Winding down 2022
The final week of trading after Christmas usually brings out the bulls on Wall Street. Depending on who you listen to, what’s known as a ‘Santa Claus Rally’ can occur either the week before Christmas or the week following. Well, now we know that Santa did not set foot onto the New York Stock Exchange’s trading floor this past week and it remains to be seen if he makes an appearance this upcoming week. We’re thinking not but if he does, he won’t stay long!
But seriously, what does this Santa Claus Rally mean for you?
Unless you are a day-trader, nothing.
As a subscriber to GaneWisdom/Market Watch you know that our sentiment has been one of caution since the summer. Despite the Wall Street prognosticators opinions, we’ve followed what the market indicators have been telling us, and these numbers in no way have justified remaining in or entering into the market.
No one knows with any certainty when the Federal Reserve will reverse direction and begin lowering rates. Our guess (and nothing more than a guess based on past history) is that it may occur in the 4th quarter of 2023. Perhaps late in the 3rd. We’ll see. The markets would respond a few weeks, probably a month or two, prior. We have a recession to live through first. Duration and severity yet unknown. But for now, let’s discuss the present.
Signs of Concern
According to Global Research at Bank of America, the month of December has recorded the largest ever weekly outflow of money from Stock Funds! $27.8 billion from Exchange Traded Funds (ETFs) and $14.1 billion from Mutual Funds. This is a strong signal that those in retirement accounts are now beginning to be concerned – and as you’ll read – they are right to be.
When the ‘average’ guy continues to see blood pouring out of their quarterly retirement statements – on average down 5% for the 3rd quarter and down 23% year-to-date they are bound to become nervous – despite what the ‘experts’ are feeding them.
Home sales have continued to decrease as they have for the previous 11 months and orders for new homes have plummeted as well.
Small Cap Stocks continue to show weakness as has the NASDAQ 100 which last week (12/23/22) saw a drop of 2.3% but is underwater year-to-date by 32.69%. The NASDAQ Composite which includes over 2,500 companies (which includes the 100 companies of the NADAQ 100) is down 33.3% year-to-date.
We believe that in order for this Bear Market to end, a bottom - what’s known as a ‘Panic Bottom’ - will need to occur. Before this happens the S&P 500, which closed Friday 12/23/22 at 3844 will need to reach somewhere in the neighborhood of 3,300 - a loss of another 14% and this on top of the year-to-date loss in the S&P 500 of 19% +.
Our current outlook is bearish.
Our current position is to remain in (or transfer into) Money Markets (cash).