“Get ready for a market showdown! June 4 will settle the bullish vs. bearish debate once and for all!”

The bull/bear debate can finally be resolved in June by focusing on 4 key events on the economic calendar for June. Steve Reitmeister shares his views on what happens next and why the S&P 500 (SPY falling back to October lows, or lower, is the most likely outcome. Get all the details in the comment below. .

I strongly denounced last week’s rally with an apparent break above the key 4200 resistance level for the S&P 500 (TO SPY).

The short version is to emphasize that this rally is totally hollow and only led by a handful of mega caps. Without breadth… and therefore without credibility.

The full version of the story can be found here: The fallacy of the bullish argument.

This market is at a critical moment. The bulls are desperately looking for a clear green light to go forward, while the bears are reminding everyone of the red flags that could send stocks lower.

Let’s review the 4 possible potential catalysts in June and the likely outcome for stocks.

market commentary

The economic calendar is full of potential catalysts for mid-June. At this stage the bulls need the bears to give up hope and join their cause. That will only happen if there is undeniable evidence that a recession is not building and that the economy is only getting stronger.

On the other side of the ledger, bassists need to stop talking about the “recession potential“and show that it comes true in reality. That would wake up the bearish spirits from their multi-month hibernation, leading to stocks being mauled in no time.

Here are the 4 key dates that could serve as a catalyst for the next big stock move:

thursday june 1^street = ISM Manufacturing: There have been a LOT of weak readings for ISM Manufacturing without really signaling that a recession was on the way. However, this remains one of the key monthly reports to monitor the health of the economy.

It is highly unlikely that it will convince investors on its own. But this report could set a tone where investors look for confirmation of the other monthly reports that could tip the balance strongly in one direction or another. Note that many of the regional manufacturing reports for the past month have been weak and therefore portend similar poor readings for this national report.

friday june 2^{North Dakota} = Government Employment Status: Job additions are expected to continue to decline to 180,000 this month. Keep in mind that population growth requires an additional 150,000 jobs per month just to maintain the existing level of unemployment. Therefore, any move below that mark could cause investors to forecast an increase in the unemployment rate.

Also, many eyes will be on the wage component, as that sticky inflation has clearly been annoying for the Fed. It is currently expected to hit +4.4% year-over-year. (It doesn’t take a math wizard to appreciate how much higher than the Fed’s 2% inflation target and what I’m going to say in the next section.)

monday june 5^he = ISM Services: This report was in positive territory at 53.4 last month. But if that falls below 50 into contraction territory, it would definitely increase the odds of a recession down the road. The most recent retail sales report didn’t help matters as it showed a -3.3% year-over-year decline after removing the artificial benefit of inflation.

Wednesday June 14^he = Federal Meeting: Most investors expect them to stop raising rates. And that is quite likely. However, that is quite different from switching to lower rates which they claim is a 2024 event. So Powell’s press conference following the rate hike decision will be closely watched for evidence. time tracks for any future pivots.

Remember that the Fed coordinates a large number of messages in the speeches of Fed officials as part of its mission to have clear communication with investors. And the CLEAR message this past month has been “more work to do“To lower inflation.

As in higher rates for longer and no rate reduction this year. As in the same thing they have said all year… and without a doubt they will say it again on June 14^he…certainly disappointing the bulls who continue to NOT get the message right.

How do I think everything will turn out?

This comment from a few weeks ago answers the key question above: Why Steve Reitmeister Is Turning More Bearish

Simply put, if the Fed is betting on a future recession because of its efforts to douse the flames of inflation…then you should bet on that too!

With that in mind, now let me share with you the most interesting thing I read this weekend. Here are famed Swiss money manager Felix Zulauf’s comments on an effective recession early warning and what that tells you about our current recession clock:

“We only know in hindsight when the recession started, but there is an indicator that you can look at that gives you some indication of when the start of the recession is here, without knowing for sure. And that’s when the inverted yield curve starts to flatten out.

“And in fact, in the last few days or two weeks, we’ve seen some flattening of that yield curve, and this could be an indication that we’re very close to the start of a recession. I think such a recession will continue.” be short, not long. It could be deep because I think the Fed and other central banks are tightening too much. They drive forward by looking in the rearview mirror because inflation is a lagging indicator and monetary policy is a leading indicator.

“So, I think they get too tight, and it could be a sharp or deeper recession, but much shorter because once it’s here and once it’s recognized, the Fed and other central banks will come in and turn around and go from harden to relax relatively quickly.

“I think in the third quarter we will see the Fed abandon their QT policy, quantitative tightening, and if the market falls the way I expect, and it could lead to lower lows, I still have a target that I told my subscribers to late 21, about 30% down, which is the 3000 low on the S&P and maybe 9000 on the Nasdaq or something like that.That means lower lows below the October lows, sometime in the second half by the end of this year.

And here’s a cross-plot showing the 2-year vs. 10-year rate inversion over time and its relationship to recessions (gray bars):

In fact, you can see that recessionary periods did not occur at the deepest times for yield curve inversion. Instead, it took place after it flattens out and often begins to improve.

Now take that into consideration as you look at the far right of the chart where the most recent reversal has started to flatten out. And correlate that with the expected 10% drop in corporate profits in the second quarter. And now correlate that with the Fed’s expectations of a recession building up by the end of the year before they start lowering rates.

Bulls have enjoyed a fair rally since October as no recession emerged. This made it appropriate for shares to rally to current levels.

However, to continue going higher from here, they need to make sure that recessionary fears are dead and buried. And as previously shared, there are still good reasons for caution.

Therefore, I will not join the bullish rally at this time. Instead, I will continue to watch for the next big catalyst that will end the bull/bear debate once and for all. However, if you were to ask me now to predict what will happen in the future… I would certainly bet on the bearish outcome.

What to do next?

Discover my balanced portfolio approach for uncertain times. The same approach that has beaten the S&P 500 by a wide margin in recent months.

This strategy was built on the foundation of more than 40 years of investment experience to appreciate the unique nature of today’s market environment.

Right now, it is neither bullish nor bearish. Rather he is confused and uncertain.

However, given the facts available, we will most likely see the bear market come out of hibernation by attacking stocks to the downside once again.

We can gladly enact strategies to not only survive that recession… but even thrive. That’s because, with 40 years of investing experience, this isn’t the first time I’ve been involved in the bear market roundup.

If you’re curious to learn more and want to see the handpicked trades in my portfolio, click the link below to get started on the right hand side of the stock:

Steve Reitmeister’s Trading Plan & Top Picks >

I wish you a world of success in your investments!

steve reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Publisher, Reitmeister Total Return

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Shares of SPY were down $0.27 (-0.06%) in after-close trading on Tuesday. So far this year, SPY has gained 10.29%, versus a percentage increase in the benchmark S&P 500 index over the same period.

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About the author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. He is not only the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return Wallet. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

Further…

The charge June 4 Dates to resolve the bullish/bearish debate first appeared in stocknews.com