The S&P 500 (SPY) seems to be going nowhere. But that doesn’t mean that nothing happens. Nor does it mean that there is no money to be made in this market. Listen to Steve Reitmeister’s recent market commentary, which sheds light on the path to investment gains even when the outlook seems so bleak. Read the full story below.
In late March, I wrote an article summarizing what many of us were thinking at the time:
Today I’m writing a new chapter in this saga as the stock market is still lackluster, leaving many investors sidelined.
Therefore, it is a good time for us to discuss why this is happening, what the future holds and why it is still worth staying invested even when the environment seems as trendless as it is now.
market commentary
Let’s start with a picture of the S&P 500 (SPY) in the last month to set the stage:
Don’t be fooled by the apparent peaks and valleys. Overall, we’ve been in a tight 2% range for the past month.
Some call this area bound.
Some call this the tensioning of a spring before the next big eruption.
But everyone will call it boring as hell!
The latter explains why interest in the retail stock market has declined so much. This is reflected in a 15-30% drop in page views for most major investment websites that focus on the retail (retail) investor market.
The next logical question is: Why is this happening?
There is a tug of war between bulls and bears all year round. With stocks rocketing near 4,200 by early February, it seems like the bulls took the lead early on…but since then, stocks have traded in a narrow range where bulls and bears are somewhat balanced seem to be.
Bears will say storm clouds are still forming for a recession and a deeper bear market, thanks to a hawkish Fed determined to induce a recession to end high inflation.
Bulls will say the long-feared recession continues to NOT materialise. And maybe never. Thus, the lows are already in and the new long-term bull market has already begun.
Right now, these two opposing views are fairly evenly matched, resulting in a narrow trading range and a significant drop in volatility. This sleepy action will end when the bulls or bears can wave the flag of victory. Until then…the sleepy range-bound action continues.
Why do I keep believing the bears will win?
The short version says that the Fed usually predicts a soft landing when it hikes rates, but actually induces a recession 75% of the time.
This time, however, they are forecasting a slight recession by the end of the year. So if they usually underestimate the outcome, then a worse recession is probably on the way, no doubt pointing to the return of the bear market and lower lows on the way.
(You can read the full version of my current bear market outlook here: Why Steve Reitmeister is becoming more pessimistic)
The latest economic data also remains lackluster as of Monday, as the Empire State Manufacturing report plunged from +10.8% last month to a depressing low of -31.8% this month.
On Tuesday, retail sales were then significantly better than expected at +1.6%, which was utter nonsense in some media touted as positive. The correct view is to recognize that this report does not take inflation into account. Now consider this revised math:
+1.6% YoY increase in retail sales
Annual CPI inflation rate of -4.9%
= -3.3% decline in US retail sales. Ouch!
Still, it’s fair to say that we’ve seen plenty of false signs of a recession over the past year. All signs that would point to a genuine weakening of the labor market remain decisive.
Those looking for a leading indicator should focus on the weekly jobless claims report, which rose 10% week-on-week to 264k. If that starts knocking on the door with more than 300,000 weekly claims, it’s a sign that the unemployment rate will start to rise. And once it starts to rise, it usually stays on that warpath for a long time.
This event would certainly cause more bulls to take cover while the bears take control of the market. Until that happens, you can expect that boring trading range to be the norm.
Why stay invested?
Again, many investors have become discouraged, believing that this ranged action leaves them with no opportunity to make a profit.
Nonsense!
Consider the expression that it “There is always a bull market somewhere“.
That was true even in 2022 when the overall market was in decline. That’s because the bull market was spotted by shorting stocks or buying inverse ETFs. These trades yield profits because in a bear market, down = up.
And even now that the market is rangebound, there are still many positions that are shifting. You just have to dig a little deeper to find them. That’s the benefit we enjoy with our POWR rating system.
This explains why the Reitmeister total return is up +1.93% since the beginning of April even as the S&P 500 is in the red. And small-caps in the Russell 2000 are suffering even worse losses.
No, I’m not saying this is the most amazing result ever. But it shows how to squeeze a purse lemon and make lucrative lemonade.
That’s why you stay invested even in monotonous times. Also, it is sometimes difficult to stay on the sidelines and work your way back into the market when it breaks out of a range. Oftentimes, this FOMO train accelerates quickly and misses out on copious profits.
In short, stay invested in this market.
Just make sure you do it right. And then I’ll update you on how the bull/bear tug of war is unfolding so we can move in the right direction.
What do you do next?
Discover my balanced portfolio approach for uncertain times. The same approach that has clearly outperformed the S&P 500 in recent months.
This strategy was developed using over 40 years of investment experience to recognize the uniqueness of the current market environment.
It is neither bullish nor bearish at the moment. Rather, it is confusing and uncertain.
However, given the facts at hand, we will most likely see the bear market awaken from hibernation and send stocks plummeting again.
We’d love to strategize to not only weather this downturn, but actually thrive. That’s because, with 40 years of investing experience, this isn’t my first time participating in the bear market rodeo.
If you’re curious and want to learn more and see the handpicked trades in my portfolio, please click on the link below to be taken to the real page of what’s happening:
Steve Reitmeister’s trading plan and top tips >
We wish you every success in investing!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Editor, Riding Master Total Return
SPY Stocks. Year-to-date, SPY is up 7.68%, while the benchmark S&P 500 index is up % over the same period.
About the Author: Steve Reitmeister
Steve is better known to StockNews audiences as “Reity.” In addition to being the company’s CEO, he also shares his 40 years of investment experience Reitmeister Total Return Portfolio. Find out more about Reity’s background and links to his latest articles and stock picks.
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