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Find out how to Commerce the 7/26 Fed Announcement?

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Few occasions are a higher catalyst for inventory value motion than Fed conferences. And the one arising Wednesday 7/26 carefully watched by buyers to see if Fed officers are prepared for the lengthy awaiting “dovish pivot”. In that case, then it bodes nicely for the latest S&P 500 (SPY) advance. But when not, and the Fed stays fairly hawkish, then possible shares are prepared for an enormous step again. Get the remainder of the story within the well timed commentary under….

This earnings season got here with low expectations. That is making a low hurdle that the majority corporations are having success leaping over permitting the general market to trudge increased.

The subsequent hurdle is on Wednesday July twenty sixth once we get the Fed fee determination. The query on everybody’s thoughts is whether or not the Fed is staying on their hawkish inflation preventing warfare path…or are buyers proper that they need to be prepared for a pivot to decrease charges ahead of anticipated?

That subject and extra will likely be on the coronary heart of at the moment’s Reitmeister Complete Return dialogue.

Market Commentary

First, please make sure you be part of me this Thursday 7/27 for my webinar presentation:

On the final Fed assembly Powell pounded the desk that given the persistence of excessive inflation, Fed officers have been ready to do 2 extra quarter level fee hikes. Within the weeks that adopted we received served up superb information on the inflation entrance with a lot decrease than anticipated readings for the July CPI and PPI studies.

But nonetheless coming into the announcement Wednesday 7/26 @ 2pm ET there’s a 99% expectation of 1 / 4 level fee hike on the way in which. And here’s what buyers at the moment expect at subsequent Fed meetings:

20% probability of one other quarter level at 9/20/23 assembly

44% probability of one other quarter level at 11/1/23 assembly

Then you’ve got various levels of expectation of charges getting minimize in 2024. Nevertheless, even by June 2024 you’ve got nonetheless have greater than 38% odds of charges at a really hawkish 5% or above.

This continues to have charges inverted which is traditionally among the best predictors of a future recession. Ycharts has a US recession probability chart primarily based on this idea that at the moment stands at 67% odds of recession forming over the following 12 months.

But even in gentle of that ominous image, the S&P 500 (SPY) is on a robust run. That’s as a result of we’ve all heard about the potential of recession…which retains NOT taking place. This has created a powerful FOMO rally that’s pressuring these with a bearish bias to surrender hope.

Will that rally proceed after the Fed assembly?

The reply to that is determined by whether or not the Fed agrees with buyers in regards to the accelerating enchancment on the inflation entrance present in July’s CPI & PPI studies. Or do they proceed to see inflation as too sticky in locations like labor and shelter and thus wish to maintain elevating charges to place a stake by way of the guts of excessive inflation as soon as and for all?

Any dovish tilt of their language will likely be celebrated with extra shopping for exercise. However given that is totally anticipated, as confirmed by the sturdy working rally in hand, then a hawkish Fed sticking to their weapons may spark a protracted overdue pullback.

No…not return to the bear market. Not a full blow correction both. Only a wholesome pullback of 3-5% the place a few of the latest extra income are taken off the desk.

This isn’t a tradable occasion. So long as we’re above the 200 day transferring common, then no should be out of shares.

Relatively, it creates a buying and selling vary surroundings the place people with a notable benefit can nonetheless squeeze out income. And sure, our reliance on the POWR Scores is a confirmed benefit that ought to proceed to maintain us in good stead.

Value Motion

As famous above, and shared in my 2023 Lessons Learned commentary from last week, we will likely be simplifying our market timing method. That’s completed by a deal with the 200 day transferring common for the S&P 500 (SPY).

Plain and easy we will likely be bullish above that mark and bearish under.

You’ll be able to see how sturdy the latest bull run is by seeing how far above the 200 day transferring common (pink line) we’re on the present time. However even the 50 day (yellow) and 100 day (orange) are fairly under the present motion.

As famous a bit of earlier, a stubbornly hawkish Consumed Wednesday may spark a fairly regular 3-5% pullback. That may nonetheless have us nicely above the 100 day with little purpose to concern of additional draw back to come back.

Nevertheless, if the Fed stays hawkish + fundamentals start to darken displaying the recession could also be nearer at hand…then I could not wait til we get all the way in which right down to the 200 day transferring common earlier than taking extra defensive maneuvers.

No, I cannot be getting brief until we’re underneath the 200 day transferring common. However certainly may put a bit extra cash on the sidelines if these darkish storm clouds begin to type.

Till then it’s truthful to imagine we’re nonetheless very a lot in a bullish surroundings. Simply consider that buyers ought to take some revenue on the Magnificent 7 and different overpriced AI/tech shares and put that cash to good use in additional attractively priced investments. And that creates segue to the following part…

What To Do Subsequent?

Uncover my present portfolio of 5 shares and 4 ETFs that have been handpicked for the Reitmeister Complete Return portfolio to outpace the market within the weeks and months forward.

That is all primarily based on my 43 years of investing expertise seeing bull markets…bear markets…and every little thing between.

If you’re curious to study extra, and wish to see my 9 present trades, then you might want to…

Start a 30 Day Trial to Reitmeister Total Return >

Wishing you a world of funding success!


Steve Reitmeister…however everybody calls me Reity (pronounced “Righty”)
CEO, StockNews.com and Editor, Reitmeister Total Return

SPY shares . Yr-to-date, SPY has gained 19.99%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.

In regards to the Writer: Steve Reitmeister

Steve is healthier recognized to the StockNews viewers as “Reity”. Not solely is he the CEO of the agency, however he additionally shares his 40 years of funding expertise within the Reitmeister Total Return portfolio. Study extra about Reity’s background, together with hyperlinks to his most up-to-date articles and inventory picks.

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