Fed, earnings, layoffs: 3 reasons why it's a bizarre time for investors

Yahoo Finance's Brian Sozzi discusses three themes in the market right now and why it's a confusing time for investors.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Markets off to a rocking start this year. But according to our very own Brian Sozzi, it's making for a bizarre time to be investor. For more on this let's go over to Sozz to break down this "Morning Brief." Sozz.

BRIAN SOZZI: Hey, I'm over here now, Brad and Julie. Yeah, let me tick through these right now. We have the full "Morning Brief" on the Yahoo Finance home page. Check it out. But a couple of points here worth making and why I'm calling this just a very bizarre time to be an investor. It's always a bizarre time but right now is super bizarre.

First up, like Michael Antonelli was just saying, this is a-- this, so far, has been not a very good earnings season. We used to earn-- we've seen a lot of earnings not only just decline year-over-year but flat out miss consensus estimates and the outlooks for earnings. And even sales, I should mention, not exactly good.

Number two, the layoff beast has been unleashed, yet stocks are still rocking. All these layoff announcements started to come from Microsoft, Amazon, you name it, they have now started to spread to the industrial sector, like a 3M when we learned when they reported earnings last week. I suspect you might see some layoffs now coming from the consumer space. But again, they report earnings in February.

And last but not least here, no clear sign the Fed Chief will be a dove, yet stocks are still rocking this month. And, of course, guys, we'll learn more about that tone from Jay Powell when we have that big Fed meeting this week.

JULIE HYMAN: Yeah I mean, it's not the first time that we have seen stocks go up at a time when-- you know, or risk on at a time where it's not exactly clear that they should be. I was just looking at the groups in the S&P and what they've done so far this year.

We have communication services as the top group. That includes stuff like Meta, right? And sort of the social media companies. Consumer discretionary is number two. At a time when we saw consumer spending-- we got the numbers last week for December. Consumer spending in December fell. And yet, consumer discretionary stocks are up. And finally, tech stocks are in the number three spot. Then you have real estate after that, by the way, which is traditionally a defensive group.

BRIAN SOZZI: And nobody cares about that space.

JULIE HYMAN: So bizarre. But, I mean, that is bizarre, indeed, that we see that kind of mix of cyclicals and then, oh, a defensive in the number four spot, as doing well this year. It's confusing time.

BRAD SMITH: It is a confusing time and especially when you do have some of the more bullish sentiments still being around some areas that have performed well last year. And so for that trade to still be intact or at least top of mind for some investors-- and thinking about you, energy. And then, additionally, you think about health care is one of the thematic plays for 2023 that continues to get brought up.

This could just potentially add on-- at least in the first half of the year until we do see more of that mullet trade that I keep bringing up that Brent Thill discussed with us on the show before. If you see more of that party in the back, where could some of the high growth internet names-- you're laughing, Sozz.

BRIAN SOZZI: I can't help it. [LAUGHS]

BRAD SMITH: --where could that come back in to play for a portfolio.