Is the Bear Market Truly Dead?
The recent surge in the S&P 500 (SPY) has led many to believe that another bull market is on the horizon. However, investment veteran Steve Reitmeister warns that things may not be as rosy as they seem. In his second half of 2023 stock market outlook, he urges caution and provides a trading plan and top picks for investors.
Stocks closed on a high note this Friday, marking a bullish end to the first half of the year. However, what lies ahead in the second half remains uncertain. While the current trend could continue, Reitmeister suggests that there are reasons to be more cautious in the coming months.
Reitmeister points out that recent price action is bullish, with gains finally spreading beyond the tech mega-caps in the S&P 500 to other stocks, including small- and mid-caps. However, on the fundamental front, he sees things as mostly bearish. He highlights the probability of a future recession, which could lead to lower corporate profits and lower stock prices.
Using a popular measure of recession probability, Reitmeister notes that there is a 70% chance of a recession by May 2024. However, he acknowledges that investors are tired of hearing about the possibility of a recession that has not yet materialized. They may not react until the recession is at their doorstep.
Reitmeister also discusses the recent core PCE inflation reading, which was slightly better than expected. While it may have contributed to the rise in stocks, he emphasizes that it is still far from the Fed’s required 2% inflation target rate. The increasing probability of a rate hike at the next Fed meeting also suggests that the Fed will continue to tighten monetary policy, which could potentially impact the stock market.
Looking ahead, Reitmeister believes that a retracement and trading range in July would be a logical choice as investors wait for further clues on recession probabilities. However, he acknowledges that the market is not always logical. Therefore, he suggests maintaining a balanced portfolio and being prepared to react if the situation changes.
In conclusion, Reitmeister cautions against assuming that the bear market is truly dead. He advises investors to stay vigilant and adjust their trading plans as needed. By considering both the bullish and bearish cases, investors can navigate the market with a balanced approach.
To get a more in-depth analysis and Reitmeister’s top picks for the second half of 2023, readers are encouraged to watch his presentation, which covers various topics including the bear case, bull case, and operations plan.
In an unpredictable market, it is essential for investors to stay informed and make well-informed decisions. Reitmeister’s insights provide a valuable perspective for those looking to navigate the stock market successfully.
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When you look at the S&P 500 (SPY) surging on Friday… and most of June… and heck, most of the year, it looks like another bull market is coming. However, investment veteran Steve Reitmesiter notes that “that was then… and this is now.” Be sure to tune in for his second half 2023 stock market outlook, trading plan, and top picks. Get the rest of the story below.
Stocks closed on a high note this Friday. This puts a bullish exclamation point on the first half of the year!
That is now… but what happens next is a bit more mysterious.
Yes, the current trend could continue. Or maybe there are reasons to be more cautious in the coming months.
Let’s spend some time today to consider what happens in the 2North Dakota half of the year so that we can devise the best trading plan to make profit from the market.
market commentary
The most complete way to share my perspective on the stock market and trading plan is by watching the presentation I just gave for MoneyShow which covers the following topics:
- Review of…How did we get here?
- bear case
- bull case
- And the winner is??? (Spoiler: most likely bear case)
- Operations plan with specific operations such as…
Assuming you’ve seen the video, let me add some additional color comments.
That starts by admitting that recent price action is directly bullish. Even the previously noted problems with the lack of market breadth are improving as gains finally make their way past the tech mega-caps in the S&P 500 (TO SPY) to other stocks, including small- and mid-caps.
Unfortunately, on the fundamental front I still see things as mostly bearish. The key is the probability of a future recession forming that would lead to lower corporate profits and therefore lower stock prices.
Using the popular measure of recession probability where people compare investing between 3-month and 10-year Treasuries, it now looks like this with just over a 70% probability of recession by May 2024:
So how can stocks go so high as the future probability of a recession darkens?
This fits with the “boy who cries like a wolf” version of the investment story. Just replace “Wolf” with “Recession”.
Investors are tired of hearing about the probability of a recession since it is NOT still happening. At this stage, they won’t react UNTIL the recession/wolf is at their doorstep with blood dripping from its fangs. THEN investors will sell stocks in earnest. Until then, it seems to be…”party at garth” for investors.
You may have heard a snippet today that the core PCE inflation reading was slightly better than expected. Since this is the Fed’s favorite inflation measure, it was seen as the main catalyst for stocks to rise again.
Now the facts…
YoY inflation of +4.6% is actually better than last month’s reading of 4.7%. But unless I’m mistaken, it’s nowhere near the Fed’s required 2% inflation target rate.
Furthermore, the month-over-month reading was exactly as expected at +0.3%, which still points to the current rate of increase between +3.6% and 4%. Once again, still too hot.
This explains why the odds of a rate hike at the next Fed meeting on July 26 are now 87% versus 72% a week ago and 53% a month ago. Which means that this inflation reading doesn’t make anyone think that the Fed will stop putting its foot in the neck of the economy with future rate hikes.
Remember on Wednesday, Chairman Powell signaled yet again that there are 2 more rate hikes on the menu. This was accompanied by the usual sound bites about more work to be done… and higher rates for longer… and please put down your crack pipe if you think we’ll lower rates this year (OK… that last part was me, not Powell 😉
There are a slew of key economic reports coming out next week such as ISM Manufacturing, ISM Services and Government Employment. However, unless they SHOUT RECESSION, then I suspect investors will remain blissfully ignorant.
No… I am not saying that the bull market will continue to go non-stop from here. I’m saying you’re not ready for a real selloff until the proof of a recession is seemingly irrefutable.
Note that often the end of a quarter ends with a bang followed by a groan. That is why I am not chasing this market. We have enough in the market to participate to the upside without overextending our necks to get our heads lopped off.
I still think that we have a mild case of irrational exuberance that should give way to a modest retracement and trading range to start July. This would be the logical choice as investors await further clues to signal recession probabilities and whether that pushes us higher…or back into our bearish caves.
But… who says that the market is logical? 😉
For now, a balanced portfolio closer to 50% invested feels more appropriate given the available facts. We will continue to monitor the situation and make any necessary adjustments. Just don’t be too late to react to that receding wolf when it starts moving in your direction.
What to do next?
Find out my full market outlook and business plan for the rest of 2023. It’s all available in my latest presentation:
2North Dakota Mid-2023 Stock Market Outlook >
In case you’re curious, let me pull back the curtain a bit more on the main contents:
- Review of…How did we get here?
- bear case
- bull case
- And the winner is??? (Spoiler: most likely bear case)
- Operations plan with specific operations such as…
- Top 10 Small Cap Stocks
- 4 inverse ETFs
- And much more!
If these ideas appeal to you, click below to access this vital presentation now:
2North Dakota Mid-2023 Stock Market Outlook >
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
SPY shares were trading at $443.25 per share on Friday afternoon, an increase of $5.14 (+1.17%). So far this year, SPY has gained 16.78%, 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 the bear market TRULY dead? first appeared in stocknews.com
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