We are making this week’s Market Update free of charge
Last week we wrote:
“You’ve continued to read here in these pages how since the inauguration of our site, we’ve categorized these market advances as a ‘Bear Market Rally’. This opinion has widespread support and if we look at history we have been in bear-market territory for the past 244 trading days. The only time a long-lasting duration of a bear market such as what we’ve now endured, occurred shortly after World War II. May 15th, 1948, saw the end of a 484-trading day bear market. Historically the average bear market has lasted 142 trading days and as you’ve read above, we have certainly surpassed that…..”
Well, my friends – we are now in Bullish territory once again. The Bear Market has ended!
For many months we’ve been expecting what’s known as a ‘Panic Bottom’ which would signal the end of the bear market. A Panic Bottom, when they happen, are very ugly. This is where investors have just lost much if not all of the profits that they’d made prior and decide enough is enough and throw in the towel before they lose any more. We’d been looking at a Panic Bottom for the S&P 500 at around 3,300.
We also wrote last week:
“It wasn’t that many weeks ago that we were preparing ourselves for a meltdown in the markets. Known as a ‘Panic Bottom’ which we were girding ourselves for would happen when the S&P 500 dipped down to 3,300 give or take. We are happy to report that the possibility of that taking place may – may – be over. Should the S&P 500 hit and stay above 4,300, the current ‘Bear Market’ (of which we’ve been in a rally of) will be history………”
Although the S&P 500 closed the week at 4,298, just shy of our benchmark of 4,300, the consensus by most market technicians is that a new Bull market begins when the S&P 500 closes above a 20% gain from a Bear Market low. The S&P 500 achieved that benchmark Thursday (6/8/23).
For the week: the DJIA closed at 33,876 up 43 points and +0.42% for the week. The NASDAQ closed Friday at 13,259, +20 points and +0.15% for the week. The S&P500 up for the week by +0.24%.
As you know, we have been of the opinion that in order for the market to regain its momentum into a bull, the Small Cap stocks would need to show strength, something that they’ve not really done in what seemed like forever. For the second week in a row, the small cap markets have gained traction, this week up by 1.94%
Now that the debt-ceiling has been passed, the Federal Reserve can go back to their focus on bringing the inflation rate, still stubbornly clinging to the 4-5% range, down. Their preferred remedy is to hike interest rates which of course they’ve been doing since last March, 2022. This upcoming week will see the Federal Reserve convene for their June meeting. We don’t see an interest rate hike this go around but look for a probable rise in July. A possible increase of ¼% would be likely. The Fed rate currently stands at 5 - 5.25%.
On the horizon
We should however point out that there is not a cloudless sky to behold.
The job market continues to stay strong and healthy and as our subscribers have read numerous times here, good news is sometimes bad news. Bad news can be good and….well you get the idea! The bad news is that despite a fairly aggressive rate hike experience these past 15 months, the inflation rate is not going down as quickly as the Fed had hoped. U.S. inflation is still holding in the 4%-5% range. Still too high for the Fed.
Another concern that we have is the Treasury interest rates. When long-term rates are lower than short-term rates, what’s known as an ‘Inverted Yield Curve’ is created. When this occurs, the chance of a recession increases, and this is where we are currently. 2-year Treasuries are at 4.59%. 5-year at 3.91% and 10-year Treasuries stand at 3.74% …. Hence an inverted yield curve.
Currently nationally the interest rates on 30-year fixed rates are at 6.71% down a bit from 6.79% the previous week. Putting things into perspective, the 30-year rates were 5.23% one year ago.
Research by Bank of America indicates that in the 12 months following the start of a Bull Market the S&P 500 rises 92% of the time. Based on data stretching back to 1929, the period from one month to one year could be counted as positive for the overall markets. This, of course, is no hard and fast rule but it is an opportunity for investors who were/are of the ‘Buy and Hold’ mentality, (espoused especially by many financial advisors) to recoup losses and (speaking candidly here) to feel good about their ’brilliant’ decision to ‘stick it out’ during a bad market. Of course, these same folks don’t seem to grasp that had they followed a strategy – like ours here at GaneWisdom/Market Edge for instance - they would not be making up losses but realizing an even higher percentage return. Our subscribers, in following our market analysis and commentary, are now up over 5% since our inception in August 2022.
As a matter of fact……..
My service as an active Registered Investment Advisor was to personally review my clients’ accounts with them once per year. Routinely however I personally called each of them once per quarter to update them. More if necessary. The service with our firm was impeccable and was one of the main reasons for our tremendous success. I write this for this reason: regardless of how well we did (often beating the market’s returns) once, maybe twice a year I would hear “Yeah, but if you would have done such and such, you could have done better!” My answer – “If I would have known upfront what horse was going to win the Derby, I could have made money there too.” You see, it’s easy to pick a winner when the race is over, and this is a quandary we run into when some investors scan the Year-to-Date (YTD) returns. We have a strategy and when our indicators signal a move of some sort, we follow that analysis. Our results, in the end, speak for themselves. All of our previous posts can be found in the Archive section of our website.
Investors concern, measured by the Cboe Volatility Index (VIX) has now dropped below 14 to 13.81. You will recall that in March, as the banking industry was melting, this index reached over 30. Anything over 20 is considered a cause for concern, however hitting 30 – 40 is cause for alarm. Fortunately, this number spiked then has retreated downward since. What we are saying here is that investors’ concern is very low while remaining very bullish.
Please understand this:
As of this week, as noted above, the Bear Market is over. Does this mean that as an investor you should expect the markets to climb up 15%, 20%, 30% ++++ because of this occurrence? I assure you, there will be bumps along the road despite the euphoria and you MUST be prepared. As a subscriber you will be updated not only with weekly updates but mid-week updates as well. What we are saying is this – there will be a time to buy and a time to sell. And buy again and sell again. Markets NEVER go straight up nor straight down. There will always be opportunities to make money and avoid catastrophic losses but only if you know what to look for. The signposts. That’s the kind of advantage GaneWisdom/Market Edge offers.
This past week saw another Mid-Week update from us. Our mission is to prevent our subscribers from absorbing large losses when the markets fall, by taking small losses if need be. ‘Buying and Holding’ results in a continual merry-go-round of losses, making up those losses and hanging in there until the market recovers or increases. That’s great for those who have no desire to manage their own money, have no burning desire to increase the value of their account or are just not all that concerned about their investments and are satisfied to ‘go with the flow.’ And let’s be clear – THERE IS NOTHING WRONG WITH THAT! If this is how you are most comfortable that is exactly what you should do.
If, however you want to participate in the proactive management of your investments, be it a 401k, 403b, IRA, ROTH IRA, or non-qualified (a non-retirement account) portfolio, we are here to offer guidance in order for you to do so. We believe that the cost for a year-long subscription - $200.00 – can offer peace of mind regardless of market conditions. Indeed, most of our subscribers have recouped the cost of their subscription through their first suggested transaction from our service.
Our subscribers have continually read our admonition to avoid investing emotionally. Making decisions with ‘feelings’ is not only foolhardy, but dangerous. At GaneWisdom/Market Edge we use technical analysis when forming investment advice. When analyzing the market these last weeks, we have observed the broad strength shown by each of the 11 sectors of the S&P 500 (please refer to our Market Update for the Week of June 5th, 2023, where these sectors are listed). Based on our indicators we advise the following -
Our current market position is to remains in:
- S&P 500 loaded mutual fund or S&P 500 ETF
- A portfolio consisting of Financial Services.
NEW Market Alert– Transfer a portion of your money into a portfolio consisting of Leisure goods and/or services. Do this before the end of trading on Monday, June 11th, 2023
NEW Market Alert– Transfer a portion of your money into a portfolio consisting of Telecommunications. Do this before the end of trading on Monday, June 11th, 2023
Please watch for our Mid-week Market Alerts should there be any.
* As is the case with any investment, use your discretion and judgement before purchasing and/or transferring. Diversification is always prudent; therefore, our suggestion is using a portion of your portfolio and not the total in any one fund or subaccount. A portion should remain in Cash (Money Markets)