As you’ve read over the last few months here, the better news we get the worse things can become! Talk about things being upside down! Case in point – the number of Americans filing for unemployment was reduced from the 246,000 that was expected to 230,000. Despite that positive news, this confirms that despite the Federal Reserve’s best efforts at reducing inflation through its ongoing rate hikes is not having the desired effect. Certainly, the economy is slowing but not at the pace the Fed is looking for. Although the economy grew by only 1.1% in the quarter just ended (down from 2.6% previously) we have witnessed a stock market this past quarter that has gone gangbusters.
Home sales are down, falling 5.2% month-over-month, which is the first decline since this past November. Consumers continue to buy and pay debt by credit which even though borrowing costs are accelerating.
Speaking about borrowing, the banking sector continues to be of concern. The media has done a good job of toning down its reporting on what many believe is a crisis, thereby calming the jitters of many. First Republic Bank, which just a few short months ago was trading at $140.00 closed Friday at $3.51! This situation had been ticking by the minute as regulators contemplated shuttering the bank altogether and finally did so after the close of business Friday. There is real concern among analysts that these latest bank failures is just the beginning.
Consumer confidence is falling and there are indications in this sector that are pointing to a recession, yet, the markets have been going crazy this quarter. When we started publication of GaneWisdom/Market Edge in August, we saw the Dow Jones at 33,702 and the S&P 500 at 4,228. Friday saw the Dow close at 34,098 and the S&P 500 at 4,169. Buying and holding, a favorite of most financial advisors did not fare well. With our guidance, subscribers have realized a 4% gain over the past 9 months. Not great, but not bad.
The big brokerage houses are ramping up the rhetoric that the Bear Market is over and happy days are here again. Not so fast…………..there are still too many indicators blinking yellow. For instance, Treasury Secretary Janet Yellen is sounding the alarm concerning the debt ceiling. “It is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security” Yellen said on Tuesday. “In the longer term, a default would raise the cost of borrowing into perpetuity.” She has warned that should Congress continue their habit of kicking the can down the road, severe consequences will be had. This debate will be forced to a head by June.
Make no mistake – interest rates are going to continue to rise. Business investment has slowed significantly which is another indicator that the economy is showing signs of a slowdown. The markets, although currently flexing some big muscles, may not be able to sustain this pace much longer. Being prepared is THE BEST alternative at the present time. This is why you’re subscribing to our site. We are watching, waiting, and guiding. If the market does indeed blow past the S&P 500 at 4,300, we will revise our opinion certainly on a Panic Bottom – which we constantly refer to – that needs to happen for the markets to be done with the Bear. The Panic Bottom BTW is where investors can’t take the pounding and losses any longer and throw in the towel. We look for a bottom of 3,300 +/- in the S&P 500 for this to confirm our signal.
Finally, our positions continue as they have the last few weeks:
Remain in the following:
S&P 500 Index Funds
International Growth Fund
Cash (Money Markets)
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 Tuesday May 2nd, 2023
We are issuing a BUY alert into a NASDAQ 100 Index Fund or ETF QQQ before the close of business today.
Mid-Week Market Alert for May 5th, 2023
We are issuing a SELL signal for those whose portfolios include an S&P 500 Index Fund. Money should be transferred by the close of business on 5/5/23.
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.