Investment Guru Declares Victory Over Inflation: Stocks Now ‘Cheap Enough to Buy’

In a recent CNBC interview, Josh Brown, CEO of Ritholtz Wealth Management, made a bold declaration: “We have vanquished 9% inflation.” This statement comes on the heels of a years-long battle against soaring inflation, culminating in a 9.1% annual surge in the consumer price index recorded in June 2022, the largest increase since 1981. However, since that peak, the inflation rate in the U.S. has subsided, with the latest data showing a 3.1% rise in the consumer price index in November 2023 from a year ago.

Brown’s comments underscore a significant achievement in the U.S. economy, particularly in light of the Federal Reserve’s aggressive interest rate hikes aimed at curbing inflation. Despite concerns that higher rates could slow down the economy, the latest jobs report paints a different picture. Nonfarm payrolls increased by 199,000 in November, while the unemployment rate declined to just 3.7%.

Moreover, Brown pointed out other notable accomplishments in 2023, such as the VIX at 12, stocks being cheap enough to buy, and widely held stocks in America experiencing significant rallies. He also highlighted the successful avoidance of a potential banking crisis, painting a picture of a year filled with positive outcomes.

Looking ahead to 2024, Brown remains optimistic about the stock market’s prospects, noting that the S&P 500 climbed 25% and the Nasdaq surged 45% in 2023. Despite these impressive gains, he believes that the market is not overvalued as a whole, although he cautions against focusing solely on the so-called Magnificent Seven stocks.

Instead, Brown suggests looking for bargains beyond the popular tickers, such as small caps trading at 12 times forward earnings, mid caps at 13 to 14 times forward earnings, and large cap basic materials at nine times earnings. He also highlights the potential shift of investments from money markets to dividend-paying companies, specifically mentioning the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) and the Vanguard Dividend Appreciation ETF (VIG).

While Brown remains positive about the stock market’s outlook, he advises caution, acknowledging that the 2023 bear case is now behind us, but the 2024 bear case may still lie ahead. Despite the potential challenges that may arise, Brown’s overall sentiment is one of optimism and confidence in the resilience of the U.S. economy.

As investors navigate the ever-changing landscape of financial markets, Brown’s insights offer a valuable perspective on where to find value and opportunities for growth. By looking beyond the surface and delving into lesser-known sectors and companies, investors may uncover hidden gems that could drive their portfolios to new heights in the coming year.