Talk to almost any stockbroker or financial advisor this upcoming week and we are fairly certain that you will be informed that the Bear Market is over! Back offices will be announcing that “now is the time to position clients in a good equity stock and hold on for a thrilling ride!”
Now before you think we are calling for heavy rain and thunderstorms, please understand we are looking at the same numbers as our counterparts are however, we tend to take a bit more sober viewpoint, mainly due to our not having production quotas to meet. This is NOT to say that a major upswing won’t happen, but that we follow indicators and trends and at this moment, it is too early to tell what the foreseeable future holds in store for the stock market.
Over these past months we keep talking about good news being bad and bad news being good, at least where the market and economy is concerned. For instance, this week’s jobless report signaled a reduction in filing for unemployment in the US. Good news right? What this actually means is that the US Labor market is still strong and because more people are working inflation will continue to be of concern. Remember – Fed Chairman Jerome Powell has said time and again that the magic inflation number is 2%. This mens that the Fed wants to see a 2% inflationary growth rate before they discontinue rate hikes. That said, the current turmoil in the banking industry (kept very quiet in the media) is causing some to believe that rate hikes – for now – may be dormant. Currently the inflation rate stands at stands at 4.9%
The housing market nationally witnessed a downturn in mortgage applications, falling by 5.7%. Building permits fell this week by 1.5%. Refis were also down, falling 7.7%. Current 30-year mortgages jumped this week as well, landing at 6.99%
For the thirteenth month n a row, the US leading economic index has fallen indicating that a recession is more than possible. This indicator includes 10 indicators combined and is published by a non-profit organization known as the Conference Board.
The question facing investors currently is the same one that has been asked for months – are we headed for a recession? If so, will it be what’s known as a ‘Hard Landin’ or a ‘Soft Landing’? Soft landings are ones that do not include a recession and current stock prices would be a bargain.
Hard landings include a recession, and the current price of stocks would be subject to declines of 20% or more. As we wrote above, the gurus will tell you that there is “No way” a recession is in the offing. But again, as we’ve said – there’s no way to know exactly. This actually is why we follow the indicators and market trends. If the economy turns upward, we’re ready for a move. If however the market heads south, we are prepared for that as well.
Although we believe a compromise will be reached concerning the Debt Limit, both major parties are continuing their game of chicken with one another. This is hovering over the stock market like a vulture and is in the back of many traders’ minds. Don’t be shocked if that magic date pronounced by Janet Yellen of June 1st comes and goes with no settlement reached. Truth is that the government should have enough money until mid-July but if an agreement is not reached by August a major economic meltdown could very easily occur. Again, we don’t see such a thing transpiring, but with these people, who knows?
Where should we look at the moment
What we find interesting is that the S&P 500 has rallied past it’s high in February for the year. The concern is that it seems that fewer stocks are causing the index to go up. The technology sector of the S&P 500 is the sector that is applying upward pressure right now.
This week the S&P 500 was up 1.56%, closing at 4,191, The Dow closed the week at 33,426, up 0.4%. The Nasdaq up 3.0% closing the week at 12,658.
Although as a subscriber you know that we have looked to the end of the current Bear Market (and make no mistake, we are still in a Bear Market Rally) to take place when a Panic Bottom of @3,300 is reached, we have also observed that should the coming few weeks see the S&P 500 close above 4,300 the bear will finally go back into hibernation.
For now, we will stick with our strategies. Our market position calls for:
Transfer a portion of your cash (money market) position into an S&P 500 fund
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 May 23, 2023
Although we have not recommended subscribers have a position in International Funds, as a service, we are recommending those who may have money in International Funds transfer into cash (money market) by the end of the business day on Wednesday, May 24th, 2023