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The 2023 Bull Run is Over?

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Hey are you enjoying the early gains for the 2023 stock market? Me too. Unfortunately this appears to be a mirage with the S&P 500 (SPY) ready to head lower…and probably make new lows in the months ahead. Why is that? Read on below for the answer.


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The market has been hot out of the gate to start the new year. Perhaps too hot as the applause for softer inflation blocked out the noise that these lower prices happened because of serious recessionary red flags.

I sense this may be the last gas for bulls and the bears are about to take the steering wheel again.

Why?

That will be the focus of today’s commentary…

Market Commentary

The new year always brings with it fresh optimism. That alone could explain the +4.2% showing for the S&P 500 (SPY) to kick off the year.

On the surface, bulls can point to exciting news that inflation continues to decline. That was the headline read for sure, especially after the 1/12 CPI report. Let’s dig in deeper on that one…

At this stage month over month is more important than year over year. That’s because most of the inflation pain happened many months ago, especially in the spring of 2022. That makes inflation look high year over year…but the month over month tells you the true current pace.

On that front we see Core Inflation up +0.3% month over month which points to annualized +3.6% which is nicely lower than the past…but still well above the Feds desired 2% target.

More specifically “sticky inflation” is still a problem. This report shows an +0.8% increase in shelter prices (housing) which translates to nearly 10% a year. Far too hot.

Further wage inflation was report last week at +4.6% year over year with a slight slowing of trend to +0.3% month over month (+3.6%) per year.

The sum total of this information says that the Fed will not change there tune. So given what the Fed has said in the past about keeping rates higher for a long time…and then repeating that mantra over and over again including this past week…then it points to the February 1st Fed announcement as another cold shower for bulls.

Now let’s get to what is causing lower inflation. That being 9 straight months of restrictive Fed policy that is finally doing its job. However, that is the view over the left shoulder. If you look over the right shoulder you will see it has come at the cost of an economy on the brink of recession.

  • 48.4 ISM Manufacturing on 1/4 with 45.2 New Orders (reads recession)
  • 49.6 ISM Services on 1/6 with 45.2 New Orders (reads recession)
  • 89.8 NFIB Business Optimism Index on 1/10 (lower reading than during Covid…reads recession)
  • 1/13 Earnings season begins with 2 of the 4 major banks soiling the bed. JPM warning that they are braced for recession.

Note that the US has not had an inflation induced recession since the 1980’s, so investors are a bit out of tune on how to handle this rare environment. Meaning they are far too interested in watching inflation data and predicting the likely Fed response as opposed to what they should be doing. That being to monitor the health of the economy as their guide of whether to be bullish or bearish.

If recession is on the way, that begets lower corporate earnings (typically 20% drop in EPS) and this begets lower stock prices given what investors are willing to pay for that weakened earnings profile. This is why it’s very hard to be bullish at this time.

Let’s press forward with a discussion of earnings season. The previous quarter was likely one of the worst in years as earnings estimates got slashed precipitously for coming quarters. Another round of that would be harmful to stock prices.

This means we have to watch earnings trends closely. Specifically speaking, the change in estimates going forward and if the current expectations for a 7% decline in earnings in Q1 darkens or brightens from here. That will have market moving consequences.

Here again, the average recession leads to a 20% reduction in EPS expectations. That is certainly not factored into stock prices at this time. All the more reason to watch earnings estimates more carefully. The early bank results foreshadow more pain on the way.

Now let’s rotate to price action. Bulls have already had some pretty impressive runs in the midst of the past years bear market only to get thwarted at the moment of truth. See S&P 500 one year chart below.

Be sure to focus on the 200 day moving average (red line) which keeps ending bullish advances. Both in mid-August and late-November and perhaps once again here in January.

Note that as of the Friday close the S&P stands at 3,999 while the 200 day moving average is at 3,981. Sounds scare that we are above that mark at this time. But before joining the bull party, please hear me out.

This is VERY typical behavior at the end of a bull run. Especially one that ends on a Friday.

Here we had premarket futures down 1% after some really bad bank earnings reports. Yet even then I knew that stocks would end the day higher pressing up against 4,000.

Why?

Just call it pattern recognition as I have seen it many times before. That being where the bulls have just enough energy to punch back one more time setting up a cliff hanger type moment: Will we break higher?…Are will the bear be back on the prowl? Tune in next week for the exciting conclusion.

Unfortunately, the Friday action is kind of like sprinting into the tape at the end of a marathon…just not a lot of energy to run again any time soon. This sets up for high likelihood of downside action on the way. However, I admit that anything is possible and indeed the bulls could have a couple more laughs in store.

Yet with the recessionary clouds darkening and earnings season off to a rocky start and the Fed likely to repeat their hawkish “a long time” mantra at the February 1st meeting…then I suspect we are soon at the end of this bullish run with more downside on the way.

Even if stocks do break above the 200 day moving average at this time, I would be hard pressed to join that party til the Fed announcement on 2/1 where they are likely to pour cold water on bulls once again.

What To Do Next?

Watch my brand new presentation: “2023 Stock Market Outlook” covering:

  • Why 2023 is a “Jekyll & Hyde” year for stocks
  • 5 Warnings Signs the Bear Returns in Early 2023
  • 8 Trades to Profit on the Way Down
  • Plan to Bottom Fish @ Market Bottom
  • 2 Trades with 100%+ Upside Potential as New Bull Emerges
  • And Much More!

Watch Now: “2023 Stock Market Outlook” >

Wishing 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 rose $0.08 (+0.02%) in after-hours trading Friday. Year-to-date, SPY has gained 4.20%, versus a % rise in the benchmark S&P 500 index during the same period.


About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, 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 most recent articles and stock picks.

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Entrepreneurship

10 Things Every Working Woman Should Do This Year

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Opinions expressed by Entrepreneur contributors are their own.

Self-care has become an all-encompassing term that has strayed from the importance of everyday commodities that keep us in good health and spirits. Though pampering and “treat yourself” moments still have value, here are ten ways to invest in yourself to produce long-lasting, positive results.

Related: 8 Self-Care Tips From Wildly Successful Entrepreneurs

1. Put money into a 401(k)

It’s never too early (or too late!) to start saving for the future. Depending on your employment status, there are different retirement savings accounts. 401(k)s are the most common since these are employer-sponsored and often come with an employer match. However, freelancers also have options, such as a SEP-IRA or a high-yield savings account, to put away extra, tax-free dollars for retirement.

2. Schedule a health checkup

Self-care first includes taking care of your physical health. It’s easy to discredit regular checkups when you’re feeling healthy, but make this the year to get your blood work done. It creates a baseline for your health to identify areas needing improvement or extra attention.

Also, choose areas in your life where you can make small changes. Improving your health doesn’t always mean a drastic overhaul; it may be as simple as drinking more water or adding an extra 30 minutes of exercise to your day.

Related: 3 Key Tips for Optimizing Your Physical Health as an Entrepreneur

3. Review health insurance benefits

Many people with health insurance aren’t sure exactly what it does and doesn’t cover. If you’re unsure, talk with your HR representative or your health insurance provider to get an overview of deductibles, co-payments and other supplemental benefits you may not be aware of. Then, decide if the health care plan makes sense for your current lifestyle.

Are you paying for benefits you don’t use, or do you need additional benefits that aren’t covered? Selecting the right plan will help ensure you have what you need without paying the extra expense for anything you don’t.

4. Ignite your curiosity

Maintaining healthy cognitive functions through new pursuits gives a boost to the brain. Get curious and find what speaks to you. This can be anything from exploring local museums, embarking on different hiking trails, learning a new language or reading more books.

There’s no limit to what you can do, and these activities can ignite more creativity and motivation in your work. While it may be helpful to look to others for inspiration, make them enjoyable so you’ll want to make them a regular occurrence.

5. Prioritize mental health

Mental health has been at the forefront of people’s lives over the past few years, as many have experienced burnout. We often equate productivity with a value that drives us to go beyond our means and leads to anxiety, stress and depression. Take note of your everyday stressors and see how to reduce or eliminate them. Then, replace them with relaxing outlets that allow you to recharge.

There are various ways to prioritize mental health, from practicing positive self-talk to meditation to scheduling an electronics-free day. You may have to try different solutions before you find one that fits.

Related: 5 Ways to Protect Your Mental Health as an Entrepreneur

6. Implement good sleep habits

Consistent sleep is one of the essential factors of good health but one that is often overlooked. For many, it can be challenging to wind down from the workday. Therefore, you must “train” your body to prepare for sleep by getting into a nighttime routine.

Create a sanctuary for yourself to improve your sleep habits. Enjoy a soothing cup of herbal tea, perform a skincare routine, and snuggle in with a good book rather than scrolling through your phone. Additionally, ensure your bedroom is dark and cool for ideal sleep comfort and turn on soothing sounds if it helps lull you to sleep.

7. Try something new

What have you wanted to try but have always held back? Maybe it’s public speaking or contributing to a blog. Whatever “new” has been on your to-do, make a plan, schedule it on your calendar and go for it. It’s common to hold back from these activities due to fear of the unknown or failure, but trying new things helps create confidence and can be the catalyst you need to push you to the next level.

8. Learn to set boundaries

Boundary setting is crucial to relationships yet can be difficult to master. It doesn’t always involve simply saying no to people’s requests. Instead, it requires protecting your own values when people violate them. Setting boundaries may mean spending less time with certain people, removing yourself from toxic situations, or declining invites to events that don’t improve your life. Explore areas where boundaries will help you grow, and keep in mind growth itself is a work in progress.

Related: How to Set Boundaries to Build Thriving Relationships

9. Spend quality time alone

Learning how to enjoy time spent alone is a valuable gift. We are inundated by a false sense of connection through the internet, which often makes us feel lonelier than ever. Then, we overschedule our calendars to make up for human connections, only to feel drained afterward. Slow it down and plan a few solo dates a month to see how it feels to be truly present with yourself.

For those who aren’t used to spending quality time alone, it can feel awkward and uncomfortable initially, but these stem from your own perceptions. Take in a matinee, sit in a coffee shop and read, or enjoy a concert or event you’ve wanted to attend. Alone time has been linked to improved stress management and greater life satisfaction, so it’s worth trying to give yourself more time.

Related: Turns Out, Those Who Like Being Alone Can Be More Creative

10. Get active

Getting active can take on several directions. It can be physical, emotional or spiritual. The point is to engage with people and pursuits that feed your soul. Whether volunteering within your community, setting yourself an exercise goal, or learning more about personal development, there are endless ways to get active and invest in yourself this year.

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Entrepreneurship

Are You a Winner? How to Truly Define Winning in Your Business

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Businesses gauge their performance typically with dozens of goals and metrics. But you can’t do everything at once. The challenge is to get people focused on the one thing that’s most important right now. If it moved in the right direction, it would eliminate a weakness (or capitalize on an opportunity) and improve financial outcomes. You improve that, and you win.

However, not every company clearly defines winning. A catalog of goals can pull the organization in multiple directions and stretch finite resources. Numerous goals can inherently be at odds, working against each other and for conflicting purposes. For example, a cost reduction goal might undermine an innovation goal requiring a significant investment.

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Gen Z Is Making Ugg Boots Fashionable Again: Report

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Ugg boots, the furry, sheepskin boots that defined the 2000s are back, apparently, with spiking interest and Gen Z cachet, according to data from shopping website, Lyst.

The site’s annual quarterly report that highlights the “hottest” 20 fashion brands was released on Thursday, and, as Insider noted, Ugg is on it for the first time since the index began in 2017.

“Gen Z shoppers are breathing new life into once dormant brands … with over 1.2 billion mentions on TikTok — Ugg’s influence is undeniable,” the report notes.

The boots were also sold out of stores during the holidays, it added.

Generation Z, or people born between 1997 and 2012, has demonstrated a penchant for bringing back old technology and trends, from flip phones to “vintage” headphones with cords.

But Ugg boots go back much further — the word “ugg” is actually a general term in Australia that means boots made from sheepskin and fleece, according to the BBC.

The company that created the “UGG” boot, Deckers Outdoor Corporation, is based in the U.S. and has tried and failed to trademark the word in Australia (where a court decided it was a generic word and thus could not be trademarked), the outlet added.

The company says the boots began to gain popularity in California in the 1980s. They were first featured on Oprah’s Favorite Things in 2000 (a huge brand-maker back then) and became “cherished commodities” early in the decade, according to Vogue.

The boots later gained prominence again with a fashion movement that prioritized “ugly” clothes, and have since become an unironic Gen Z favorite, per Insider. Kylie Jenner was also spotted wearing them in November.

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