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.
This week saw a major upsurge in not only securities purchased but good economic news as well. Let’s take a look………..
This was the second week that would be considered very bullish. The S&P 500 closed out the week at 4,282, up 1.83%. The Dow Jones posted a whopping 700+ point day on Friday closing at 33,762, up 2.02% and the Nasdaq Composite saw a massive increase of 139 points putting it up for the week 2.04%
Tech stocks are the leader of the pack but more importantly Small Cap stocks are moving ahead now. Readers of our posts know that small caps have lagged behind the rallies this year and until very recently have hovered near their bear market lows - until this week when they showed a gain of 3.3% for the week. For this current rally to continue, small caps must also be included in order for the bulls to continue to run forward.
The good news this week revolved around the strong results of the May jobs report as well as the (expected) passing of the debt ceiling bill. The Bureau of Labor reported Friday that 339,000 jobs were added in May and the unemployment rate rose to 3.7%
The Federal Reserve continues to take oxygen concerning the inflation rate which has remained in the 4% - 5% range. As we’ve pointed out numerous times, the Fed has stated that a rate of 2% growth is their target so expect to see rate hikes resume, however at a possibly slower rate. Time will tell, but the possibility of a recession seems to be easing. Investors are feeling little fear concerning the markets so consequently the CBOE Volatility Index (VIX) we’ve referred to many times has abated to its lowest level since 2020.
As you’ve read here over these past months, the S&P 500 is a better indicator of the overall market and this week saw all 11 sectors of the S&P positive. The S&P sectors consist of the following:
Consumer Discretionary
Real Estate
Materials
Industrials
Health Care
Financials
Information Technology
Energy
Communication Services
Utilities
Consumer Staples
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.
There has been much speculation since mid-March as to which direction the Federal Reserve is planning to go concerning interest rates. Of the 12 members of the FOMC (Federal Open Market Committee – the governing body of the FR), three have recently sounded very timid toward further interest rate hikes. The stated goal of 2% inflation, as we noted above, is still a priority, however there may be a bit of a time-out concerning rate hikes in the near term.
The Fed is expected to convene June 13-14 and the betting on the street is for no rate hike at that meeting.
The Federal Fund rate (what banks charge each other on overnight transactions) is currently at 5.07%. The Prime Rate is currently 8.25%. 2-year Treasuries currently stand at 4.25% while the 10-year Treasury rate stands at 3.38%. We are still in the midst of an inverted yield curve which as you know offers signals on the economy, none good. What makes this ever more confusing is the recent strength that the markets are showing. The benefit of having guidance as we provide here at GaneWisdom/Market Edge can be very helpful in your financial planning at a moments notice.
The S&P 500 has shown great strength this year. Closing at 4,282 on Friday, the S&P 500 is now above where it was on August 21st, 2022, when we began publishing. The S&P 500 closed that previous Friday (8/19/22) at 4,228. The Dow at 33,702 that same day. What is causing us concern is THE FACT that only a small handful of companies, of the more than 2,000 companies that make up the S&P 500, have caused the index’s recent rise. Google (Alphabet, Inc), NVIDIA Corp and Apple are among them. Artificial Intelligence has been the cause of the breakout in the Nasdaq. Without these companies and approximately a half dozen more that lifted the S&P 500, that index would be flat for the year! Although we are aware of the market’s current strength, rest assured we are paying very close attention to these indicators.
Not all ending-Bear Markets lead to a Bull Market. We expect to see a downturn of sorts before mid-week as profit takers will come in for their share of the pie. This should not be construed as a meltdown or rally-ending, just that those who made a few dollars will want to wait out the next push, north or south.
There are many variables that are moving the direction of the markets presently as we’ve noted above. It is (in our opinion) critical to stay informed and up to date. It is possible to subscribe to various newsletters and software, sometimes for thousands of dollars per year and that assists you in deciding where you feel the markets are heading and where your money is best invested. The alternative is to become a subscriber to GaneWisdom/Market Edge for $200.00 per year, follow our guidance and allow us to provide market-insight in easy-to-understand English. For those who currently harbor the ‘Buy and Hold’ strategy as espoused by many financial advisors, you are now just about even to your balance last August (without additional deposits). Our subscribers, who have followed our advice on the other hand, have been up 5%+ since that time.
You can follow the crowd, or you can take charge of your finances be they retirement accounts (otherwise known as ‘Qualified accounts’) or non-Qualified money. We encourage you to visit our ‘Archive’ section for confirmation of our results.
Our current market position is to remains in:
S&P 500 loaded mutual fund or S&P 500 ETF
NEW Market Alert– Transfer a portion of your money into a portfolio consisting of Financial Services before the close of trading on Monday, June 5th.
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)
Mid-Week Market Alert for 6/8/23
If you have an energy - dominant Mutual Fund or Subaccount available in your retirement plan or current portfolio of funds, money should be transferred by the close of business on 6/8/23.
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 modest portion of your portfolio and not the total.
