To The Moon

Summary：

• $S&P/ASX 200(XJO.AU)$  , Top 2022 YTD stocks & industries performances review
• Factors related to ASX stock performances in 2022
• 2023 Outlook of AU Economic & Money Policy
• Institutions' Outlook of ASX stock market performances in 2023
• 6 best defensive ASX shares for 2023

Disclaimer: Capital at risk. The content inside this article is not a financial advice or a recommendation to acquire or dispose any investment.

Source from Bloomberg

1. $S&P/ASX 200(XJO.AU)$  , Top 2022 YTD stocks & industries performances review

2022 has been an unpleasant year of decades-high inflation and non-stop rate hikes.  With no exception to the previous rate-rising periods, Australia’s stock market has gone through a turbulent time.

As of Dec 30th, 2022, The$S&P/ASX 200(XJO.AU)$ Closed at 7038.7, with a -0.97% weekly, a -3.37% in December and the YTD performance of 2022 is -5.45%.

In June, the benchmark index $S&P/ASX 200(XJO.AU)$ tumbled into the correction zone for the first time in two years, which is defined by a 15% drop from the 2022 peak.

Weekly Candle Chart

The Top 10 YTD Winners in 2022 of ASX stocks are: $WHITEHAVEN COAL LTD(WHC.AU)$ , $New Hope(NHC.AU)$, $Coronado Global(CRN.AU)$ ,$WOODSIDE ENERGY GROUP LTD(WDS.AU)$ , $Core Exploration Ltd(CXO.AU)$ , $ORIGIN ENERGY LIMITED(ORG.AU)$ ,$Worley Ltd(WOR.AU)$ ,$Sayona Mining Ltd(SYA.AU)$ ,$Monadelphous(MND.AU)$ ,$Champion Iron Ltd(CIA.AU)$ Recommend to Read:

Top 10 ASX 200 Gainers in 2022: Whitehaven Surged Nearly 300%, Coal and Lithium Stocks Are the Biggest Winners

Top 10 YTD Industries in performances with winners are as below：There are 147 detailed industries cover 2910 stocks.

Data from Tiger Trade, as of Dec 30th, 2022

The Top 10 YTD performances industries of each winners are as below:

• Air Freight & Logistics（4 stocks included，the top winner is $Calix(CXL.AU)$ with a rise of 73.37%），
• Automobile Manufacturers (1 stock included，the top winner is $Apollo Tourism & Leisure(ATL.AU)$ with a rise of 64.84%),
• Department stores(1 stock included, the top winner is $Myer Holdings Limited(MYR.AU)$ with a rise of 62.88%)
• Oil & Gas Equipment & Services(4 stocks included，the top winner is $MEDIROM Healthcare Technologies, Inc.(MRM)$ with a rise of 158.11%)
• Integrated oil & Gas( 1 stock included, the top winner is $ORIGIN ENERGY LIMITED(ORG.AU)$ with a rise of 51.64%)
• Oil & Gas Exploration & Production( 82 stocks included, the top winner is $Pancontinental Oil & Gas NL(PCL.AU)$ with a rise of 800% )
• Coal & Consumable Fuels (38 stocks included, the top winner is $Terracom(TER.AU)$ with a rise of 443.86%)
• Multi-Utilities (2 stocks included, the top winner is $AGL ENERGY LTD(AGL.AU)$ with a rise of 35.93%)
• Semiconductors(4 stocks included, the top winner is $Silex Systems(SLX.AU)$ with a rise of 140.6%)
• Diversified Chemicals （2 stocks included, the top winner is $INCITEC PIVOT LIMITED(IPL.AU)$ with a rise of 24.63%）

2. Factors related to ASX stock performances in 2022

The primary drivers throughout the year were the rapid change in global monetary policies and the cloudy economic outlook. Since May, the Reserve Bank of Australia has delivered 275 basis points of rate hikes, including a record consecutive run of four 50 basis-point increases, taking borrowing costs to a level not seen since April 2013. The tightening journey that Australian people have experienced this year is the fastest pace since 1994.

In addition to the macro themes mentioned, soaring costs, floods in Eastern Australia, multiple Covid-19 waves, supply-chain challenges, labour shortage and housing cycle fluctuations continue to weigh on the ASX investor’s confidence over the local economy.

As such, the performance of each ASX sector varied widely. Energy, utilities and material sectors have benefitted the most from robust demand and higher price as the Ukraine war boosted the demand for Australian exports. Mining companies, in particular, are seeing their earnings and profits rising to a record level. On the other hand, the information and real estate sector are the first-row victims hammered by the higher interest rates.

3. 2023 Outlook of AU Economic & Money Policy

Looking ahead to 2023, Vanguard modelling anticipates a 40% chance of a recession in Australia, a base case scenario that is far lower than the 90% odds placed on US, UK, and Euro area recessions. This is because while inflation and wage pressures have affected many Australians. 

Relatively speaking, Australia in a better position, thus interest rates need not rise as much. Australia also stands to benefit from a cyclical rebound in China, and as a net exporter of commodities given elevated commodity prices.

Source: Vanguard

However, Vanguard forecasts suggest that the fight against inflation needs to persist, and policymakers will be likely to continue to raise interest rates to lessen the inflationary push from elevated demand.

Australia’s consumer prices index increased 7.3% in the third quarter and is expected to peak at around 8% by the end of 2022, based on RBA’s recent forecast.It is foreseeable that the headwinds and issues dominated over the past 6 months will continue to be concerns for investors. With that in mind, the third quarter of 2023 will see the interest peak at around 3.8%.

4. Institutions' Outlook of ASX stock market performances in 2023

However, even with the absence of the first rate-cut to occur, the pause of the current tightening journey is likely to reignite the risk appetite for Australian equities.

During the past 40 years, the ASX share market has shown a strong pattern of outperforming with a double-digit rebound following a year of decline. The only exception was during the recession in 1982-1983, but the stock market then made a record 60% jump in the following year.

Source: Marketindex

Besides that, the attractive valuation is another source of tailwind for 2023. The Aussie sharemarket’s valuation has become much more appealing today compared to a year ago, with the Price/Earnings (P/E) ratio is now below the 5 and 10-year average.

DATA SOURCE: HTTPS://SIMPLYWALL.ST/MARKETS/AU

Overall, it’s foreseeable that the year and months ahead will have no shortage of challenges and headwinds. However, with the potential slowdown in monetary tightening and the cooling of inflation, some of the forces that have been dragging on shares in 2022 have good chance to be ease and generate investment opportunities.

Fidelity Australian Equities Fund Pointed in its Global Market Outlook 2023：“Reasons for cautious optimism High energy costs coupled with better conditions for commodities will help cushion any negative impact on the Australian economy. Immigration and population growth are likely to accelerate, underpinning Australia’s long-term structural growth and providing an additional cushion against recession.”

• The businesses that tend to do well during inflationary periods are those linked to commodities, as well as essential firms with pricing power.
• Sectors such as essentials (supermarkets, healthcare), materials, insurance and financials are likely to perform well in 2023, a more challenging environment should provide investors with an opportunity to invest in inexpensive, high-quality businesses with long-term structural growth.

Fidelity Australian Equities Fund Pointed also shared that some stocks which have worked well in 2022, but also do differently in 2023：

• Stock selection in materials added significant value in 2022.The conviction holding in clean energy-focused miner IGO performed positively, supported by a renewed uptrend in lithium prices. IGO is a pure-play electric vehicle (EV) battery stock and is strategically positioned in supplying the metals required for the clean energy future.
• We are taking a barbell strategy to the portfolio. At one end of the barbell is commodities (metals, mining and energy) and includes stocks such as IGO, BHP, Rio Tinto, Iluka and Santos. At the other end of the barbell are companies which sell the essentials and have pricing power (consumer staples, healthcare, insurance and financials) and include stocks such as Coles, Woolworths, Ramsay Healthcare, Suncorp and CBA.

Welcome to Read：https://www.fidelity.com.au/sites/fidelity/assets/Outlook-2023_Fidelity-Australian-Equities.pdf

5. 6 best defensive ASX shares for 2023

The most defensive two, are $SONIC HEALTHCARE LIMITED(SHL.AU)$ and $AUB Group Ltd(AUB.AU)$. Despite any potential economic headwinds, I’d say there’s a good chance people will continue to get blood tests and insure their valuables.

In addition, $Lynas Rare Earths(LYC.AU)$ and $Codan(CDA.AU)$ are more antifragile than some might assume. Rare earths are commonplace in modern technology and are critical in the energy transition — any destabilisation of relationships with China could further exacerbate the problem. Meanwhile, Codan’s communications division provides mission-critical products to both frontline workers and the military — areas of the economy that don’t stop during a recession.

Lastly, in the event of a recession, we could all appreciate some extra money flowing in. which are final two best ASX shares to buy for 2023 are dividend payers.

Currently yielding 7.6% and 8.8%, $JB HI-FI LIMITED(JBH.AU)$ and $Shaver Shop(SSG.AU)$ are two well-capitalised and well-run retailers.

While retail tends to be hit hardest by weak economic environments, these two companies have the balance sheets and the management to navigate the storm. Furthermore, both appear priced as though a tumultuous future is already factored in, trading on price-to-earnings (P/E) ratios of 9 times earnings.

How is your ASX stocks trading performs in 2022?

Any special expectations in 2023?

Happy investings in 2023!

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