{"id":58409,"date":"2023-03-27T10:41:16","date_gmt":"2023-03-27T14:41:16","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=58409"},"modified":"2023-03-27T10:41:55","modified_gmt":"2023-03-27T14:41:55","slug":"the-worst-stock-market-ever","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2023\/03\/the-worst-stock-market-ever\/","title":{"rendered":"The WORST Stock Market Ever!"},"content":{"rendered":"

Please enjoy this updated version of weekly commentary from the Reitmeister Total Return<\/a> newsletter. Steve Reitmeister is the CEO of StockNews.com<\/a> and Editor of the Reitmeister Total Return<\/a>.<\/p>\n

Click Here to learn more about Reitmeister Total Return<\/a><\/p>\n

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I woke up 2 days ago already knowing the theme for this article:<\/p>\n

The WORST Stock Market Ever!<\/strong><\/p>\n

That\u2019s because this ride is more Tilt-A-Whirl than Merry-Go-Round thanks to all the volatility. Pretty soon the corn dogs, cotton candy and elephant ears are coming up. (sorry for the visuals\u2026but needed to drive home the point <\/p>\n

Gladly if we pull back to the big picture, we can make sense of it all to chart our way to calmer shores. That is what is in store in today\u2019s commentary.<\/p>\n

Market Commentary<\/h3>\n

OK\u2026I might be kidding about this being the worst stock market ever\u2026but it\u2019s certainly not fun. That\u2019s because most people are rational and want things to move ahead in a more orderly fashion. This stock market of late has been anything but that.<\/p>\n

Up, down and all around. Not just across weeks and months\u2026but INSIDE of a single session. This candlestick chart of the past month tells that story in spades:<\/p>\n

\"SP500<\/a> <\/p>\n

So much to point out on this chart starting with us being absolutely flat month over month. This would seem to indicate that nothing of significance happened.<\/p>\n

Now look deeper. Note how short lived all the rallies are\u2026as well as the quick duration of the sell offs. And finally notice how big some of those candles are with tremendous intraday moves.<\/p>\n

All that action over the past month\u2026and nothing to show for it in the market average.<\/p>\n

That\u2019s where it makes sense to now look at things on a Sector level where we see a lot more diversity between winners and losers.<\/p>\n

\"Top<\/a> <\/p>\n

The obvious part is the weakness of the financials thanks to all the bad news in the banking sector. Real estate is so intra related with the banks that it\u2019s pretty obvious why that group has taken it on the chin as well. The rest of the weaklings are a fairly Risk On groups which talks to growing fears of future economic health.<\/p>\n

The counterpart to that is to discover that most of the Risk Off groups are near the top of the list: Consumer Defensive, Utilities, and Healthcare. The oddity is the strength of Communication Services and Tech. However, when you think of Tech as being dominated by FAANG\u2026and they often act as a defensive group people often cling to\u2026then you understand that the totality of this picture says it was a Risk Off month even if overall market breakeven.<\/p>\n

Everything discussed so far explains WHAT is happening\u2026now let\u2019s shift to WHY.<\/p>\n

The simple answer is to say the outlook for the economy (and thus the stock market) is unclear. Thus, each new day brings new headlines that tilt bearish today and bullish tomorrow.<\/p>\n

Certainly, people see the threats that could lead to recession\u2026but it keeps not happening. And that is what confuses the odds on what happens next and that lengthens this tug of war between the bulls and bears.<\/p>\n

For example, a lot of economic data was weakening at the end of 2022. Like ISM Manufacturing under 50. And Retail Sales actually shrinking after removing inflation. This led to a large cut in corporate earnings expectations for Q1 of this year where Wall Street is currently looking for -9% earnings loss.<\/p>\n

That steep loss doesn\u2019t look as much in the cards when you appreciate that many thought Q1 GDP would also be in negative territory\u2026perhaps marking the start of a new recession. And yet now as we look at the most revered GDP prediction model (GDP Now from the Atlanta Fed) that stands at +3.2% for the current quarter.<\/p>\n

Reity, you are starting to contradict yourself. I thought you were bearish on the market?<\/em><\/p>\n

Yes. That is true. I just wanted to make it clear WHY the market was so volatile. That being the mixed signals on the economy making bulls and bears tussle for control.<\/p>\n

Now we have to turn our attention to the future and what is likely to happen. Here again, I want to share this simple, yet effective equation to quickly explain why I am still wearing the bear cloak. (It includes an important new addition in bold)<\/p>\n

Higher Rates on the Way (5%+)<\/p>\n

+ In Place AT LEAST til End of 2023<\/p>\n

+ 6-12 Months of Lagged Economic Impact from Fed Policy<\/p>\n

+ Banking Credit Crunch<\/strong><\/p>\n

= Fertile Soil to Create a Recession in the Future<\/p>\n

Fed Chairman Powell talked about all of the first 4 factors at the recent rate hike announcement and press conference on 3\/22. In fact, stocks were going up during the speech til he hit folks with a 1-2 hawkish punch staring with:<\/p>\n

\u201cIt\u2019s possible that this [banking crisis] will turn out to have very modest effects \u2013 these events will turn out to be very modest effects on the economy, in which case \u2013 and inflation will continue to be strong, in which case, you know, the path will look \u2013 might look different. It\u2019s also possible that this potential tightening will contribute to significant tightening in credit conditions over time, and in principle, if that \u2013 that means that monetary policy may have less work to do. We simply don\u2019t know.\u201d<\/em><\/p>\n

This was followed by a statement that the credit crunch IS happening and is relatively equivalent to a 25-50 point basis cut on its own. This got stocks coming down from nearly +1% session to about breakeven. And then came punch #2.<\/p>\n

That being when a reporter stated that current surveys show that the average investor expects just one more rate hike of 25 basis points and then rate CUTS every meeting thereafter. So, are investors wrong?<\/em><\/p>\n

YES!<\/p>\n

It wasn\u2019t just the words he used. It was how Powell said it. Like a disappointed parent when his kid brings home an F on the report card. (what are you not understanding here!!!<\/em>).<\/p>\n

And then he reiterated quite emphatically that their forecast still calls for NO CUTS this year. From there the S&P 500 gave up the 1% gain and tumbled all the way to -1.65% into the close.<\/p>\n

For me the aforementioned equation starting with a hawkish Fed ends with recession at some point in the future. Clearly not Q1\u2026but Q2 and the rest of the year are still very much into play.<\/p>\n

Unfortunately, until investors see more PROOF of a recession unfolding then the recent trading range and extreme volatility will continue. That is why I recommend investing based upon what you predict will happen beyond that range. Again, that leans decidedly bearish in my book.<\/p>\n

What To Do Next?<\/h3>\n

Watch my brand new presentation, REVISED: 2023 Stock Market Outlook<\/a><\/p>\n

There I will cover vital issues such as\u2026<\/p>\n