The S&P 500 (SPY) has been on a tear since November 1st when the Fed started to make their dovish tilt opening the door to future rate cuts. Unfortunately they keep not happening and start date keeps getting pushed further and further out. That has many wondering if stocks are getting ahead of themselves setting things up for a fall. Thus a good time to tune into what investment veteran Steve Reitmeister has to say about the market outlook along with his trading plan and top picks to stay ahead of the pack. Read on below for more.
As you likely remember from your English Lit classes, sometimes you have to…”Beware the Ides of March“.
That was 3/15, the date Julius Cesar was assassinated and is often viewed as an important check point for investors at this early stage of the new year.
Overall, there is not much to beware as most signs continue to point bullish. On the other hand, the S&P 500 (SPY) has rallied considerably the past few months where the overall market does seem ripe for at least a modest pullback, if not correction.
That concept and more will be at the forefront of today’s market commentary.
Market Commentary
Last week we contemplated; What Would Cause a Bear Market Now?
To boil it down, there are 2 likely causes of bear markets. First, is a looming recession which drags down earnings and risk taking leading to a thorough trimming of stock prices.
The second bear market precursor is the forming of a stock price bubble that becomes untenable. The last time that happened was back in 2000 with the bursting of the tech bubble. However, even the most ardent value investor would be hard pressed to make any such parallels to current conditions (maybe a few nosebleed AI stocks that deserve a haircut).
Putting those ideas together, there is not much reason to fear any looming bear market forming. On the other hand, there is not tremendous reason for stocks to press significantly higher as I shared in my last commentary: Is the Bull Market Growing Tired?
The main story there is about how the start date for Fed rate cuts keeps getting pushed further and further back. Please remember there was a time that folks expected that to take place in December 2023. Now we are writing off May 1st and HOPING June 12th is the starting line.
Not helping matters was the hotter than expected PPI report on Thursday morning where the month over month reading of +0.6% was twice the level expected.
With that news bond rates climbed and stocks fell on the session. Plus, the odds of a rate cut coming in June was shaved down to 60% when just a few weeks ago the probably was over 80%.
Hate to tell you this my friends, but I would say odds of a June cut is 50% at best…probably lower.
That’s because if the Fed is “data dependent” as they love to tell us, then the most recent data says that inflation is still too high. That includes the Sticky Inflation reading from earlier this week that remains over 4% and not moving fast enough towards the desired 2% target.
This calls into question if June is a real possibility when there is not enough inflation readings in that short stretch to unequivocally believe that high inflation is dead and buried. That is especially true given the Fed’s statements that they would rather cut rates too late than too early as they do not want any smoldering embers of inflation to reignite into a fire.
The most important event on the economic calendar is the March 20th Fed rate decision along with their quarterly Summary of Economic Projections. No one on the planet is expecting a rate cut at this meeting. However, they will scour every word in the report…and every statement and facial expression from Powell at the press conference looking for clues of what comes next.
No doubt someone at the press conference will ask Powell what he meant by the recent statement that rate cuts are “not far” off. Most likely, he walks that comment back with more “data dependent” talk and “better late than early” which clues investors in that even June may be too soon for the rate cut parade.
If true, then that may be the catalyst for the long awaited pullback from these current highs. Nothing scary. Just a healthy 3-5% pullback after the 25% rally from the October 2023 low.
However, there is no law that says that must happen. Instead, investors could just continue to just idle at this red light awaiting the green that eventually will happen when rates do get cut. This would be what you call a consolidation under 5,200 where the market average doesn’t move much…but results in ample sector rotation.
Some call that a “rolling correction” where each sector takes turns being on the outs even as the overall market indices don’t move much. Those sector focused sell offs cause appropriate dips in overripe positions. This is the best way to clear the path for the next healthy bull run.
Long story short, stay bullish. And stay focused on healthy growing companies that are attractively priced. The POWR Ratings continues to be your best friend in finding quality stocks.
More about that in the next section…
What To Do Next?
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This is all based on my 43 years of investing experience seeing bull markets…bear markets…and everything between.
If you are curious to learn more, and want to see these lucky 13 hand selected trades, then please click the link below to get started 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 were trading at $510.73 per share on Friday morning, down $2.63 (-0.51%). Year-to-date, SPY has gained 7.45%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better 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 in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
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