The bulls and bears debate could finally be settled in June by specializing in 4 key events in the June economic calendar. Steve Reitmeister shares his views on what’s next and why the S&P 500 (SPY retreating to October lows or below is the almost definitely consequence. See the comment below for details.
I strongly condemned last week’s rally with an apparent breakout above the key 4200 resistance level for the S&P 500 (SPY).
The short version is supposed to emphasise that this raid is totally empty and only run by a handful of mega caps. No breadth… and subsequently no credibility.
The complete story may be found here: False stubborn argument.
This market is at a critical moment. The bulls are desperately looking for a brilliant green light to race forward while the bears are reminding everyone of the red flags that would send stock prices down.
Let’s take a take a look at the 4 potential catalysts for June and the likely consequence for stocks.
Market Commentary
The economic calendar is filled with potential catalysts starting in mid-June. At this stage, the bulls need the bears to offer up hope and join their cause. This may only occur when there’s undeniable evidence that a recession shouldn’t be forming and the economy is barely strengthening.
On the other side of the book, bears must stop talking about “recession potential” and show that it really works in point of fact. This might awaken the bear spirits from their several months of hibernation, resulting in a fast slump in motion.
Listed here are 4 key dates that would function a catalyst for the next big stock market move:
Thursday June 1st = ISM production: There have been MANY poor ISM readings for industry without really signaling an impending recession. Nonetheless, it remains to be considered one of the key monthly reports to observe the health of the economy.
He’s unlikely to persuade investors on his own. But this report may set the tone for investors to look to other monthly reports for confirmation, which could tip the scales heavily in a single direction or the other. It needs to be noted that lots of the last month’s regional manufacturing reports were weak, which portends similar weak readings for this national report.
Friday June 2n/a = Government employment situation: The variety of job openings is anticipated to fall to 180,000 this month. It needs to be noted that population growth requires 150,000 recent jobs per 30 days just to keep up the current level of unemployment. Thus, any move below this mark may lead investors to anticipate a rise in the unemployment rate.
Also, many eyes will likely be on the wage component as sticky inflation has clearly been a pain in the Fed. It’s now expected to be +4.4% year-on-year. (You do not should be a math wizard to understand so long as that is greater than the Fed’s 2 percent inflation goal, and that is what I’ll say in the next section.)
Monday June 5p = ISM Services: This report was in the black at 53.4 last month. But when that breaks below 50 in contraction territory, it’s going to definitely increase the odds of an upcoming recession. Matters weren’t helped by the latest retail sales report, which showed a 3.3% year-on-year decline after removing the artificial effect of inflation.
Wednesday June 14p = Fed meeting: Most investors expect rate of interest hikes to stop. And it’s quite likely. Nonetheless, this is sort of different from the move to lower rates, which still claims to be a 2024 event. So, Powell’s press conference following the decision to boost rates of interest will likely be closely watched for clues as to timing for future returns.
Please note that the Fed coordinates many speeches by Fed officials as a part of their mission to speak clearly with investors. And the clear message last month was “more work to do“to bring down inflation.
As in higher rates for longer and no reduction in rates this yr. Like the same thing they have been saying all yr… and can little doubt repeat on June 14p… little doubt disappointing bulls who still do NOT get the message.
How do I believe all the things will end up?
This comment from a couple of weeks ago answers the key query above: (*4*)Why Steve Reitmeister is getting bearish
Simply put, if the Fed is betting on a recession in the future due to efforts to quench the flames of inflation…then it’s best to bet on it too!
With that in mind, let me share with you the most interesting thing I read this weekend. These are the comments of the famous Swiss financial manager Felix Zulauf on the effective recession warning and what that tells him about our current recession watch:
“We only know looking back when a recession began, but there’s an indicator which you could watch that offers you some indication of when a recession will start without knowing for sure. After which the inverted yield curve begins to flatten out.
“And indeed, over the past few days or two weeks, we have seen some flattening on this yield curve, which can indicate we’re very near the onset of a recession. I think such a recession will likely be short, not long. It will probably be deep because I think the Fed and other central banks are overtightening. They drive forward by looking in the rearview mirror because inflation is a lagging indicator and monetary policy is a number one indicator.
“So I believe they’ve overdone it and it might be a pointy or deeper recession, but a much shorter one, because once it’s there and once it’s acknowledged, the Fed and other central banks will step in and reverse and go from tightening to easing relatively quickly.
“I believe in the third quarter we’ll see the Fed drop QT policy, quantitative tightening and if the market goes down as I expect it to go down and it could lead on to lower lows I still have the goal I told my subscribers in late 2021 around 30% down, which is the low of the S&P 3,000 and possibly the Nasdaq 9,000 or something. This implies lower lows below the October lows, around the second half of this yr.”
Here’s a correlated graph showing the 2-year and 10-year rate of interest reversal and its relationship to recessions (gray bars):
Indeed, you’ll be able to see that the recession periods didn’t occur at the deepest moments for the yield curve inversion. As a substitute, it happened after flattening, and it often starts to enhance.
Now consider this by taking a look at the right side of the chart where the last reversal has began to flatten out. And correlate that with the expected 10% drop in corporate profits in the second quarter. Now compare that to the Fed’s expectations of a recession coming at the end of the yr before they begin cutting rates of interest.
The bulls have enjoyed a legitimate increase since October as the recession has not arrived. This brought the stock back to its current levels.
Nonetheless, to go higher to any extent further, they should be certain that recession fears are dead and buried. As mentioned above, there remains to be good reason to be cautious.
That is why I’m not joining the bull rally at the moment. As a substitute, I’ll proceed to observe the next big catalyst that may end the bull/bear debate once and for all. Nonetheless, in the event you were to ask me now to predict what’s going to occur in the future… I might definitely bet on the bearish consequence.
What to do next?
Discover my approach to a balanced portfolio for uncertain times. The identical approach that has beaten the S&P 500 by a big margin in recent months.
This strategy has been constructed based on over 40 years of investment experience to understand the unique nature of the current market environment.
It’s neither bullish nor bearish at the moment. He’s fairly confused and insecure.
Nonetheless, given the available facts, we’ll almost definitely witness a bear market coming out of hibernation, which is able to drive down stock prices again.
We’re joyful to introduce strategies that won’t only survive this crisis… but will even thrive. That is because with 40 years of investing experience, this shouldn’t be my first time at a bearish rodeo.
If you wish to learn more and see the hand-picked trades in my portfolio, click on the link below to start on the right side of the stock:
Steve Reitmeister’s Trading Plan and Top Picks >
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 fell $0.27 (-0.06%) after trading hours Tuesday. Yr to this point, the SPY has gained 10.29%, in comparison with the percentage gain of the S&P 500 index over the same period.
About the Creator: Steve Reitmeister
Steve is healthier known to the StockNews audience as “Reity”. He shouldn’t be only the CEO of the company, but additionally 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.
Post June 4 Dates for settling the bull/bear debate first appeared on StockNews.com