“When the wave breaks here. Don’t be there. Or you’re gonna get drilled!” – Turtle
A New Bull Market?
The question on many minds is whether U.S. stocks have officially entered a new bull market.
Some analysts suggest this is the case, citing the S&P 500’s recent 20 percent rise from its low of October 2022. However, we have our doubts.
It’s important to note that the S&P 500 remains down over 7 percent from its peak closing value of December 29, 2021. While it’s possible this index could reach new heights during the current rally, any such surge may prove to be fleeting.
Several bearish indicators are looming over the market, including rising interest rates, increased Treasury sales, stress in the credit markets, and the threat of an impending recession.
In fact, we believe that the risk associated with the S&P 500 has escalated in recent months, particularly as top technology stocks have experienced substantial gains. As a result, many investors might find themselves inadvertently exposed in the “impact zone.” This could lead to significant losses when the market inevitably transitions to its next bearish phase.
We will delve deeper into this situation soon, but first, let’s provide some context.
The latest consumer price index (CPI) report from the Bureau of Labor Statistics (BLS) serves as a crucial starting point. Recently, the BLS reported a year-over-year consumer price inflation rate of 4 percent in May. This rate is more than double the Federal Reserve’s desired inflation target of 2 percent. Continue reading
In summary, while discussions around a new bull market prevail, caution is warranted given the underlying economic indicators. Investors should be vigilant about their positions and remain aware of potential market downturns.
