The late summer correction for stocks is over as now we have bounced ferociously from bottom. This is straightforward to see because the S&P 500 (SPY) keeps leaping over technical hurdles just like the 50, 100 and 200 day moving averages. This green light for stocks will stay true so long as we avoid recession. So diagnosing the health of the economy is crucial thing that investors can do now. After that’s choosing the perfect stocks & ETFs to outperform. That is precisely what Steve Reitmeister delivers in his most up-to-date market commentary below.
Stocks have nicely bounced from recent bottom. The important thing ingredient being the lowering of bond rates that was beginning to crush the soul of stock investors.
Not only have we found bottom, however the S&P 500 (SPY) is back above key technical levels (50/100/200 day moving averages) that time to more bullish upside ahead. Also helping matters is the positive bias for stocks through the holiday season…what is usually called the Santa Claus rally.
Let’s dive in additional to those key dynamics and what it tells us concerning the investing climate within the weeks and months ahead.
Market Commentary
The bonds rates up > stocks down dynamic was the important thing story August through October. Some just talked about it as a case of rate normalization back to more typical historical levels. While others talked about the potential for more ominous trends like a debt crisis with severely higher rates > recession risk > bear market final result.
For now, that crisis argument is swept under the rug with the more benign rate normalization being the more likely scenario. Unfortunately, a recent potential boogeyman has also crept up within the investment conversation. That being the likelihood that bond rates are coming down due to increased odds of future recession.
That’s incredibly hard to see from Q3 GDP coming in at a strong +4.9% clip. Nonetheless, history has many examples of hot quarters like this being the last gas of an expanding economy before tipping over into recessionary territory.
This is particularly true in higher inflation environments where consumers are afraid of waiting too long on purchases on condition that prices can be higher in the longer term. This “pulls forward” demand to create a stronger GDP reading now…and weaker, sometimes recessionary readings in the longer term.
Could that be happening now?
That was the main target of my last commentary you may read here: The Dark Side of the Recent Stock Rally.
The most important point is that lower rates is sweet for the stock market so long as there isn’t a recession forming. Slowing growth can also be high quality. +4.9% is well above trend and never sustainable. Cooling all the way down to about 2% growth could be just high quality to ease recessionary pressures and keep the economy and stock market rolling merrily forward.
Well the updated estimate for GDP estimate for Q4 from GDPNow is true on track at +2.1%. At this stage we usually are not even 20% done with the information that can be a part of the ultimate reading. So loads of time for that to enhance or devolve. Our job is to maintain watching it closely which can be a central a part of my upcoming commentaries.
Lastly, a late note to share because the market went from green to red on statements by Fed Chairman Powell. The headline on CNBC reads “Powell Says Fed isn’t confident it has done enough to bring down inflation”.
I’m sorry that may be a silly excuse for a dump since it echoes 110% of what he said on the 11/1 press conference. There’s nothing recent in that take and continues to depart the door open to the Fed raising rates…or doing nothing at their next meeting.
Interestingly the CME’s FedWatch tool is now at 14.5% likelihood of a raise at the subsequent meeting on 12/13 which is down from 24.4% estimate a month ago. So this isn’t market changing news. Just a simple excuse to take some recent trading profit off the table before the subsequent leg higher.
For now now we have a fundamental green light and a technical green light (above 50/100/200 day moving averages) which says an excellent time to be investing in stocks. The important thing, as at all times, is determining which stocks have the perfect probability for future outperformance. That’s what we are going to discuss in the subsequent section…
What To Do Next?
Discover my current portfolio of seven stocks packed to the brim with the outperforming advantages present in our POWR Rankings model.
Plus I even have added 4 ETFs which can be all in sectors well positioned to outpace the market within the weeks and months ahead.
That is all based on my 43 years of investing experience seeing bull markets…bear markets…and all the things between.
In the event you are curious to learn more, and need to see these 11 hand chosen trades, then please click the link below to start now.
Steve Reitmeister’s Trading Plan & Top Picks >
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Editor, Reitmeister Total Return
SPY shares fell $0.54 (-0.12%) in after-hours trading Friday. 12 months-to-date, SPY has gained 16.49%, versus a % rise within the benchmark S&P 500 index through the same period.
Concerning the Creator: Steve Reitmeister
Steve is best known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience within the Reitmeister Total Return portfolio. Learn more about Reity’s background, together with links to his most up-to-date articles and stock picks.
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