Bearish markets require more patience than bullish markets. This is because the rallies are so impressive that they ask you to get back on board just before you fall to new lows. Truly a “mermaid song” for investors. Let 40-year investment veteran Steve Reitmeister tell you why stocks (SPY) will go down … and why they may take longer than you think. Read the rest below.
(Please enjoy this updated version of my weekly commentary on the Reitmeister Total Return newsletter).
Shares on Tuesday rose and investment media (CNBC and the like) are sharing details on why this is so. And why you should consider being optimistic.
Keep in mind that Monday’s shares fell and these same media outlets published scary headlines telling you why you need to be bearish.
Investment media don’t care about accuracy. Not even to help you invest better. They just want to get the most out of their information to sell advertising space.
This means that there is no precision … no consistency … no value !!!
What should you do instead?
Read on below for the answer …
Undoubtedly, today’s FOMO demonstration seemed very tempting to participate. It simply continued to increase minute by minute because, in general, computer-driven marketers rely on momentum and pile on each other.
Unfortunately, today’s gains have very little to do with the long-term outlook … which remains bearish.
Simply put, nothing has happened that makes anyone think in their right mind that the bear market is over, as inflation is a deadly economic disease that is still too virulent. In addition, you have a Fed that is determined to crush inflation through aggressive rate hikes that will no doubt dampen an already weakened economy (-1.6% in the first quarter and second quarter, GDPNow estimate at -1 , 5%).
This process is far from over. That is why the economic decline is far from over. That is why the fall in the stock price is far from over.
This is a very brief version of the much deeper discussion I had on this topic during July 11th.th Platinum Member Webinar (see it here now>)
Keep in mind that I originally thought this bear market would end at some point in the 2ndnd half of the year, making it a 13-month shorter-than-average bear market. (Measured from the previous peak to the bottom of the bear market).
This result may still be possible. Unfortunately, this past month, above the recent bottom line, is starting to make me think that this may be more of an extended bear market as we suffered between 2000 and 2003.
The great similarity is that in both scenarios the valuations of the shares extended a little for the global market. Especially true for the most exciting growth stocks that rose to great heights only to fall to the ground again.
I know some of you think the ratings were much more extreme during the tech bubble of the late 1990s and so it’s not a good comparison. However, when you look at the S&P 500 chart (SPY) below, you will see that the overall PE of the market was quite similar, showing that the valuations spread too far at all levels.
I’ve shown this rating slide at webinars in the past, to everyone’s surprise, how strangely similar the PE peak was in early 2022 compared to the tech bubble of 2000. And yes, we’ve come down from this peak … but still well above the long-term average PE of 15.5 that we should go down to the bottom of the bear market.
Now that we appreciate the similarity in valuation heights, we can now appreciate how the current market path can reflect what we saw between 2000 and 2003. It is a long, winding path with many falls … followed by many fake rallies. until the final fund was found about 3 years later, in the spring of 2003.
So so far I’ve talked about the modern market moving faster than in the past … mainly due to the rise of computer based trading … maybe this is as slow as 2000-2003.
No, this is not the base case right now. I still think it will work faster than that. However, it is interesting to contemplate the possibility, as each bear market has its own unique properties. Just open your eyes to the possibilities and thus increase everyone’s patience so that the gains from our reverse ETF positions are not filled immediately as a jackpot.
Reity, is it possible that the bear market is over?
Yes it is possible. But it is VERY unlikely for the reasons already stated.
Once again, my 9/11 webinar presentation details the nature of bear market funds. And how many cycles of drops / rallies / drops are needed until the final bottom is found. So there’s really nothing special for me about today’s bounce.
Now add that we are coming out of a bit of a stock valuation bubble thanks to the low TINA rate (There is no alternative … to the stock investment environment of recent years). And just like the last time we had to deal with excessive levels of valuation between 2000 and 2003, it may take longer to let ALL THE AIR out of the bubble.
This knowledge gives me the patience to not let myself be dragged into these rallies of fools at first sight. But, yes, there is a limit to this patience, as, in fact, the process of lowering the bear market is different every time and there is always the possibility that the next bullish market has emerged.
In my book, I wouldn’t seriously contemplate that the fund has been found until we test the S&P 500 (SPY) 100-day moving average, which is currently at 4,148. The interesting thing about this place is that it corresponds to where the shares bounced in early May after the first time we fell into bearish territory.
Exceeding the 100-day moving average in combination with any serious signs of inflation moderation and could be tempted to be optimistic again. Or at least a much more balanced portfolio than the direct market discovery we are making now.
It is fun. During a bullish market, investors have a great deal of patience to wait for all sorts of runs and corrections for the next higher stretch.
However, during the bear market … there is virtually no patience to find. A bit hypocritical when you think about it, as both are long-term processes that take a while to complete.
That tells us to be history students. The appreciation of the economic cycle has not been completely downward, which would include a drop in income and the loss of jobs.
When these shoes fall … and they will … then investors will quickly abandon false bullish aspirations. This will produce wave after wave of descent. And just when there seems to be absolutely no hope … that’s the bottom line … and that’s when the next bullish market will emerge.
When you appreciate these lessons from history, it’s hard to say seriously that we’ve already found funds and that this is a mature ground to grow the next long-term bullish market. We need more inconveniences for this to happen. And that means we need more time.
Be patient my friends. This may take much longer than previously thought. But he still says our bearish portfolio strategy is still on the right side of history.
What to do next?
Right now, there are 6 positions in my hand-selected portfolio that will not only protect you from a nearby bear market, but will also lead to big gains as stocks go down.
Like the wide gain our members enjoyed in June, when the market finally fell into bearish territory.
This unique strategy fits perfectly with the mission of my Reitmeister Total Return service. This is to provide positive returns …even in front of a roaring bear market.
Come find out what my 40 years of investment experience can do for you.
Also, have access to my full portfolio of 6 timely trades to not only survive … but thrive in this brutal bear market environment that is far from over.
Click here for more information>
I wish you a world of investment success!
Steve Reitmeister… but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and editor, Reitmeister Total Return
SPY shares. To date, SPY has decreased by -16.80%, compared to a% increase in the S&P 500 benchmark during the same period.
About the author: Steve Reitmeister
Steve is best known to the StockNews audience as “Reity.” Not only is he the CEO of the company, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his latest articles and stock choices.
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