The bear market is here. No doubt about it. Now we need to explore how low the S&P 500 (SPY) will go and plan to move the business plan forward in the coming months. (Hint: Sorting stocks is # 1 on the to-do list). 40 year investment veteran Steve Reitmeister will share his business plan in the latest comments below.
(Please enjoy the updated version of my weekly commentary from Reitmeister Total Return Newsletter).
Bull markets are like driving up and down the sun. Everyone has fun!
Bear markets are like driving at night. People talk a lot about it …But all you have to do is turn on your lights.
In fact the lights are active for Reitmeister total back members. We may not be the first people to sound the bear alarm, but we swung quickly to make a clean profit after the market finally hit the bear market area last week.
Why does the bear market stay here for so long? How far down do we go? And what is a business plan?
All those pressure questions will be answered and further answered in our weekly commentary which is निम्न
On 5/24 I finally had to face the facts that falling into the bear market was becoming more probable than returning to the bullish times. This led to the first phase of creating a hedge portfolio. We built the remaining 6/3 of that hedged wall that called the rally bluff, bringing the stock closer to 4,200.
Since then the S&P 500 has fallen more than 10% and yet our portfolio has generated + 3.17% profit. It is well suited for our service mission to consistently seek excellent performance despite market conditions.
On Monday, the stocks finally broke the long wait in the bear market area, (under 3,855) we kept a trade alert to sell all our stock positions. Thus, we are no longer hedged. Instead we are now 56.5% shorter in the market with an array of 3 inverse leveraged ETFs. Also allocate another 15% to a pair of ETFs which increase in value as rates rise. That has become the best business in town in 2022.
So why would the bear market continue further south, making this net portfolio allocation the right choice?
First, because the clear and loud bear signal just stopped when we finally closed the bear market area. Anyone who thinks this is just an improvement or a true bear market has just received their response in the negative with the FOMO rally.
Some will foolishly wait for the Fed rate decision to make its call tomorrow. The debate is about 50 points vs. 75 points. However, it has completely lost the point that inflation was not temporary and the Fed is easily behind the curve 6-12 months. Therefore, they are less likely to manage soft landings. (Improvements: Too much, too much, too little !!!)
How much does the stock go down?
Of course this is another logical question. In fact, I received some emails from some customers asking why I think this bear market loss would be worse than the -34% average decline. This is especially true when the economy is not currently in recession.
First, remember that investors look 4-6 months ahead to make moves in anticipation of what is likely to happen in the future. Of course, they often predict recessions before they appear on the scene. In this case, sales started in January and this Q1 GDP was actually -1.5%. This means we are already on the brink of a recession and investors were not mistaken in what seemed like an early dose of caution.
Yeah Al that sounds pretty crap to me, Looks like BT aint for me either. Unfortunately this is almost irrelevant because as we turn our attention to Q2 it is not so good.
The current GDP estimate is only + 0.9% lower than the more attractive + 2.5% estimate a month ago. The decline is due to the recent softening of economic data and if it continues through the June data we are likely to see the next contraction period down the barrel.
Note that GDP is now estimated at + 1% for Q1 the same day that the original -1.4% GDP was read which was later modified to -1.5%. The obvious point is that there should be no rest in reading the current + 0.9%.
To put it bluntly, investors advance the worst economic data. And since stocks are already sinking into the bear market area, it will shock the biggest investors … many of whom are corporate executives who will now take a dose of caution when making their business decisions.
Caution = taking less risk = lower spending = increasing recessionary barriers = giving investors more reason to sell stocks (rinse and repeat)
Another nail in the coffin of the recession is today’s NFIB Small Business Optimism Report which has shown the lowest reading in expected trading conditions in the 6 months from now. Here is a quote from NFIB chief economist Bill Dunkelberg:
“Small-business owners are more pessimistic in the second half of the year because supply chain disruptions, inflation and labor shortages are not easy.”
All of this is likely to be offset by lower revenues in the coming quarters. When it is fruitful, the valuation of the stock (like PE) actually increases, which brings the valuation down to the next level of sales. The sum total of these things is why I doubt that we will surpass the average 34% decline of this bear market (3,180). Maybe we end up with 40% (2,891).
And the maximum pain will be found in that darkest hour below. About 10-20% of rallies open so fast that it amazes people. But that’s the essence of it “Be greedy when others are afraid.”
The point is, most people are getting the memo right now that this is a bear market and they should join the sale if they haven’t already. This leads to a downward FOMO rally (fear of losing).
Then there will be a series of bear market bounces after the bottom hit. And then the bottom will be formed.
Right now the right strategy is shortening the market which we are doing through 3 ETFs which is shortening 56.5% of the market. Add to that our 2 well-reasoned trades to take advantage of rising rates because the Fed is definitely on our side (more evidence to come in tomorrow’s FOMC rate decision.)
The sum total of that intelligence has led us to make lucrative profits this week as the market bears have fallen 10% along the market area. As we explore the bottom line, we will make more and more money with this strategy.
At some point we will reap those profits and sow the seeds for the next bull by buying excellent growth stocks at seriously low prices.
Timing is as much an art as science. But, after 6-12 months you made so much money that the headache went away easily in time.
The point is, this is a bear market and we need to use bear market strategies. To do anything other than that is sheer madness. Fortunately we have the right strategies to play in Reitmeister Total Return and then we are ready for what comes next.
What to do now
Right now I have 5 places in my portfolio that will not only save you from the upcoming bear market, but also bring you substantial profits when the stock head is low.
This strategy fits perfectly into the mission of my Reitmeister Total Return service. This is to provide positive returns …Even in the face of a roaring bear market.
Yes, it is easy to make money when the bull market is in full swing. Anyone can do it.
Unfortunately, many investors do not know how to make a profit as the market head is low. So let me show you the route with 5 trades perfectly suited for today’s bear market conditions.
And then down the road we will take our profits to these places and the bull market will start fishing down for the best stocks to rally it right back.
Discover what my 40 years of investment experience can do for you.
Also get instant access to my complete portfolio of 5 timed trades primed to excel in this tough market environment.
Click here to learn more>
Wishing you a world of investment success!
Steve Reitmester… but everyone calls me Raiti (pronounced “Raiti”).
CEO, Stock News Network and Editor, Reitmeister Total Returns
SPY shares were trading at $ 373.87 per share on Tuesday afternoon, down $ 1.13 (-0.30%). Year-to-date, SPY has declined -21.04%, against% increase benchmark S&P 500 index over the same period.
About the Author: Steve Reitmeister
Steve is known as a “reity” for stocknews viewers. Not only is he the CEO of the firm, he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, as well as links to his recent articles and stock selections.
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