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While acknowledging that 2023 will likely see economic headwinds, investment strategist Stephanie Link argued Friday that the current market has priced in much of the bad news already and that "it's time to start to nibble a bit" at selective stocks.
"This is not all gloom and doom," the chief investment strategist at Hightower Advisors told CNBC. "There is momentum in this economy right now. We are certainly not in a recession right now."
Link contended that an eventual pivot from the Federal Reserve will eventually cause stocks to "skyrocket." She also stressed that the "market is pricing in a lot of bad news" with the S&P 500 (SP500) (NYSEARCA:SPY) down 18% in 2022 and the Nasdaq (COMP.IND) lower by more than 30%.
"Even though we got a bad retail sales number yesterday, we have better jobs, higher wages, input cost coming down and gasoline prices were down 13% last month alone," she added.
In terms of specific stocks, Link revealed that she has recently added a new position in homebuilder D.R. Horton (DHI), noting that it is the "best-in-class operator" in terms of margins and ROE.
Link also expressed bullishness on tech giant IBM (IBM) and pharmaceutical stalwart Johnson & Johnson (JNJ). As part of this call, she noted that multinational companies will experience fewer headwinds on the currency front in upcoming quarters, with the dollar falling 9% from its highs.
"I think you have to just take a little bit longer term perspective and look at your favorite best-in-class, blue chip companies -- strong balance sheets, good dividends, free cash flow," she said.
Looking at Friday's intraday action, the S&P 500 was trading at around 3,830, down about 2%. While shares have fallen lately in the wake of the Fed's latest interest rate announcement, the S&P remains well above the 52-week low of 3,491.58 it set in October.
For another perspective on the current market, Mike Wilson of Morgan Stanley expects investors to switch their focus away from inflation to corporate earnings. He predicted that earnings could come in 15% to 20% below the current Wall Street consensus.
Earlier this week, the Fed raised its benchmark rate by 50 basis points, slowing the pace of rate hikes after increases of 75 basis points in the past four meetings. Meanwhile, the latest CPI data showed that consumer inflation reached its lowest pace so far in 2022, +7.1% in November compared to +7.7% in October.
For more on the macro outlook, see why Seeking Alpha contributor The Macro Teller says that the economy is slowing fast and that "the probability of a recession is skyrocketing (now at about 70%)."