Five Upcoming Events that Could Fuel a Rally
Extreme pessimism often creates a ripe environment for a stock market rally. In our Evidence Based Investment (EBI) approach, one of the four broad categories of data we monitor is market sentiment. No doubt, market sentiment indicators have been flashing excess pessimism, as we have reported in our October Investment Conditions & Outlook Report.
Our disciplined weight of the evidence approach also considers a variety of macroeconomic indicators. These inputs are flashing concerns of a slowing economy, triggered by hawkish moves by the Fed to fight and ultimately subside inflation. The trillion-dollar question is: Can this be done without triggering a severe recession? Thus far, our leading indicators are pointing to a mild recession in 2023 as the most likely outcome.
Valuation Indicators
The Valuation indicators in our system look at the price metrics of stocks in many ways. We have made the case that the market has already priced in a mild recession, but more losses could be expected if the economy were to drift into the moderate to severe recession zone. Since nobody knows, we’d say it is healthy that the stock market is weighing in on possibilities and adjusting prices based upon the variety of threats and dangers on the horizon. In fact, it is more difficult to invest when the market appears to be ignoring dangers and threats.
Destructive & Creative Forces
On the opposite side of dangers and threats (destructive forces) are creative forces that represent strengths and opportunities. As the strong dollar is indicating, the United States of America is fortunate to be in a relative strong and good position to be able to withstand dangers and threats and take advantage of strengths and opportunities. In this way, whether a recession is mild, moderate, or severe, the economic seasons of spring, summer, fall, winter, and then spring again, is to be considered a cycle to be aware of and master. The question is, what economies, companies, work forces and family units can weather the seasons reasonably well (survive) and be in the position to harness creative forces ahead and thrive? We’ve currently overweighted our U.S. holdings significantly because we believe the U.S. is in the best position to accomplish this. Our most recent market commentary features a chart that breaks down wealth creation opportunities by region around the world, that we will tap into the future.
Technical Indicators
Technical indicators are an additional dimension our EBI approach considers. We know this. After a waterfall decline, there is often a bounce, then a retest, then a fairly significant rally thrust forward that, when sustained, represents a new bull cycle. Presently, our technical indicators are assessing the recent retest and technical indicators around the potential bottoming process. This is where five upcoming factors could result in an end of the year rally.
Five Upcoming Events that can Trigger an End-of-Year Stock Market Rally
What are the five upcoming events that can trigger an end-of-the-year rally?
The first related to the Fed comments after their November 1 and 2 sessions. Any comments related to a less hawkish stance due to the Fed believing inflation is or will soon get under control would be positive and the market may respond well.
The second is unemployment reports coming out in early November. Any positive surprise within those numbers could spring a rally.
The third is the election (November 8). The market typically likes gridlock (split in power between president, senate, and house of representatives) and the election results will add a level of certainty if this is the case or not.
The fourth is the next CPI report (mid-November). Again, any data that helps subside fears of inflation being uncontrolled would be positive.
The fifth is geopolitical. Any sign of progress in reducing geopolitical threats across the world would be viewed as positive.
Our weight of the evidence approach is to maintain our current slightly defensive posture, continue monitoring threats and dangers and be on the lookout for opportunities and strengths as we help clients endure this cyclical bear market cycle. Our whole thesis of “investing from a position of strength,” evidenced through our patented Strength Based Wealth Management (SBWM) system, is designed to help our high and ultra-high net worth clients prevail through such expected times. We are happy to review all the above in more detail with clients. Our regularly scheduled semi-annual clarity sessions are in full force and we have a whole series of interesting research and slides to share with clients. Call us at (303) 721-7000 or fill out our contact form if you have further questions.
Not a Client Yet? Want some Help?
For more information, feel free to reach out to Cathy Wegner, Director of New Client Engagements at cathy@janiczek.com or call her at 303-339-4480. Cathy will begin the conversation with you and put you in touch with appropriate Janiczek Wealth Management experts who can help you have a better system and approach to successfully navigating the economic and market ups, downs, and plateaus.
