GDP growth was better than expected in the fourth and final quarter of 2022, giving investors hope heading into 2023 that bullishness will reign. Thus far, that’s been the case with the major stock market indexes pushing higher in the first month of the new year.
However, there could be an overabundance of optimism in the new year. Wild cards affecting last year’s stock market still remain, including high inflation and rising interest rates.
“The mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter went on,” wrote Andrew Hunter, senior U.S. economist for Capital Economics, as reported by CNBC. “We still expect the lagged impact of the surge in interest rates to push the economy into a mild recession in the first half of this year.”
Other market purveyors are echoing Hunter’s sentiment, noting that economic growth wasn’t awe-inspiring. Still, it’s notable that inflation didn’t completely put a stop to consumer spending.
“Just as the economy wasn’t as weak in the first half of 2022 as GDP reports suggested, it’s also not as strong as the Q4 GDP release would indicate,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Held aloft by resilient consumer spending, the economy expanded at a solid pace late last year, but remains vulnerable to a more pronounced slowdown in the coming quarters.”
As the rest of 2023 plays out, it’s a reminder to traders that they should be cautious, but if the markets continue to trend towards the upside, they keep riding the rally.
2 ETFs to Play the Bullishness
The obvious play for traders is to build off the momentum of the stock market rally, namely the S&P 500. A way for traders to maximize their gains with triple the exposure of the index is the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL).
Another play is via big tech. The sector certainly had its struggles in 2022 amid rising inflation and downgraded profit forecasts.
However, a tech turnaround could make for an interesting play using the Direxion Daily Technology Bull 3X ETF (TECL). Like SPXL, it also offers triple leverage, allowing traders to maximize their gains.
The fund seeks daily investment results, before fees and expenses, of 300% of the daily performance of the Technology Select Sector Index. The index includes domestic companies from the technology sector, so this won’t offer traders much if they’re looking for a global tech play specifically.
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