Vanguard’s global investment expert explains what traders are doing to kick off 2023 and how markets are reacting to the Federal Reserve’s policy tightening.

Have a nice weekend, team. I am Phil Rosen. As you can guess from this newsletter, a big part of my job is talking to top market and economics experts.

I always seek to speak with Wall Street strategists, energy analysts, investment bankers, and everyone in between.

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Today I share my conversation with Fiona Greig of Vanguard’s Investment Strategy Group.

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Avant-garde

Fiona Greig is Global Head of Investor Research and Policy for Vanguard’s Investment Strategy Group. This conversation has been lightly edited for length and clarity.

Phil Rosen: Part of your expertise is in investor behavioral trends. What do you observe there to start 2023?

Fiona Greig: In general, when it comes to retail investors, we’re just seeing fewer people trading in general. This is also true in retirement accounts.

This suggests a “stay focus“, which means yes, there has been some volatility, but the longer-term outlook they have for the stock market is flat. So unless they have a particular need to liquidate or to pull back, investors are really staying the course, and I think that’s good news.

The Fed has signaled that rates will continue to rise, which in theory should weigh on markets – but we have seen stocks rally. What is happening here?

GF: One way to read this is that rate hikes are factored in. Look at the December rate hike, it was not a market event. This suggests to me that the markets expect a moderation strategy from the Fed.

There are lower expectations for stock returns in the near term, but we see pretty clear expectations and optimism for returns over the next 12 months, and even the next 10 years.

What trends should investors be wary of or capitalize on in the current landscape?

GF: I would say it’s a bad idea to pull out just because the markets are having a bad day. Investors must accept volatility and cannot become capricious. So I would recommend staying on for the time being.

Then I would make sure to take advantage of workplace pension plans now. Increase your savings rate. People now have the opportunity to start investing and allocating funds, and should think about transferring money to the market in a balanced and low-cost way.

Here’s the full info with Vanguard’s Fiona Greig.

What do you think of Greig’s outlook for investors this year? Tweet me @philrosennor write to me [email protected].

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And here are the top stories from the markets this week:

Lev Radin/Pacific Press/LightRocket via Getty Images

1. A seasoned investment chief expects stocks to crash in 2023. He explained that the “perfect bull market cocktail” of the past four decades is about to come to an end – which means that the valuations of some of the most popular names could fall.

2. The top performing stock picker of 2022 recommended buying these six stocks right now. This batch of names are his favorites that can protect against high inflation, low profits and a long-term energy shortage. See the full list.

3. ChatGPT’s creator, OpenAI, has doubled in value since 2021. Not to mention Microsoft’s $10 billion investment, the language bot went viral for his ability to respond to messages on dating apps and distribute investment advice. It was even a hot topic among the global elite at the World Economic Forum in Davos, Switzerland.

4. The stock market is about to be shaken by a rebound in inflationwarned Bank of America, pointing to rising commodity prices resulting from China’s reopening and the ongoing war between Russia and Ukraine. This means that the age-old trends that have dominated the market for the past decade will be reversed.

5. Ray Dalio slammed the debt ceiling this week. The billionaire investor compared politicians who support his raise to binge-drinking alcoholics. In his words: “We all know that there is no real debt limit because what is called a debt limit never actually limits debt.”

6. Sam Bankman-Fried had $50 million in a small rural Washington state bank. Strangely, the company had only three employees and specialized in agricultural loans to farmers before investing in them. Later, Bankman-Fried’s trading company, Alameda Research, took a stake in the bank and renamed it “Moonstone”.

7. Credit Suisse’s equity chief says investors are piling into all the wrong sectors as they anticipate a recession. In his view, you don’t need to hold defensive stocks if there is no recession, a scenario he believes is becoming more likely. Here are three areas of the market he recommends that will provide the best returns.

8. Morningstar is bullish on these 10 cheap, high-quality stocks. Company strategists said these companies pay a healthy dividend and can offset stock market losses in a slow-growing economic landscape. Get the actions here.

9. Russian oil trade remains solid despite sanctions and a price cap, according to a Kpler analyst. Moscow’s energy revenues may not have been hit as hard as some estimates might suggest, largely because Asian customers, including India and China, have continued to buy crude. Here’s what else you need to know.

10. Anthony Scaramucci said he invested $10 million in FTX native cryptocurrency and only received $400,000 in return. The SkyBridge Capital investor backed the crypto exchange token after receiving $45 million in funding from FTX. Still, Scaramucci said he remains bullish on crypto even though he got burned.

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Organized by Phil Rosen in New York. Feedback or tips? Tweeter @philrosenn or email [email protected]

Edited by Max Adams (@maxradams) At New York.