Greetings from an “Express” SkyClub somewhere in the rafters of John F. Kennedy International airport. I’ve just left the cleanest air quality in the world outside of Zurich for the suburbs of Manhattan.
The weather is hot. And the air smells like the world is on fire. Sure enough, wildfires in Canada are creating havoc on the Eastern Seaboard.
One must question if this is an apt metaphor for the state of the global economy. While I don’t see fire… I smell a lot of smoke. With the S&P 500 at its highest levels since August 2022, we now have a string of events in the coming days that could set the market’s tone through the balance of the year.
All this comes on the back of weaker economic data — more smoke…
The Data Looks Grim
The Federal Reserve will make its next interest rate decision on June 14. After weeks of speculation, the narrative has shifted toward a “pause” among the Fed Open Market Committee. The central bank will need to look at the key inflation data. We’ll also see an inflation update on the Consumer Price Index (CPI) and the Producer Price Index (PPI) as the Fed decides.
Meanwhile, the Department of the Treasury’s massive capital injection into its reserves will likely mimic a rate hike. The Treasury will likely absorb about $1.2 trillion in its General Account by the end of the year. The money might not come from the equity market. But it’s certainly a drain on the banking system that could arrive later this year.
All the while, more debt probably doesn’t mean economic growth. The U.S. government might try to spend into oblivion to prevent an official recession, but growth forecasts are plunging right now.
The World Bank now projects 2.4% growth for the next 12 months. The Paris-based Organization for Economic Cooperation and Development (OECD) suggests 2.7%. And central banks still aren’t done raising rates — which will also drag on growth.
The Bank of Canada surprised the world with a 25-point hike — bringing its interest rate to the highest levels in two decades. This comes after the Bank of Australia made a similar move just two days ago.
This is all “smoke and fire” type of data... The market is screaming toward that 4,300 level, and the Russell 2000 has been strong in the last week. There is a lot of money that has come back in since the debt ceiling stoppage.
This is an extremely difficult environment — with more and more short sellers piling in to bet on a sharp downturn. The rate of traders who are net short on the S&P 500 is now at 14.7%.
This is just a reminder that when momentum goes Green, you get out of the way. But these things don’t historically end with a lot of optimism. The last time traders were this net short was September 2007.
This is one of those markets where you take gains where you can. Otherwise, you must take an 18- to 24-month outlook on these markets. It’s a great time to start looking at companies that are trading with strong F scores and low Graham scores.
Members of Tactical Wealth Investor will receive our latest pick in the portfolio on Thursday. It’s one of the best renewable energy players on the planet, trading for well under the sum of its parts. It has rock-solid financial management, and it’s got an upside of 30% from here in 2023.
I’ll tell you all about the company after I alert my Tactical Wealth members.
To your wealth,
Garrett Baldwin
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
Market Momentum isGREEN
Tactical Wealth Investor readers will get their next pick tomorrow — apologies for the delay due to travel. That said, I want to ensure I provide as deep an analysis as possible on all stocks in the portfolio. And I have a lot to cover. Especially the latest on retail names that have been rallying like crazy, and the incredible rotation of capital into a lot of the names in our portfolios.
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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