If I emphasized it once, I emphasized it a dozen times in December alone…
2023 took an unexpected turn, defying all earlier predictions.
Approximately a year ago, an article entitled “My Top REIT Picks for 2023” cited a Nasdaq article that was notably optimistic:
“In our view, 2023 will be a year of important ‘transitions.’ We believe the first transition will be away from a bear market to a potential bull.
“History suggests attractive forward returns for stocks after the type of drawdowns we witnessed in 2022, but the timing of the market boom is unclear and the process will be bumpy, in our view. Longer-term, returns for balanced stock and bond portfolios look attractive to us again, with valuations more reasonable and bond yields above long-term inflation expectations.
However, even then, I appended some caveats to that assessment:
“We believe the next two major transitions involve an evolution of investors’ concerns: away from inflation and towards recession, as well as away from pandemic-related disruptions towards geopolitical ones.”
Most individuals, including myself, were, in fact, predicting a recession.
Given the prevailing inflationary conditions, a recession seemed the most logical outcome.
Reflecting on it now, I must acknowledge my erroneous economic projections. Yet, was there any other “logical conclusion” to draw upon at the time? On that, I stand firm.
The Year of the Recession That Didn’t Happen
This leads me to reiterate another point I have been making…
The unanticipated turn of events in 2023 underscores the unpredictability of the future. This was also reflected in “My Top REIT Picks for 2023” when I stated:
“Some say we’re in for a recession in the first half of the year. Some say we’re in for a recession in the second half. Some say we’re already in a recession and that won’t change for a while. And some say we’ll avoid a recession altogether.”
Yet, “Nobody’s throwing parties of anticipation about picking up profits left and right like gold nuggets on the ground.”
Evidently, the camp predicting a no-recession scenario emerged victorious. However, I struggle to recall any of those forecasts being remotely close to accurate.
This is not to discredit anyone. It should be noted that I have already admitted, and continue to admit, the imperfections in my predictions.
The multitude of national and global factors at play, from consumer sentiment to political priorities to international conflicts, made it inherently challenging to foresee the outcome.
The extent of these factors is usually minimal or at least manageable in some years, possibly allowing analysts to make reasonably accurate predictions.
We (hopefully) scrutinize the current data from various perspectives, (hopefully) set aside our egos, and (hopefully) consider historical trends and outliers…
Only to arrive at conclusions open to critique and commentary from all quarters.
Our track records are usually shaped by our experience, education, and willingness to keep learning.
Yet, these records are never without flaws, and sometimes our forecasts miss the mark by a considerable margin.
The Year of the Value Stock That Didn’t Happen
The Nasdaq article I referred to earlier, while accurately identifying the “geopolitical” disruptions, failed to materialize the predicted recession.
Moreover, it foresaw:
“… the end of ‘growth’ stock dominance and an increased focus on consistent cash flow, dividend, and coupon generators – what RiverFront calls the ‘P.A.T.T.Y.’ (Pay Attention to the Yield) theme. Under these circumstances, we see modest upside for stocks and bonds in our base case scenario, with preferences for consistent cash flow generators, cyclicals, smaller-cap companies, and traditional ‘value’ plays like energy and financials.”
When I then remarked how, “Since REITs are ‘traditional value plays’ as well, that analysis ultimately bodes well for the sector”…
It led to two erroneous analyses rather than one.
On a similar note, I also had to acknowledge:
“2022 was a tough year for real estate investment trust (“REIT”) investors. A very tough year, in fact. This is the first time in over a decade that my top picks lost money.
“I’m always happy to show you the proof of my stock-market wins. But I have to be just as honest about the losses.”
As previously stated, seasoned analysts tend to have impressive track records, albeit not flawless ones.
This is why analysts and readers alike need to anticipate the best but be prepared for the worst. This brings me to a final point before delving into the events of 2023.
This is a quote from the previous article, appearing just after my concurrence with Nasdaq’s assessment:
“But even if that isn’t the case [that value stocks are the biggest winners of 2023], I believe the companies below are worth buying and holding onto for the long-term.”
Realty Income Corporation (O)
As many of my followers know, Realty Income is my largest holding as I view this as the ultimate “Sleep Well At Night” stock, or “SWAN” for short. The triple-net real estate investment trust (“REIT”) has been operating
