There are many reasons why the stock market (SPY) is bearish heading into 2023. This is especially true when inflation is still too high and he’s stepping up the Fed’s hawkish behavior. And then the specter of a potential banking crisis emerged that only added to the uncertainty and increased the likelihood of a bear market. Read on below to discover Steve Reitmeister’s latest market outlook, trading plans, and top picks to stay on the right side of the market action.
S&P 500 (spy) has been downright beaten for recently giving back nearly all of its hard-earned gains since the beginning of the year.
But let’s be honest…There is not much real relief in sight.
Let’s take a look at our current position, the stock’s future outlook, and our trading plan to outperform.
Market commentary
First, I have to talk about the elephant in the room. Of course, I am referring to my serious concerns about the recent bank closures.”Ghosts of past financial crises“.
Let me insert an important disclaimer here.
I am not a banking expert!
And sadly, 99% of the articles I’ve read this past week weren’t even written by banking experts. So please understand that what I am sharing is from the perspective of an economics major with 43 years of active investment experience.
This looks like more smoke than fire, but small wildfires can start here and there.
In short, after the 2008 financial crisis, bank scrutiny was much more than before. Combine that with the fact that we don’t have a stock bubble like the last one in real estate…and we’re not creating a new insane financial debt instrument that could collapse the financial system.
All of this adds up and it doesn’t seem like we are on the brink of a systemic bankruptcy of the banking system. However, there are isolated incidents of balance sheet vulnerabilities and mismanagement that need to be cleaned up. This is especially true for banks with too much exposure to cryptocurrencies.
Will there be more bank failures?
In most cases yes. Unfortunately, hedge funds have great incentives to short stocks in order to find weaknesses and capitalize on them.
Even Cramer openly jokes about how easy it is for hedge funds to short stocks and spread stock-squashing rumors. A simple pickaxe.
This creates a huge headline risk in between as the uncertainty increases with each new bank failure. And that uncertainty adds to all the previous concerns that inflation and the Fed’s hawkishness are causing a recession and a deepening bear market.
Stocks were already sold out in February and early March, as the road signs indicate. Attention ahead!
Meaning inflation is still too high, the Fed has stepped up its hawkish rhetoric that interest rates are likely to be higher than previously announced and remain for the long term. And it was previously stated that the interest rate would be at least 5% and would be on the books until the end of 2023.
Previous concepts were good enough to push the economy down to recession levels. So likely to be even more hawkish is why the last six sessions he spent under the vital psychological support of 4,000 people. And his last four sessions below the 200-day moving average are at 3,940.
Now let’s consider an interesting concept mentioned in this article.
Goldman Sachs no longer expects the Fed to raise rates in March
A month ago, as we saw in February, the March 22nd Fed meeting was supposed to raise rates by 25 basis points. He then became more hawkish by Fed officials, and the odds began to move toward his 50-point hike, more aggressively curbing inflation.
So what if the Fed pauses rate hikes because of a banking crisis?
In fact, I suspect investors will view it negatively. Because it signals to investors that the Fed is seriously concerned about the stability of the banking system and must deviate significantly from its hawkish plans.
Investors should not view such a move as a dream.”dove pivot“Rather this will cause the Fed to press the panic button (which they have called Public Enemy #1 for over a year) that financial system stability is more important than fighting inflation.
As crazy as it sounds, let’s hope the Fed continues to aggressively raise rates at its March 22nd meeting.
Note that the Consumer Price Index report came out Tuesday morning. Yes, just 6% year over year, previously he was 6.4%. Don’t lose sight of the fact that the inflation target is still at 2%, well off target.
For those who want to say that inflation was really a problem in the spring of 2022, but not so much today… unfortunately, the idea is a mess. The proof is 0.4% monthly growth, which still shows a 5% annual pace of growth. (Recall again that the target level is 2%).
Wednesday March 2015 brings a more positive Producer Price Index report along with retail sales. Then all eyes will be on his Fed interest rate decision of 3/22. Than actually being a dove.
Taken together, this remains a bearish environment. Even if the banking issue hadn’t been on the minutes, I still would have continued to debate how the Fed’s actions would open the door to recessions and the natural deepening of bear markets.
But when you mix the uncertainty of banking issues with the serious headline risks that lie ahead, it’s just a coffin nail for bullish aspirations in early 2023.
So the 2022 bear market has just hibernated a bit to welcome the new year. Now it’s happening and it’s about to drive the stock price down even further.
No daily, weekly, or monthly lowering. But as we look over the next few months, we should expect even more downsides. Yes, it will likely drop further below the 3,491 level from October.
As such, the Lightmeister Total Return Portfolio is built to profit when equities fall further into bear market territory. If you haven’t applied that strategy yet, it’s never too late to do so.
what next?
my brand new2023 stock trading plan” cover:
- why 2023 “Jekyll & Hyde” stock year
- How the bear market will revive
- 9 deals the bears are back and profitable right now
- 2 More than 100% chance of trading when a new bull appears
- etc!
Good luck with your investment!
Steve Lightmeister…but everyone calls me Reity (pronounced “Righty”).
CEO, StockNews.com, and Editor, Lightmeister Total Return
spy stock. Year-to-date, SPY is up 2.43% for him, while the benchmark S&P 500 index is up 1% over the same period.
About the Author: Steve Lightmeister
Steve is better known to StockNews audiences as “Reity”. Not only is he the company’s CEO, he shares 40 years of investment experience. Lightmeister Total Return PortfolioFind out more about Reity’s background, links to our latest articles, and stock ticker details.
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