Steve Reitmeister, a 40-year investment pro, has a more balanced view of whether the future is bullish or bearish. This doesn’t mean you have to wait for results because there are actually ways to actively invest right now to top the S&P 500 (SPY). Get Steve’s latest market forecast, trading plan and top picks in the commentary below.
The S&P 500 (the spy) is even closer to death week by week. And yet an interesting theme is emerging as we look back over the past month.
On one hand it is quite bullish. And on the other hand actually recession.
Meaning that overall it is quite confusing. So we’ll do our best to make sense of it all in the fresh market commentary below…
Market Commentary
Ok…what’s so bullish about the action over the past month?
That’s easy to say because the S&P 500 is up +3.3% over that period. Also, we are flirting with recent highs seen below 4,200 in early February.
Great…so what’s the downside to that?
The nature of the threat posed by groups that are leading the way. The following 2 performance charts for the past month illustrate this point in spades:
Bullish times are usually marked by investors taking on a little more risk to enjoy more upside. So when smaller stocks outperform. In addition, investors will bid for more growth-oriented industries such as consumer cyclicals and technology.
Clearly that is no longer the case
As you can see the bigger the stocks the higher the returns. And sector risks such as utilities, healthcare and consumer defensives are leading the charge.
Again…kind of boom when you see green arrows on the board. But a bit of a letdown with investors in flight-to-safety mode.
Our Meredith Margaev POWR stocks under $10 service There were some other interesting ideas on this front:
“That brings me back to my earlier point that the “stock market” is doing well, and “stocks” are not. You see, “stocks” aren’t really doing that well.
A number of analysts are concerned that this rally is much more vulnerable than it appears. Part of that is because market breadth has been weak. As of last Friday, less than half (45%) of the Russell 3000 stocks were trading above their 200-day moving average. That coincides with news that the rally has been largely driven by a handful of mega-cap stocks like Microsoft and Apple.
We’re also seeing low volatility — the VIX is at its lowest level since the start of the year — which could mean investors are likely very complacent and stocks could be headed for a selloff.”
Stocks will continue to float higher to resist the February high of 4,200 unless something clearly bearish occurs. Helping matters in the short term is an earnings season that was better than low expectations…but not terribly impressive either.
What the results clearly showed early on was that the banking crisis benefited the big banks because deposits from smaller regional and community banks “too big to fail“Institutions.
Overall, the earnings season is just like everything else…not a recession, but not really a boom either. This remains the case until a new catalyst comes along so that people can readjust the recessionary possibilities and make them either more bearish or more bullish.
Looking at the economic calendar, there aren’t many catalysts until the week ends with ISM Manufacturing on 5/1 followed by ISM Services on 5/3 and the Fed’s rate hike decision and then government employment on 5/5.
The catalysts for the recession will be obvious. That is clear bearish evidence with the October low of 3,491 and possibly lower stocks.
Funnily enough, upstream catalysts can be very subtle. Only the absence of bad news = good news = stocks move higher.
This is what Goldman Sachs was saying in their text “This stock market looks like”.Bullet proof“. And the main reason is the strength of the job market that refuses to buckle. In that case, income leads to spending and economic growth. That’s why we stay out of recessions.
This has moved me down the odds once again for a future recession and bear market extension. I’d say it’s about 50/50 at this point. Thus I am increasing my exposure to the stock market by emphasizing the best stocks, thanks to our leverage. POWR Ratings Model.
I know some would prefer that I have more certainty…like there is something wrong with me.
no friends I have a background in economics and can say with complete confidence that it is an inexact science. That’s why an average recession forms when less than 50% of economists predict that outcome.
I say not 50/50 because I’m afraid to call. That’s because at one point I was 80% sure of a recession and it won’t happen again and again…I have to appreciate that the odds are slim. But the odds of that recession still very much exist.
Thus, I will continue to sleep with 1 eye open for its possible return. Until that really comes on the scene, I will continue to increase my allocation to attractive stocks.
What to do next?
Discover my balanced portfolio approach indefinitely. The same approach that has beaten the S&P 500 by a wide margin so far in April.
The strategy was built on over 40 years of investment experience to appreciate the unique nature of the current market environment.
Right now, it is neither a boom nor a recession. Instead he is confused…unsettled…uncertain.
Yet, even in this unattractive setting we can chart a course of outperformance. Just click the link below to get right into the action:
Steve Reitmeister’s Trading Plan and Top Picks >
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Rayty (pronounced “righty”)
CEO, StockNews.com and Editor, Reitmeister total compensation
SPY shares traded down $0.17 (-0.04%) in after-hours trading on Friday. Year-to-date, SPY is up 8.20%, the % gain of the benchmark S&P 500 index over the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reighty”. He is not only the CEO of the firm, but also shares his 40 years of investment experience in the company Reitmeister Total Return Portfolio. Learn more about Ritty’s background, with links to her most recent articles and stock pics.
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