1.03%
dropping another 1%.

Read: What the Eagles-Chiefs Super Bowl matchup can tell us about the stock market

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily. Also check out MarketWatch’s Live blog for up-to-the-minute markets updates.

The buzz

Caterpillar shares
CAT,
-1.15%
are dropping on a profit miss, while revenue disappointment is weighing on shares of Exxon
XOM,
-1.77%
and UPS
UPS,
-2.81%,
while Pfizer
PFE,
-0.55%
is falling on a downbeat outlook as COVID sales drop.

On the upside, GM stock
GM,
-4.37%
is climbing after better-than-expected earnings, McDonald’s
MCD,
-0.58%
shares are higher after an earnings beat and strong sales. Spotify
SPOT,
-2.19%
is also gaining as user growth breezed past expectations.

After the close we’ll hear from Advanced Micro Devices
AMD,
-3.91%,
Amgen
AMGN,
-0.81%,
Snap
SNAP,
+1.65%
and Electronics Arts
EA,
+0.09%.

Read: Why McDonald’s earnings probably haven’t been hit by higher prices

DoorDash shares
DASH,
-3.53%
are down after the delivery group said its three co-founders will sell millions of shares starting in February.

U.S. and global economies are set to slow in 2023, but the forecast is “less gloomy,” said the IMF. The only major economy expected to see a recession is the U.K., which on Tuesday marked three years since its Brexit separation from Europe.

The employment cost index for the fourth quarter is out at 8:30 a.m., followed by a pair of house-price indexes, the consumer confidence and the rental vacancy rate. The two-day Fed meeting kicks off Tuesday.

Financial News is launching its first Twenty Most Influential in Crypto, recognizing the top executives making waves in the crypto and blockchain industry. 

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The chart

Crude prices have been pushing lower this week ahead of central bank meetings, where hawkish outcomes could weigh on the commodity, as an OPEC gathering also looms. Here’s one view:

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

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