'The Bull Market Is Dying Slowly'

Stocks and bonds tumble (again)... The gas line at Costco is long... Orange juice outperforms... The Nasdaq is off 27% from its highs... Greg Diamond's 100% winner... 'This bull market is dying slowly'... More feedback on the Fed...

The rough ride continues...

Another day, another sea of red and multipercent declines across each of the major U.S. stock market indexes... And it's the same story just below the headlines with higher-risk growth names selling off by greater amounts than anything else...

Once again, the tech-heavy Nasdaq Composite Index led the way down, off more than 4%... the benchmark S&P 500 Index finished down more than 3%... and the sturdy Dow Jones Industrial Average was off 2%...

Bonds continued their tumble too... The yield on the 10-year Treasury note hit 3.17% intraday, its highest level since November 2018. Remember, yields trade inversely to prices.

In other words, if you've been relying on the conventional 60-40 stock-bond allocation, your portfolio continues to get hammered... The benchmark 60-40 measure we use is down roughly 16% in 2022...

And more people are starting to notice... Someone asked me (Corey McLaughlin) over the weekend... "Stocks can't keep going down, right?"

Well, yes... Stocks, generally speaking, can keep going down. I can't say for sure if they will, or how much longer or by how much if they do... but it's wise to prepare for the possibilities rather than using "hope for the best" as an investment strategy...

This is why we've urged you to consider the alternatives to conventional market wisdom...

And still do...

For decades, many people have just assumed that bonds are supposed to always go up when stocks go down. I can't blame them... The strategy, balancing riskier stocks with safer bonds, has worked for a lot of people...

But when "safe" bonds – after trillions of dollars of money-printing amid a pandemic and a burgeoning global war – yield a rate lower than inflation, investors don't see a ton of sense to own bonds anymore... so prices fall...

And when economic growth slows, for any number of reasons, as it did in the first quarter of 2022 by 1.4% as measured by gross domestic product ("GDP")... and expectations for slower growth in the months ahead rise... forward-looking stock prices tend to fall too.

Today, inflation is still high... Orange juice – yes, orange juice – was the best-performing commodity last week, up 10%... The national average for a gallon of gas hit $4.32 today, up 21 cents from a month ago and $1.37 than this time last year, according to AAA.

It's getting bad enough that more people are driving out of their way to get cheaper gas from the local Costco Wholesale (COST)... instead of the usual station near home or work.

Rob Garf, a vice president at cloud-based software company Salesforce (CRM), shared this image and take yesterday...

In any case, while long lines at the pump and packed parking lots might be a plus for Costco, I can't imagine this will show up well in the Federal Reserve's next round of inflation statistics that it uses...

On a related point, Costco just axed its mortgage benefit for members, as lending rates skyrocket and it decided offering caps on fees wasn't worth it anymore.

In the meantime, economic growth around the world is slowing...

On the 'bright' side...

We're starting to see more mainstream media outlets starting to report on the now four-month-long sell-off in the markets in 2022... This is a social behavior that tells us the path might be getting closer to the finish than the start...

Last Thursday – after stocks' worst day of 2022 – CNBC ran its blood-red, anxiety-producing "Markets in Turmoil" graphics, which might be as good of a contrarian indicator as there is. Here's the stunning record... via Charlie Bilello of Compound Capital Advisors, who said it's "the only indicator with a perfect track record."

The average one-year return after CNBC launches its "Markets in Turmoil" coverage is 40% and the market has always been higher one year later, as Bilello noted... Though, I will point out the cited history is all from 2010 to 2020, an "easy money" decade when inflation was never this high.

Late last week, I also saw a rare sight that tells me something about public opinion... "401k" was trending on Twitter (TWTR) and commenters wondering why their account balances were down sharply, as if they are always supposed to go up...

Stocks don't always go up... Has anyone checked on Dave Portnoy?

More people might be slipping into panic mode...

These are the kind of anecdotes that begin to show us we might be closer to a "bottom" rather than a top, though – importantly, as we'll share today – it doesn't appear we're quite there yet...

If you're worried about your portfolio today, you are not alone... The Nasdaq is in mainstream bear-market territory already – down 27% from previous highs in November... and the S&P 500 is getting closer, down 16% from its highs at the start of 2022...

If you've been following along in the Digest this year, these outcomes hopefully do not come as a shock to you... We've shared various bear-market warnings... and recession indicators that got our attention since the start of the year.

I hope you are not among those panicking today...

But if you ignored the warnings... and are finding it difficult to view your portfolio today because of what's going on in the markets, for example... take that as a more valuable indicator for yourself... that you're taking more risk than you're probably comfortable with.

As it so fits with your goals and timeline for the money in your investment portfolio, there's no shame in raising cash – to preserve capital today so you can use it when great buying opportunities present themselves... As I'll mention, our team is seeing some of these today.

Cash could be your best friend in a bear market. We don't think we can share this excerpt from our Stansberry's Financial Survival Program. It's lesson one, from our colleague Dr. David "Doc" Eifrig, enough...

During a bear market, nothing is more important than cash. And it's not hard to understand the basics of why... In fact, you could define a bear market as the rising value of the U.S. dollar versus financial assets.

Likewise, when commodities... or real estate... or foreign currencies... go through a bear market, what you're really seeing is the rising value of the U.S. dollar as compared with those other assets.

The most important factor in determining how successful you can be as an investor during a bear market is simply how much cash you have (and can raise) as asset prices fall.

As for how much cash you should have, that depends on your individual situation. As we wrote in the April 8 Digest, if you're in or closer to retirement, you might want more of your portfolio in cash... You might want less if you still have 10 or 20 more years in the markets to work with...

A two-pronged plan for bear-market survival...

The point is, when seemingly every financial asset priced in dollars is falling in value and everything at the store is going up in price, you want to own things today that will hold their value as much as a possible...

In a down market, that's cash or hard assets such as gold... In today's world of high inflation, geopolitical conflicts, and major supply-chain issues, certain commodities fit the bill too...

If you're up to speed on this broad point, though, then you can move on and attack this bear market... and buy for the long term when everyone else is scared... or are overleveraged and need liquidity, in the case of some institutional investors.

As individual investors, we also have the freedom and opportunity to make smart options bets that take advantage of other traders' fears...

These are the kind of opportunities having a fundamentally sound, well-balanced portfolio, clear thinking, and goals can present to you... and it's essentially the same reason why some of the world's best investors end up making their greatest returns in times of turmoil.

You can too...

Today, our colleague Greg Diamond closed out a trade for a 100% gain...

In a little more than two weeks.

In the April 26 Digest, we mentioned that Greg opened this trade... and today, he sent his Ten Stock Trader subscribers instructions to close it and take 100% profits, given the possibility of a short-term "relief rally" within a longer downtrend he sees...

With the recommendation initiated on April 22, subscribers notched a "double" in just 11 trading days. Considering how volatile the markets have been, that's a huge win...

Kudos to Greg and congratulations to his subscribers who pocketed these gains when "markets are in turmoil" but the trading is not over yet...

Subscribers are also sitting on gains in another open recommendation, and Greg shared today that he's eyeing more bets on lower prices... because he still doesn't see the bottom of this sell-off yet...

On the contrary, as Greg wrote today, 'the bull market is dying slowly'...

Greg wrote to subscribers in his Weekly Market Outlook today and reiterated a point he made in Module 4 of our Financial Survival Program... that many folks might be getting caught unaware that we're in a big downtrend...

As Greg wrote...

It might not feel like a panic right now.

It's not like 2020, when stocks crashed more than 30% in one month as COVID-19 swept the globe...

No major bank has gone belly-up like Lehman Brothers back in 2008...

And there aren't any bread lines like during the Great Depression back in the 1930s...

But as I described in the [Financial Survival Program], every bear market has a different "why," but they all follow the same pattern in regard to price.

Right now is no different. It's just more painful since it isn't happening that fast.

Think about it... The Nasdaq is down more than 20% this year... but only last week did the "Markets in Turmoil" graphic hit the mainstream financial news channel CNBC. Until the last two weeks, the selling has been rather orderly – so far. The volatility started slow and has grown in scale as the year has gone on... like the activity on a Richter scale that measures worsening earthquake.

Today, Greg then shared that he "ran with the bulls" in Pamplona, Spain in 2012 (and will never do it again) and shared that at the end of the run, there's a gruesome professional bull fight, in which bulls suffered a slow death with many swipes and wounds... then a final blow.

Stock market bulls are experiencing this kind of pain right now, he said...

The final blow may not come for a few months (I'll have more on this soon, trust me), but the sword swipes and stab wounds are weakening bulls. Those headwinds are mainly inflation, the Federal Reserve, supply-chain constraints, and slowing growth.

Stay tuned here and to your inbox on more to come from Greg. He's putting the final touches on a timely new research that he'll share more details on soon... (Existing subscribers and Alliance members, you will have instant access at no charge.)

Greg's nailed not only the direction of this year's market action, but the timing too. You won't want to miss what he says next.

Meanwhile, our Portfolio Solutions team is on recession watch...

As we mentioned briefly last week, on Tuesday in our monthly Portfolio Solutions update, analyst Brett Eversole discussed the growing likelihood that the country is heading for a recession.

He named three indicators that point to tough economic times ahead, including an inverted yield curve, an inflation spike, and the Fed's rate-hike cycle... He outlined each one, and continued...

What's most important is the totality of these three indicators. They tell us that there has been a shock to the system (inflation), money is getting tight (Fed rate-hike cycle), and businesses are less incentivized to invest in the future (inverted yield curve). Put it all together, and there's a good chance we're on the path to a recession.

While we've talked heavily about daily market movements this year in the Digest – given how volatile the markets have been and the concerns we've had – it's important to always keep the long-term picture in mind too...

Importantly, Brett noted that investors with a long-term view don't necessarily need to worry about a potential recession. There's a difference between a "recession," which looks likely, and a "depression," which is another thing entirely. As Brett wrote...

History shows that not every recession is a depression. Not every recession is a [global financial crisis].

In fact, most recessions are mild. Most come and go quickly and without major long-term consequences.

Since 1950, we've seen 11 recessions. Eight of those lasted less than a year. And only four saw the economy contract by 3% or more. (That includes the COVID-19 recession, which was self-inflicted and the shortest of the bunch.)

Stocks didn't necessarily crash during these times, either. The average decline for the market during these 11 recessions was just 5%.

So no, a recession in itself isn't the end of the world. And just because the data point to one in the next couple years doesn't mean we need to rethink our investment process in a meaningful way.

Going forward, companies' valuation metrics will be increasingly important, creating a dynamic likely to favor income-generating sectors like consumer staples, utilities, and health care...

In Stansberry Portfolio Solutions, our research team builds specific portfolios for specific goals. And we take a long-term view in every case for this exact reason...

If you use any of our model portfolios – the Capital, Income, Defensive, or Total Portfolio allocations – Brett, Portfolio Solutions lead analyst C. Scott Garliss, and our team have updates for you in their latest monthly issue, including several buy and sell recommendations.

Be sure to check them out. On a similar point...

On Friday, we released our latest Financial Survival Program lesson...

And this one comes from our colleague Matt McCall who also detailed the importance of investing for the long term... how patience can ultimately pay off in a bear market... and why you don't want to overlook buying certain stocks today.

While times like today may feel scary, Matt said we can create some of the best buying opportunities in strong companies positioned within unstoppable megatrends. As he put it...

Now don't get me wrong... I'm not saying that you should never sell.

But the historical figures suggest that selling after a correction has already been established as not the best strategy. If anything, investors should be looking to use all periods of weakness as opportunities to buy into solid companies that are trading at a discount...

In the latest module in our Financial Survival Program, Matt shared two of his favorite examples from his The McCall Report model portfolio... These companies are at the forefront of the megatrends in electric vehicles and clean energy, respectively.

And he says now is a great time to buy them and gave the bullish case for why. As Matt wrote, here's an example...

You're invested in a company at the forefront of the electric-vehicle ("EV") revolution. But the market is down, and the stock has taken a big hit. You're considering selling. And then you think about where this company will be a few years from now.

You ask yourself if there will be more or fewer EVs on the roads in the future.

Today, only 3% of all vehicles sold in the U.S. are electric. But by the end of the "Roaring 2020s," – what I believe will be the greatest decade in the history of the stock market – that figure is expected to grow to between 30% and 40%.

The answer to your question should be clear.

Matt acknowledges it's not easy to buy stocks when the financial media is spouting doom and gloom and your portfolio is losing money... It's incredibly difficult to go against what your gut is telling you, he says.

But after 20-plus years in the markets, he's learned that getting over that fear is imperative to becoming a successful long-term investor. He says the best way to do that is by thinking big picture, getting your emotions in check, and then looking ahead to the future.

When you consider the state of the present, that's not a bad idea at all...

If you are interested in learning more from Matt and our team, click here for more details on our new seven-part Stansberry's Financial Survival Program... and how you can access it now.

(And existing subscribers and Stansberry Alliance partners, as with the rest of the lessons in our Survival Program, you can access this new research here at no additional charge. Lessons six and seven are coming over the next two weeks.)

New 52-week highs (as of 5/6/22): ProShares Ultra Oil & Gas Fund (DIG) and Altria (MO).

In today's mailbag, feedback on Dan Ferris' Friday Digest... and more responses to last Thursday's Digest and opinions on why the Fed didn't act to raise interest rates sooner...

"Dan, You are crushing it.

"You gotta love the irony in the stock market. It is everywhere in virtually every comment. Thank you for a review of important trading points.

"The dead-cat bounce, the sharp rallies in bear markets. But I think especially important is how ARKK investors still buying ARKK. That's amazing and important to realize that the Buy the Dip mentality is still strong and there is still a complete lack of understanding of value by those people..." – Paid-up subscriber Alan M.

"I thought your article [in Thursday's Digest] was spot on. Why is this Fed, and this administration in general, clueless to what is going on in the 'real world.' For the past year or so, it seemed everyone I talked with agreed they should have been raising rates gradually. And then they say it's 'transitory' when we all saw the increases everywhere!" – Paid-up subscriber Dale O.

"Morning, and to answer your question about the Fed not acting sooner... First, fear from the pandemic or its lasting impact economically. As recently as a few months ago lockdowns were still being discussed as an example.

"The second reason in my opinion is lack of common/real world sense, or uncommon sense as Charlie Munger likes to say. I'm still surprised by how so many highly intelligent people at the Fed didn't foresee this inflationary problem growing or coming. I understand initially, but for the past year it's been obvious to me and I'm not an economist. (Small business owner.)

"Lastly, greed/fear of tanking the stock market or rocking the economic boat in general. I'm not going to be hypocritical and say I don't understand this aspect because I wasn't complaining about my returns the past two years.

"Great email." – Paid-up subscriber Dave A.

"They are unelected bureaucrats living in their D.C. bubble where common sense doesn't exist!" – Paid-up subscriber Larry N.

"The Fed has kept rates low because of the national debt. As rates move higher, it becomes more difficult to pay down the debt. I remember from a few years ago, it was said that as debt breached $24 trillion, tax receipts would only be enough to pay interest on the debt. What has changed since then? $6 trillion has been added! And future interest payments on the debt will double or triple maybe quintuple! What happens then?" – Paid-up subscriber L.G.

"Wayne F. is right on-the-money [with his note in Friday's mail].

"CBDC will be the scheme to 'reset' their B.S. from deliberate undisciplined financial engineering by not servicing debt." – Paid-up subscriber M.G.

"It's always the same answer... They are politicians who do what the White House wants, which is anything to avoid a recession, the death knell for the party in power. Everything is short-term focused, and what is good politically in the short term trumps long-term economic damage because someone else can deal with it." – Paid-up subscriber Robert B.

"The Fed is too political. Most governors are not good economists but are political appointees who serve at the discretion of the President, who probably already has unsigned letters of resignation from all of them. Powell probably knew that the Fed should have acted earlier but he was up for reappointment and he was probably afraid that Biden would appoint a politicized fool in his place – as Biden has recently tried to do with some of his proposed Fed appointments.

"I worked at the Fed when Arthur Burns delayed raising rates before Nixon's reelection, even though almost all of my colleagues sat around at lunch and wondered why the Fed was not raising rates given the economic reports that some of us had prepared for the Fed governors. They had a number of good economists on the Fed board then but they also had at least one politicized fool and others didn't want to rock the boat and oppose Burns, who was a good economist when not he was not being political.

"In this case, I believe Powell was being pressured by the administration to keep interest rates low so they could sell bonds more easily to fund the administration's excessive boondoggle acts – which, by the way, funded many people to stay out of the labor force and helped lower the labor force participation rate." – Paid-up subscriber P.C.

All the best,

Corey McLaughlin
Baltimore, Maryland
May 9, 2022

Stansberry Research Top 10 Open Recommendations

Top 10 highest-returning open positions across all Stansberry Research portfolios

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

Top 5 Crypto Capital Open Recommendations

Top 5 highest-returning open positions in the Crypto Capital model portfolio

Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.

Stansberry Research Hall of Fame

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^ These gains occurred with a partial position in the respective stocks.