Is the Bull Market Here to Stay?
The recent rally in the S&P 500 has led many to believe that the bull market is near. However, 43-year investment veteran Steve Reitmeister provides a more cautious outlook on the future of stock prices. While stocks have broken through resistance levels, they have not yet met the official definition of a bull market which requires a 20% gain from the closing low. Reitmeister argues that the recent rally was triggered by the announcement of a debt ceiling agreement, and caution investors against believing the hype.
Mixed Economic Data
The recent economic data has been mixed, with the ISM Manufacturing coming in well below expectations and the new orders component plunging. Despite the recent strong jobs report, Reitmeister argues that the Fed’s pressure on the brakes on the economy to control inflation is still too high, and the labor market is still too strong. While the odds of a rate increase in July have shot up to 70%, investors should keep in mind that false breakouts are all too common in the modern age, and the bear market may come out of hibernation by attacking stocks to the downside once again.
Surviving and Thriving in Uncertain Times
Reitmeister recommends a balanced portfolio approach to surviving and thriving in uncertain times, with strategies in place to weather any potential recessions. With over 40 years of investing experience, Reitmeister believes that this isn’t the first time he’s been involved in the bear market roundup, and shares his handpicked trades in his portfolio to help investors navigate the market uncertainties.
Expanding on the Topic
In today’s uncertain economic climate, investors must be cautious about jumping on the bandwagon of a new bull market without concrete evidence to support such claims. It is important to consider both the positive and negative economic data and the Fed’s actions before making any investment decisions. A balanced portfolio approach is one effective way to weather market uncertainties and potential recessions, as it allows for flexibility to shift more bullish or bearish depending on the changing market environment.
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The tremendous rally in the S&P 500 (SPY) this week has more people believing that the bull market is near. 43-year investment veteran Steve Reitmeister weighs in with his updated market outlook on the business plan. (Spoiler alert: the future of stock prices may not be as bright as advertised.) Get the full story below.
Stocks broke through stiff resistance at 4,200 for the S&P 500 (TO SPY) Thursday. Then on Friday he put an exclamation point in motion by closing all the way at 4282.
Can we finally call this the new bull market?
And what does that mean for stocks in the coming days?
These timely topics will be the focus of today’s commentary, as well as our business strategy going forward.
market commentary
There are already many people who claim that this is the new bull market. And it could be true over time. However, at this time the stock does not meet the official definition, which is a 20% gain from the closing low.
So, on October 12, 2022, the S&P 500 closed at its lowest level of 3,577.03. Now add 20% to that, which equates to the stock having to close above 4,292.44 for it to technically be called a new bull market.
(Yes, the market hit an intraday low of 3,491 in October. But the official measure of bull and bear markets is based on closing prices like those shared above.)
So as of Friday’s close, we are only 10 points away from the official crowning of a new bull market. That event is likely to trigger a serious FOMO rally as more bears throw in the towel, but first a word of caution…
DON’T BELIEVE THE HYPE!
Please remember that this rally was about the announcement of a debt ceiling agreement. However, as shared in my recent articlethat outcome was never in doubt because allowing a default is a nuclear option that neither party can afford.
When the irrational exuberance wears off next week, investors will be back in the same bull/bear debate about whether we could be heading into a future recession. The most recent economic data was mixed in that regard, starting with ISM Manufacturing coming in well below expectations at 46.9. Additionally, the prospective new orders component plunged to 42.6 points due to weaker results ahead.
Yes, below 50 = contraction. And yes, we’ve been under 50 since November without a recession building. But with the directional worsening, it is certainly not a positive for those who call for a bull market.
But Reity, how about the strong jobs report on Friday morning… surely that’s cause for bullish cheer, right?
Mistaken.
Overall, the market should feel good about signs of economic strength, such as the 339,000 job creation, which was 80% better than expected. However, it is not a positive thing when the Fed is still putting a lot of pressure on the brakes on the economy to control inflation.
One of the most resilient (also known as sticky) forms of inflation is wage inflation. That is still too high because the labor market is too strong. So, if you’re a Federal Reserve official relying on recent data to make your next rate decision… then today’s overly strong jobs report will only strengthen your aggressive resolve.
Today’s news still has the odds of a 6/14 rate increase at only 30%. Which means investors are expecting a pause that the Fed has signaled as highly likely. BUT the odds of a rate hike again in July shot up to 70%, indicating that investors realize the Fed is not done with its aggressive regime (and that is NOT optimistic).
Now consider this graph of the unemployment rate just before the start of each recession:
It is abundantly clear that the unemployment rate is a lagging indicator of recessions, as it appears to be effervescent just before the next recession begins.
But in fact, we need to see job additions actually turn negative and the unemployment rate rise to confirm that a recession is coming. Given all the previous false signals that a recession is brewing… here’s what it will take to convince investors to sell stocks for real once again.
Reity, is it possible that you are wrong and that this is really the start of a new bull market?
Yes. That’s possible, so my 2 newsletter portfolios are basically 50% long right now. What could be called balanced and ready to shift more bullish or bearish when more concrete evidence becomes available.
The key right now is to remember the painful lessons of the 2007 to 2009 bear market (also known as the Great Recession). Technically, the stock moved into a new bull market given a 20% rally from the November 2008 lows to early January 2009. The next thing you know, the stock fell another 28% to a last painful low in March 2009.
These false breakouts are all too common in the modern age given the undue influence wielded by computer based traders. Their favorite game is to push stocks past key resistance and support levels to attract fools…then they reverse course and make large profits at the expense of others.
I’ll become more optimistic when the recession odds really lessen. As already shared, that is not the case leaving my balanced approach in place.
At this stage, I suspect that stocks will move in the 4200-4300 range at the June 14 Fed announcement, where they are likely to remind people AGAIN that there is more work to be done. And rates will stay higher for longer. And I still don’t plan on lowering rates until 2024. And that inflation is too sticky. And that their base case is that a recession will build before they finish their efforts to bring inflation down to the 2% target.
Investors seem to have a monthly case of amnesia between Fed announcements. Then they sell, being somehow surprised by what Powell says over and over again in press conferences. Therefore, I think that getting stocks more aggressively long before the mid-June announcement seems rather unwise.
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
Shares of SPY were up $0.08 (+0.02%) in after-close trading on Friday. Year-to-date, SPY has gained 12.32%, versus a percentage increase in the benchmark S&P 500 index over the same period.
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.
The charge Is NOW a bull market? first appeared in stocknews.com
https://www.entrepreneur.com/finance/now-is-it-a-bull-market/453446
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