If you have a look at the soaring S&P 500 (SPY) on Friday… and just about all of June… and heck, just about all 12 months, it sure looks like a latest bull market is imminent. Nonetheless, veteran investor Steve Reitmesiter points out that “that was then… and that is now.” You’ll want to try his H2 2023 stock predictions, trading plan and top picks. The remaining of the story could be found below.
Stocks closed high on Friday. This puts a bullish exclamation mark on the first half of the 12 months!
It’s now… but what happens next is a little more mysterious.
Yes, the current trend may proceed. Or perhaps there can be reason to be more careful in the coming months.
Let’s take a while today to think about what is going to occur in season 2n/a half a 12 months in order that we will develop the best trading plan to take advantage of the market.
Market Commentary
Essentially the most complete way I can share my stock market predictions and trading plan is to look at the presentation I just gave for MoneyShow which covers the following topics:
- Overview…How did we get here?
- Bear case
- Bull case
- And the winner is??? (Spoiler: more likely case of a bear)
- A trading plan with specific trades similar to…
Assuming you’ve got watched the video, let me add a further color comment.
This starts by admitting that the recent price motion is just bullish. Even previously noted problems with lack of market breadth are improving as profits finally move beyond the tech mega-caps of the S&P 500 (SPY) to other corporations, including small and mid-cap corporations.
Unfortunately, on the fundamental front, I still see things as mostly bearish. The secret is the likelihood of a future recession, which might lead to lower corporate profits and subsequently lower stock prices.
Using a preferred measure of recession probability where people compare the inversion between 3-month and 10-year Treasuries, it now looks like this with just over 70% probability of a recession by May 2024:
So how can stocks go up a lot when the likelihood of a future recession is diminishing?
It matches “The boy who cried wolf” version of the investment history. Just replace “Wolf” with “Recession”.
Investors are uninterested in hearing about the likelihood of a recession since it keeps NOT happening. At this stage, they will not react until the recession/wolf shows up at their door with blood dripping from their fangs. THEN investors will sell stocks seriously. Until then, it seems…Party on Garthfor investors.
You will have heard a bit today that the core PCE inflation reading was barely higher than expected. Because it is the Fed’s favorite measure of inflation, it has been considered a significant catalyst for stock prices to rise again.
Now the facts…
+4.6% year-on-year inflation is definitely higher than the previous month’s reading of 4.7%. But when I’m not mistaken, that is not even near the 2% inflation goal required by the Fed.
Moreover, the m/m reading was exactly as expected at +0.3%, still pointing to a current growth rate of between +3.6% and 4%. Again, still too hot.
This explains why the probability of a rate hike at the next Fed meeting on July 26 is now as much as 87%, up from 72% per week ago and up from 53% a month ago. That’s, this inflation reading doesn’t make anyone think that the Fed will stop putting its feet on the back of the economy with future rate of interest hikes.
Please keep in mind that on Wednesday, President Powell once more indicated that there are 2 more increases on the menu. This was accompanied by the usual sounds of more work… and better rates for longer… and please get off your pipe for those who think we will lower rates this 12 months (OK… that last part was me not Powell 😉
There can be quite a lot of key economic reports in the coming week, similar to ISM Manufacturing, ISM Service and Government Employment. Nonetheless, in the event that they will not be CRYING RECESSION, I believe that investors will remain blissfully ignorant.
No… I’m not saying that the bull market will go non-stop to any extent further. I’m saying he is not ready for an actual sell-off until the evidence of a recession is seemingly incontrovertible.
Note that always the end of the quarter ends with a bang followed by a whimper. That is why I’m not chasing this market. We’ve enough in the market to take part in the rally without stretching our necks too far to get our heads chopped off.
I still consider we’re coping with a light case of irrational exuberance which should give technique to a modest pullback and trading volume in early July. This might be a logical selection as investors wait for more clues to the likelihood of a recession and whether this pushes us to more bullish optimism… or back to our bear caves.
But… who said the market is logical? 😉
For now, a balanced portfolio with a more in-depth investment of fifty% seems the most appropriate given the available facts. We are going to proceed to watch the situation and make appropriate adjustments. Just do not be late to react to this wolf recession because it starts heading your way.
What to do next?
See my full market forecasts and trading plan for the remainder of 2023. All this is on the market in my latest presentation:
2n/a Stock market outlook for mid-2023 >
In case you are curious, let me draw the curtain a bit of wider on the most important content:
- Overview…How did we get here?
- Bear case
- Bull case
- And the winner is??? (Spoiler: more likely case of a bear)
- A trading plan with specific trades similar to…
- Top 10 Small Caps
- 4 Reverse ETFs
- And loads more!
If these ideas appeal to you, click below to access this essential presentation now:
2n/a Stock market outlook for mid-2023 >
I wish 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 traded at $443.25 a share Friday afternoon, up $5.14 (+1.17%). Yr up to now, the SPY has gained 16.78%, in comparison with the percentage gain of the S&P 500 index over the same period.
About the Creator: Steve Reitmeister
Steve is best known to the StockNews audience as “Reity”. He shouldn’t be only the CEO of the company, but in addition shares his 40 years of investment experience in the industry Total Return Reitmeister Wallet. Learn more about Reity’s background and links to his latest articles and stock offerings.
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