- Moving the markets
Wall Street had a bad day on Wednesday, as tech and consumer stocks dragged the market down. Nvidia, Apple and Tesla were among the worst performers, losing about 3% each. The “Magnificent 7” stocks were not so magnificent after all.
Oil prices soared to their highest level since November, as Saudi Arabia and Russia agreed to keep cutting supply. This pushed up inflation expectations and bond yields, hurting stocks and regional banks.
The Fed may have to raise interest rates sooner than expected, but traders are still betting on a pause later this month. That may change quickly, as oil prices could spoil the party for the dovish crowd.
The economy is sending mixed signals, with manufacturing and services data showing a zigzag pattern. The Citi Economic Surprise Index is falling, while “Hard data” and “Soft Data” are converging. This means that inflation is rising, and growth is slowing – a recipe for stagflation.
Boston Fed President Susan Collins added to the confusion, saying that the Fed can be “cautious” on rate hikes, but also that “further tightening could be warranted”. That’s as clear as mud.
ZeroHedge summed it up like this:
Today’s price action is consistent with the market dynamic we’ve seen play out over the past few months, characterized by elevated sensitivity to economic data, with equity markets seemingly adopting a ‘bad news is good news’ view, rallying on weak growth data, and selling off on strong data – amid fears that too strong data will increase the risk of an additional rate hike.
Bond yields spiked, the dollar rose, oil prices climbed for the ninth day in a row, but gold dipped and found support at its 200-day moving average.
How will the market react to the next economic report?
Continue reading…
2. “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.
3. Trend Tracking Indexes (TTIs)
The markets had a rough day, as rising bond yields and oil prices scared off the bulls. A late rally trimmed some of the losses, but the mood was still gloomy.
Our TTIs also fell, and we may see a bearish turn in September. That’s because the economy is weakening, and September is historically the worst month for stocks.
This is how we closed 09/06/2023:
Domestic TTI: +1.75% above its M/A (prior close +2.10%)—Buy signal effective 12/1/2022.
International TTI: +3.39% above its M/A (prior close +3.85%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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