[Market Outlook] March Madness, Revisiting the First Quarter

[Company Logo] March Madness, Revisiting the First Quarter By Keith Schneider and Donn Goodman For a host of reasons, March is a month anticipated by most Americans. For those in cold climates, March signals the onset of Spring and warmer weather. Many people travel to warmer weather, and March is a period for getting away. For kids in school, especially college students, March is the gateway to “Spring Break.” [image] March Madness, of course, describes the NCAA basketball teams competing in brackets and how frequently some of the best-ranked teams don’t get out of their early brackets. This year only 5% of the brackets submitted to the sports betting operators were still on target after only the first round! You might be surprised to learn that betting on March Madness this year topped $3.1 billion. That number only covers the legitimate bracket contests and betting. I am confident that it is much higher than that. The NCAA makes almost $1 billion dollars from March Madness. The college basketball team that survives March Madness will be crowned the National Champion Monday night (April 4), and this chapter of March Madness will be closed. This year March Madness also occurred in the stock market. The bears appeared to be the odds-on favorite coming into March after January and February’s volatile 20% decline in the tech-heavy NASDAQ. However, true to March Madness, the bulls responded by mounting one of the strongest ever 4-day rallies ever. This rally caught many traders and investors off guard, however, unlike the NCAA, the market crowned its winners for March Madness (and the first quarter) last Thursday. Also, unlike the NCAA, the year is not over, and there’s a lot more ‘excitement’ to come (not necessarily good). For example, this year, another form of March Madness has been the outbreak of war in Ukraine which has only continued to expand and complicate markets. Will The Correction Last? Corrections of this magnitude and quickness typically don’t recover this rapidly. Going back to 1928; the average peak-to-trough pullback has been -16.3%. During the period from 1928 to 2021, stocks fell at least -10% in 63% of the years. Given the factors of: - Higher inflation, - Potentially 5 to 8 additional interest rate rises by the Fed, and - Midterm election noise… We expect to see above-average volatility with stock surges in price both up and down. We’ve written in this column repeatedly over the past few weeks that inflation may be the worst thing for stock prices in the next 1-2 years. With inflation numbers similar to the early 70’s, we are all too aware that high inflation leads to a rapid rise in interest rates, a reduction of corporate revenue and profits, and then a slowdown in the economy. When the market sees this coming, it leads to a contraction of market multiples – lower stock prices. Our fear is that we are going to see unprecedented Stagflation that will add to the volatility of the markets and, at best, a sideways performing market. Recapping The Quarter - Global Bonds - worst drawdown ever - US Bonds - 3rd worst Q1 since the Civil War - US Yield Curve - greatest Q1 flattening ever - Commodities - best start to a year ever - Oil - best start to a year since 1999 - Regular Gasoline (at-the-pump) - fastest rise ever to record highs - US Stocks - 3rd biggest short-squeeze rebound in March since the collapse of Lehman Brothers’ after the worst start to a year for stocks since 2009 (2nd worst in over 30 years) Here is a good chart of just how volatile the stock market has been this past quarter. [image] Here are some additional details about the rally (March Madness): - We had one of the fastest 10% rallies back from the abyss to help the markets recover much of 2022’s correction in just a few weeks. - This rally ranked in the 99.5th percentile of snapbacks for a “bull” market and in the 98th percentile of bear market rallies. See the illustration below: [image] Over the past few months, in this column and by our own Mish on national TV appearances, we have suggested diversification into commodities, oil-related stocks and ETFs, agricultural ETFs, energy-related ETFs, Gold, and Silver. We want to continue with this mantra and call your attention to a number of our investment strategies being positive on the year. Primarily those concentrated in energy, agriculture, and precious metals. In fact, Gold was the strongest performer in the quarter, as illustrated in the chart below: [image] Click below to continue reading 5+ steps to take now to navigate these unusual market conditions safely, get the weekly market highlights, and watch the Market Outlook video analysis. [Click here for the Free Video and Market Highlights](=) [Click here for the Premium Video and Market Highlights]( Best wishes for your trading, Keith Schneider CEO MarketGauge Get more - follow us here... Twitter [@marketgauge]() and [@marketminute]() and [Facebook]( To stop receiving this go [here.]( Got Questions?Office hours 9-5 ET (New York time) Email: info@marketgauge.com Live Chat: Go to bottom right corner of our [home page.](=) Call: 888-241-3060 or 973-729-0485 There is substantial risk of loss associated with trading any securities including and not limited to stocks, ETFs, futures, and options. Only risk capital should be used to trade. Trading securities is not suitable for everyone. 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