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  1. Home
  2. / Investing
  3. / Fixed Income

Doug Kass: My Best Investment Idea for 2023

This risk-free pick may provide an equity-like return next year.
By DOUG KASS
Dec 29, 2022 | 06:00 AM EST

My best investment idea for next year is not a stock. No grand 2023 S&P 500 EPS estimates or lofty price targets from this observer!

This idea is risk free and may provide an equity-like return next year.

Indeed, I would stay short (from a maturity standpoint) and to the point!

My idea is a Treasury note.
 
Specifically, the 1-Year U.S. Treasury note, which yielded 4.77% Wednesday morning.
 
Here is a chart on the 1-Year Treasury note yield:
 
Market Yield on U.S. Treasury Securities at 1-Year Constant Maturity, Quoted on an Investment Basis (DGS1) ' FRED ' St. Louis Fed (stlouisfed.org)
 
 
 
To this observer, the major restrictive factor that equities face is that "elevated" yield. It not only provides competition (and argues for a relatively low price ceiling) to equities, it also competes and is materially higher than the S&P 500 dividend yield, which stands at only 1.71%. In fact, the differential in yield between the 1-Year Treasury note yield and the S&P dividend yield, at 3.10%, is the highest in over a decade and very wide based on history.
 
 
While there will certainly be many stocks that outperform the 1-Year Note in 2023, in my view, a risk free, equity-like return (of nearly 5%) is a suitable alternative to picking a Best (stock) Idea.
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At the time of publication, Kass was long Treasuries.

TAGS: Bonds | Fixed income | Interest Rates | Investing | Markets | Trading | Treasury Bonds |

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