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Few occasions are a larger catalyst for inventory worth motion than Fed conferences. And the one developing Wednesday 7/26 intently watched by traders to see if Fed officers are prepared for the lengthy awaiting “dovish pivot”. In that case, then it bodes properly for the current S&P 500 (SPY) advance. But when not, and the Fed stays fairly hawkish, then seemingly shares are prepared for an enormous step again. Get the remainder of the story within the well timed commentary beneath….
This earnings season got here with low expectations. That is making a low hurdle that almost all corporations are having success leaping over permitting the general market to trudge increased.
The following hurdle is on Wednesday July 26th after we get the Fed charge determination. The query on everybody’s thoughts is whether or not the Fed is staying on their hawkish inflation combating conflict path…or are traders proper that they need to be prepared for a pivot to decrease charges earlier than anticipated?
That matter and extra shall be on the coronary heart of immediately’s Reitmeister Whole Return dialogue.
Market Commentary
First, please make sure you be a part of me this Thursday 7/27 for my webinar presentation:
On the final Fed assembly Powell pounded the desk that given the persistence of excessive inflation, Fed officers had been ready to do 2 extra quarter level charge hikes. Within the weeks that adopted we acquired served up excellent information on the inflation entrance with a lot decrease than anticipated readings for the July CPI and PPI stories.
But nonetheless coming into the announcement Wednesday 7/26 @ 2pm ET there’s a 99% expectation of 1 / 4 level charge hike on the way in which. And here’s what traders presently count on at subsequent Fed conferences:
20% probability of one other quarter level at 9/20/23 assembly
44% probability of one other quarter level at 11/1/23 assembly
Then you might have various levels of expectation of charges getting lower in 2024. Nevertheless, even by June 2024 you might have nonetheless have greater than 38% odds of charges at a really hawkish 5% or above.
This continues to have charges inverted which is traditionally among the finest predictors of a future recession. Ycharts has a US recession chance chart primarily based on this idea that presently stands at 67% odds of recession forming over the subsequent 12 months.
But even in mild of that ominous image, the S&P 500 (SPY) is on a powerful run. That’s as a result of we’ve all heard about the opportunity of recession…which retains NOT taking place. This has created a formidable FOMO rally that’s pressuring these with a bearish bias to surrender hope.
Will that rally proceed after the Fed assembly?
The reply to that relies on whether or not the Fed agrees with traders in regards to the accelerating enchancment on the inflation entrance present in July’s CPI & PPI stories. Or do they proceed to see inflation as too sticky in locations like labor and shelter and thus need to maintain elevating charges to place a stake via the guts of excessive inflation as soon as and for all?
Any dovish tilt of their language shall be celebrated with extra shopping for exercise. However given that is totally anticipated, as confirmed by the sturdy operating rally in hand, then a hawkish Fed sticking to their weapons might spark an extended overdue pullback.
No…not return to the bear market. Not a full blow correction both. Only a wholesome pullback of 3-5% the place a number of the current extra earnings are taken off the desk.
This isn’t a tradable occasion. So long as we’re above the 200 day transferring common, then no have to be out of shares.
Slightly, it creates a buying and selling vary atmosphere the place people with a notable benefit can nonetheless squeeze out earnings. And sure, our reliance on the POWR Scores is a confirmed benefit that ought to proceed to maintain us in good stead.
Worth Motion
As famous above, and shared in my 2023 Classes Realized commentary from final week, we shall be simplifying our market timing strategy. That’s completed by a give attention to the 200 day transferring common for the S&P 500 (SPY).
Plain and easy we shall be bullish above that mark and bearish beneath.
You’ll be able to see how sturdy the current bull run is by seeing how far above the 200 day transferring common (purple line) we’re on the present time. However even the 50 day (yellow) and 100 day (orange) are fairly beneath the present motion.
As famous somewhat earlier, a stubbornly hawkish Consumed Wednesday might spark a fairly regular 3-5% pullback. That may nonetheless have us properly above the 100 day with little purpose to worry of additional draw back to return.
Nevertheless, if the Fed stays hawkish + fundamentals start to darken displaying the recession could also be nearer at hand…then I’ll not wait til we get all the way in which all the way down to the 200 day transferring common earlier than taking extra defensive maneuvers.
No, I can’t be getting brief until we’re beneath the 200 day transferring common. However certainly might put a bit more money on the sidelines if these darkish storm clouds begin to type.
Till then it’s truthful to imagine we’re nonetheless very a lot in a bullish atmosphere. Simply imagine that traders ought to take some revenue on the Magnificent 7 and different overpriced AI/tech shares and put that cash to good use in additional attractively priced investments. And that creates a great segue to the subsequent part…
What To Do Subsequent?
Uncover my present portfolio of 5 shares and 4 ETFs that had been handpicked for the Reitmeister Whole Return portfolio to outpace the market within the weeks and months forward.
That is all primarily based on my 43 years of investing expertise seeing bull markets…bear markets…and every thing between.
In case you are curious to be taught extra, and need to see my 9 present trades, then it is advisable…
Begin a 30 Day Trial to Reitmeister Whole Return >
Wishing you a world of funding success!
Steve Reitmeister…however everybody calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Editor, Reitmeister Whole Return
SPY shares . Yr-to-date, SPY has gained 19.99%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.
In regards to the Writer: Steve Reitmeister
Steve is best identified to the StockNews viewers as “Reity”. Not solely is he the CEO of the agency, however he additionally shares his 40 years of funding expertise within the Reitmeister Whole Return portfolio. Be taught extra about Reity’s background, together with hyperlinks to his most up-to-date articles and inventory picks.
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