As 2023 begins, Wall Street appears to be shifting its focus from inflation to growth. Investors apparently believe the Federal Reserve has inflation under control after dramatically raising interest rates over the past year. Now those higher rates are fueling fears of a US recession. But the deepening of the US economic slowdown comes as China has moved to abandon its Covid-zero policy and reopen its economy after 3 years. While the US has been forced to rein in its economy due to multi-decade high inflation, China – the world’s second-largest economy – has been squeezed by strict lockdowns since the start of the Covid-19 pandemic. And with Beijing finally lifting restrictions, the Chinese economy has nowhere to go but up, even as a spike in Covid cases is expected to temporarily delay reopening. As a result, Club shares with exposure to China are seeing a boost, with the potential for its share prices, along with the company’s overall growth, to accelerate in the coming months. We’ve long predicted that China’s reopening will be a when, not if scenario, and we’ve gradually built up our China-focused positions over the past few months – key among them Estée Lauder (EL), Starbucks (SBUX) and Wynn Resorts (WYNN) – on the premise that trying to time an exact pivot on China’s reopening is a foolish quest. At Club, we believe in taking new exposure slowly over time in order to improve our cost base and get ahead of improving market sentiment. Patience is key. And our investment thesis is starting to pay off, with Wall Street expressing bullish optimism in our top 3 China-exposed holdings. Wells Fargo on Monday raised Wynn to an overweight, or equal weight buy, while raising its price target to $101 a share from $74. Wells Fargo analysts cited the reopening of Macau’s casino hub in China – where Wynn operates two properties – calling it “the best growth opportunity in gaming”. On Tuesday, analysts at Piper Sandler reiterated their overweight rating on Estée Lauder, while raising the bank’s price target to $290 a share from $255 as China reopens. Finally, Bank of America analysts reiterated their Buy rating on Starbucks stock on Tuesday, while raising its price target to $125 a share from $109, saying the coffee maker “appears to be about to benefit from China’s long-awaited economic reopening”. Still, analysts warned, “the timing of that tailwind is still uncertain as the economy grapples with the fallout from policy [like] weak economic growth [and] widespread outbreaks of COVID.” In short: if you wait for the economy to recover and the current Covid outbreak to subside, you will almost certainly miss your chance to move to China. (Jim Cramer’s Charitable Trust is long EL, WYNN, SBUX See here for a full list of stocks. stocks in his charity fund portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO THE OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO PARTICULAR RESULTS OR PROFITS ARE GUARANTEED.
People use their smartphones to take pictures outside The Wynn Macau Casino Resort, operated by Wynn Resorts Ltd., in Macau, China, on Tuesday, Jan. 30, 2018.
Billy HC Kwok | Bloomberg | Getty Images
As 2023 begins, Wall Street appears to be shifting its focus from inflation to growth.
Investors apparently believe the Federal Reserve has inflation under control after dramatically raising interest rates over the past year. Now those higher rates are fueling fears of a US recession.
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