The Best Stocks Behind 2023’s Powerful “New Regime” Rally

As families across the country gather to celebrate their first post-pandemic Thanksgiving, Luke’s examining what he’s thankful for in this week’s podcast: disinflation, a new bull market, and growthy tech stocks! Luke’s confident that the Fed will pivot in early 2023, saving the economy and growth stocks. Which means stocks could rebound big-time in 2023. If this outcome plays out, tech stocks should be in for a major bull market rally… but who’s going to be leading this market, and which are the best stocks to buy today?

There are two schools of thought here. On the one hand, we’re entering a new investment regime, where what worked in the 2010s will not in the 2020s. On the other, we’re not entering a new regime, so buy the dip because those stocks will still work exceptionally well.

The market is implying that, at least in the short term, we’re entering that new investment period. The Dow Jones – home to old-school value stocks – is up 16% this year, while the tech- and growth-heavy Nasdaq – home to this decade’s winners – is up just 2%. That’s a massive 8-1 performance delta that we never saw in the 2010s.

So, why is this happening? The Bank of England pivoted to quantitative easing in late September. That kickstarted this massive fall rally and performance delta in the Dow and Nasdaq. Given that, it seems the market now expects the Fed will pivot soon enough to save the economy from a recession but too soon to actually kill inflation. In that environment, value outperforms growth.

We see why the market is anticipating this. But we don’t think the Fed will capitulate too soon. Fed Board Chair Jerome Powell has made clear that long-term price stability is his primary goal. So, the central bank will pivot in 2023 – but not as soon as the market is anticipating. Inflation will die. Yields will fall, and rates will be cut. And in that scenario, tech stocks will lead the market next year.

When it comes to the best stocks to buy, that narrows it down somewhat. But the technology sector features a number of industries, and Luke has opinions on the lot of them. (To hear Luke’s full analysis, watch this week’s podcast here.)

The #1 EV Stock to Buy

Tesla (TSLA), Canoo (GOEV), Rivian (RIVN), QuantumScape (QS) – they’re all crashing right now. But Luke thinks EV stocks will rebound in 2023 (well, maybe not Tesla). The industry is enjoying some major legislative tailwinds. China will come back online, boosting the supply chain and EV production rates. And EV demand is still as robust as ever. Plus, battery metal prices should moderate in 2023 as disinflation sweeps the globe. We’re bullish on EV stocks here!

Buying Enterprise Software Stocks

Enterprise software stocks have been some of the best-performing of the past decade – and they’ve also fallen hard recently. And guess what? We think they’re going to strengthen in 2023. According to Gartner, IT spending will grow more than 5% next year. Companies are leaning into to enterprise software solutions in moments of economic turbulence to shore up their operations and boost efficiency. Next year, demand reacceleration will converge on really depressed valuations, and we’ll see a major boost for enterprise software stocks.

The Breakout E-Commerce Stock

Recently, we’ve seen that e-commerce growth rates are turning around. Shopify (SHOP), Chewy (CHWY), Etsy (ETSY) – are they ready to make a comeback, too? We think so! Those stocks boomed during the pandemic. Then, as consumers were fatigued from shopping online and headed back to brick-and-mortar stores, e-commerce stocks missed a step. But with a slowing economy and high fuel costs, consumers are returning to online shopping once again. Census Bureau data shows the industry has plateaued and is reaccelerating. It’s starting to normalize at pre-pandemic growth rates. E-commerce stocks look great for 2023.

Fintech Stocks: SoFi or Square?

Lower interest rates, lower inflation, and a stronger outlook for consumer spending going into 2024 will help fintech stocks dramatically next year. Higher interest rates and a dour economy have really hurt these stocks in 2022. But we’re confident those headwinds will do a 180, becoming tailwinds to boost this sector in 2023. And at $5, SoFi stock is an absolute steal ahead of tremendous growth over the coming months.

Best Clean Energy Stocks

Are we still bullish on solar, wind, and hydrogen for 2023? Absolutely. As with EVs, the legislative tailwinds here are enormous. Standalone energy storage has its first-ever tax credit in the United States. Green hydrogen has its first-ever production tax credit. Billions are being allocated to EV charging infrastructure and solar panel production. And we’ve seen Europe enact more aggressive clean energy policies in its move to energy independence. This movement is really taking off. And because of that, clean energy stocks should continue to roar.

The Final Word

Overall, let’s not forget what a horrible year 2022 was for stocks, especially growth stocks. Luke’s meticulously analyzed the market tea leaves, and we’re confident in saying that growth stocks are in the early innings of a world-class comeback.

As students of history, we know that when bear markets turn into bull markets, stocks soar big-time. We saw this in 2021, 2019, 2009, 2003, and 1991. In each of those years, the stock market soared by more than 20% – and certain stocks soared by hundreds of percent!

Studying the data, we see inflation crashing, the Fed pivoting, and no economic recession to speak of. That’s a cocktail for supreme growth. And the smart money is bracing for a mega-rally in 2023.

You should be, too.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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