- Moving the markets
The S&P 500 soared to a 13-month high as traders bet on the Fed holding off on raising interest rates this week. The Fed has already hiked rates 10 times in a row, but now the odds are 74% in favor of a pause.
Maybe tomorrow’s inflation report will confirm that view, as analysts predict a drop from 4.9% to 4% in May. That would be good news for the markets, even if the economy is slowing down. Who cares about earnings when rates are going down, right?
Of course, the Fed won’t admit they are giving in to market pressure. They will still talk tough about fighting inflation and keeping their options open. But the markets are convinced that the tide has turned, and rates will start to fall soon.
That boosted the Nasdaq but left the Small Caps behind. It could be a wild week, though, if inflation surprises to the upside and spoils the party.
The banks were weak, and the value stocks lost their shine from last week. As ZeroHedge showed with this chart, chasing trends is risky when the markets are so uncertain. One day you’re a winner, the next day you’re a loser.
Bond yields spiked at first but then settled down, leaving the 10-year unchanged. The US Dollar edged up, while Gold swung back and forth and ended slightly lower.
The markets are “hooked on hope” that the Fed will do what they want and keep rates steady. But what if they don’t?
- “Buy” Cycle Suggestions
The current Buy cycle began on 12/1/2022, and I gave you some ETF tips based on my StatSheet back then. But if you joined me later, you might want to check out the latest StatSheet, which I update and post every Thursday at 6:30 pm PST.
You should also think about how much risk you can handle when picking your ETFs. If you are more cautious, you might want to go for the ones in the middle of the M-Index rankings. And if you don’t want to go all in, you can start with a 33% exposure and see how it goes.
We are in a crazy time, with the economy going downhill and some earnings taking a hit. That will eventually drag down stock prices too. So, in my advisor’s practice, we are looking for some value, growth and dividend ETFs that can weather the storm. And of course, gold is always a good friend.
Whatever you invest in, don’t forget to use a trailing sell stop of 8-12% to protect yourself from big losses.
- Trend Tracking Indexes (TTIs)
The major indexes closed higher again as Wall Street remained hopeful that the Fed will hold off on raising rates. Our Domestic Trend Tracking Index (TTI) followed suit and moved up. I will monitor the market this week and then adjust our portfolios as needed.
We also must watch out for Friday’s big options expirations, which could add more volatility.
This is how we closed 06/12/2023:
Domestic TTI: +2.98% above its M/A (prior close +2.30%)—Buy signal effective 12/1/2022.
International TTI: +6.98% above its M/A (prior close +6.61%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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