ETF Tracker StatSheet
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STOCKS SOAR, BONDS AND GOLD RALLY, BUT EXPERTS WARN OF TROUBLE AHEAD[Chart courtesy of MarketWatch.com]
- Moving the markets
The markets soared on Friday, ending the best month of the year with a bang. The Dow Jones Industrial Average hit a new 2023 record, while the S&P and Nasdaq followed suit. But not everyone is celebrating the rally. Some experts are warning that the party may soon be over, as the economy shows signs of slowing down and the Fed signals rate cuts in sight.
One of the skeptics was Fed Chair Jerome Powell, who poured cold water on the market’s hopes for lower interest rates. He said it was too early to say if the Fed’s policy was too tight, and that the central bank would not act based on “speculation”. His remarks sent bond yields tumbling, as investors priced in a higher chance of a rate cut as soon as March. The market now thinks there is an 80% probability of a cut, up from 40% yesterday.
Gold also surged, hitting a new all-time high of around $2,090 an ounce. The precious metal has been on a tear since October, thanks to strong demand from central banks and investors. Gold is seen as a “safe haven” in times of uncertainty, and a hedge against inflation. Some traders think the current environment is perfect for gold, as the economy is cooling but not collapsing, and the Fed is on hold but not hiking. They call it the Goldilocks scenario: not too hot, not too cold.
But not all the market moves made sense. Bloomberg noted that bonds had a better reason to rally than stocks, which had to factor in the growth concerns that underpin Powell’s remarks. The latest data showed that the manufacturing sector contracted for the fourth month in a row in November, and that the economy was showing typical early signs of recession, according to Bloomberg Economics.
ZeroHedge pointed out that, historically, stocks tend to drop sharply right before the Fed cuts rates, as the market realizes why the Fed is panicking. The last time the Fed cut rates, in March 2020, stocks plunged by 30% in a matter of weeks, as the coronavirus pandemic triggered a global lockdown.
Will history repeat itself?
2. Current “Buy” Cycles (effective 11/21/2023)
Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.
If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.
3. Trend Tracking Indexes (TTIs)
Fed chair Powell gave mixed signals about the monetary policy, but traders interpreted his words as more supportive of low interest rates and continued to push the major indexes higher.
Both of our TTIs rose and ended the day further above their respective trend lines.
This is how we closed 12/01/2023:
Domestic TTI: +4.38% above its M/A (prior close +2.87%)—Buy signal effective 11/21/2023.
International TTI: +4.61% above its M/A (prior close +3.78%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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