MarketGauge Weekly Market Outlook
By Keith Schneider and Donn Goodman
Walking The Fine Line
Are we in a recession? If not, when will we be?
Is it the right time to go back into the stock market? Have interest rates stopped increasing for now?
Will my food costs continue to climb?
These are just a few frightening questions confronting Americans and investors today.
The leading economic indicators are all over the place.
Daily, forecasters claim that we have probably started a recession (NOT) and that Energy prices will continue to climb (while they’ve declined over 10% in the past few weeks).
What to make of all the noise? There are a host of different and conflicting narratives playing out through the media, economic publications, newsletters, talking heads, and stock market pundits?
After two weeks of a market rebound and a rally in the fixed income markets, we have kicked off the mid-year start in a more positive, more profitable way.
This shouldn’t surprise followers of our January and July seasonal (or Calendar) range indicators.
Is the selling over?
Is it safe to go back into the stock and bond markets? Is there a real and sustainable pause regarding food and commodity prices?
The answer is unequivocally, NOBODY KNOWS.
More importantly, the markets are acting in a quick, volatile, and anticipatory manner considering the fact that markets are a discounting mechanism that looks 6 to12 months into the future.
As a result, good news is bad news and vice versa.
This is normal in a changing economic environment with a non-accommodative Federal Reserve. Expect the unexpected.
However, we DO NOT think the stock market has reversed modes and is now, all of a sudden, in a new bull market.
Corrective rallies like the current run-up happen often and quickly in bear markets.
So heed caution.
Rallies like this one can and will turn on a dime.
Until there is clarity in the future economic forecasts, stock market rallies are suspect, and there are still plenty of economic clouds on the horizon.
Fixed income securities ended the week with a reversal. The decline in interest rates over the past few weeks turned around and headed higher.
This was prompted by a better-than-expected jobs report on Friday morning indicating that employers are still hiring in large numbers. The market’s tick-up in long-term rates supports our feeling that if we were already in a recession or about to begin one, we would NOT have seen such a big increase in the payrolls number.
Although unemployment (and first-time claims) is a lagging indicator, we do not believe employers would be hiring at this fast pace if they believed that economic conditions were in or about to decline. Employers also understand the worker shortage and cannot afford to let more job openings occur.
So, if you’re a believer in the mantra of “don’t fight the Fed,” then this may create a dilemma for your stock market allocation.
MarketGauge doesn’t fight the Fed because there are many trends that do well when the Fed needs to tighten. We follow them.
To read more about the employment picture, what is currently driving the markets, and the five indicators to watch for to determine if it is safe to go back into the markets, click here for the rest of this article.
Additionally, if you would like to discover more about the MarketGauge’s investment solutions and ways we can help you, please email us at [email protected] or reach out directly to our Chief Strategy Officer, Rob Quinn at (407) 770–7637.