In a recent CNBC interview, Andrew Slimmon, a senior portfolio manager at Morgan Stanley Investment Management, shared his perspective on the market dynamics of 2023. Slimmon’s insights shed light on the performance of different stocks and the emotional aspects of investing.
The Magnificent 7’s Dominance and the Psychology of Selling
Andrew Slimmon begins by noting that in the early part of 2023 until mid-November, a group of stocks known as the “Magnificent 7” led the market charge. These stocks demonstrated impressive performance and captivated investors’ attention. However, Slimmon introduces a crucial psychological aspect of investing. He explains that during the first year after a market low, there is typically a phase of selling, as investors often react to uncertainty by divesting their holdings.
The Pivot Towards Buying and the All-Time High List
Slimmon emphasizes that after this initial selling phase, investors tend to pivot and start buying. However, this transition can be emotionally challenging, as it requires acknowledging past mistakes and changing course. Instead of buying the all-time high stocks, which might seem like the logical choice, investors often find it easier to purchase laggards – stocks that have underperformed.
Rotation towards Underperformers Since November
Slimmon notes that a significant shift occurred in November, with investors moving away from the Magnificent 7 and turning their attention to underperforming stocks. While he acknowledges that these stocks may still have potential, Slimmon believes that the Magnificent 7 stocks possess strong fundamentals and have recently lagged in performance.
Core Manager’s Perspective on Growth and Value Stocks
As a core manager with a portfolio that includes both growth and value stocks, Slimmon provides a balanced perspective. He highlights sectors such as financials and industrials, which he believes have been lagging but have solid fundamentals. Contrary to the argument that they may no longer be attractive due to their recent gains, Slimmon points out that many of these stocks are not significantly higher than their 2021 levels. This suggests that there may still be room for growth, particularly given the challenges these stocks faced in the previous year.
Expectations for the Magnificent 7 Stocks in the Coming Year
Slimmon expresses his optimism regarding the Magnificent 7 stocks as they head into the next year. He believes that these stocks have the potential for further gains, driven by their robust fundamentals and the fact that they faced substantial challenges in 2022.
Bottom-line: Andrew Slimmon’s insights offer a valuable perspective on market trends in 2023 and the emotional aspects of investing. While there has been a shift towards underperforming stocks in recent months, Slimmon suggests that the Magnificent 7 stocks still have room for growth in the upcoming year. As investors contemplate their strategies, understanding the psychological factors at play can be instrumental in making informed decisions in the ever-evolving world of finance.
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