by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
STOCK MARKET RATING … 3.0 (0-4 bearish, 5 neutral, 6-10 bullish). The weekly bull/bear battle continues, which is very evident today.
EQUITY MARKETS and the ECONOMY … The Fed will be reporting their action on interest rates tomorrow. It is expected they will raise their interest rate by 75 basis points, because overall inflation continues at such a high rate. Expectations are that all Fed rate increases after tomorrow will be 50bp or less. Many observers believe that the Fed may be willing to acknowledge that they require an economic slowdown in order to bring inflation under control.
Here are some widely held key economic indicators as released today from the CNBC Fed Survey:
· Rate Hike tomorrow – 75bp (0.75%)
· Peak Rate – 4.26% in March 2023
· No. of months at peak rate - 11
· Probability of Recession in next 13 months – 52%
Equity markets seem to trend in one direction for a week or two (as one viewpoint prevails) only to see that trend reverse itself when events change investor perceptions. This trending alone is strong evidence that many bears and bulls are still around. Most observers believe the market will continue to swing back and forth – as news shifts between favorable and unfavorable - before new highs or new lows are finally reached. To say it differently, the market will not set new highs nor new lows for some time.
Therefore, we believe the best-case scenario is for brief bear market rallies within a downward secular market trend, as continual Fed tightening causes the economy to recess, bringing the market down further to new market lows. Bear markets typically end with very sharp price decreases in the last 30 days. We are around 40% invested in stocks, primarily in pockets of opportunity --- sometimes in either direction. Currently, all opportunities seem to be short-term in nature.
NOTE: I cut back writing this weekly letter, without ignoring the market itself, to care for my wife after her rotator cuff surgery.
PORTFOLIOS … After reading this report, if you are unsure what to do with your portfolio, call me to discuss your circumstances and I’ll explain what ought to be done to help your situation.
If you would like a complimentary portfolio evaluation, just click here and we will explain what’s good about your portfolio, what you should consider changing, and how it’s likely to perform in upcoming months, all at no cost to you.
TO MY CLIENTS … THANK YOU FOR YOUR TRUST. We’ve had great success since we started this RIA in mid-2018 and are doing better than the market return since that time period.
Learn from the Bible: Proverbs 21:5, 22:3, 27:12 and 3:56, Joshua 1:9, Ecclesiastes 8:7, 1Chronicles 12:32 and 29:11-13, and James 4:13-16.
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Opinions in this post are for general information only and are not intended to provide specific advice to, or recommendations for any individual, without our complete knowledge of that individual’s total financial profile. No strategy assures success or protects against loss. Past performance does not guarantee future results.