[Market Outlook] Will April Showers Bring May Flowers?

What You Can Do To Prepare For A Better Market [Company Logo] Will April Showers Bring May Flowers? What You Can Do To Prepare For A Better Market By Keith Schneider and Donn Goodman For much of the country thawing out from a long winter, we all look forward to April. But April can bring with it highly volatile weather, cold rain, and sleet. This April was no exception in the weather department. If the weather matched any of the action of the stock and bond market, then this April we got SOAKED! [image] April has historically been the best month to invest in the market, but this year was the opposite. [image] April was brutal (unless you were a short seller, and then you were very happy). The S&P 500 Index ended down over 8% for the month. As a result, it's currently down -13.3% year-to-date. The tech-heavy NASDAQ QQQ index had its worst month since 2008. It closed the month down over 13%, and down over 20% year-to-date. Given our indicators and risk gauges forecasting much of this since last Fall, we must say we were not surprised. If you go back and review our Market Outlooks since last Fall, you will see that we thought the market internals were breaking down even during a positive fourth quarter of 2021. Again, with…. … interest rates rising at an accelerated pace during 2022, … bonds selling off at a historic rate, and … a fierce rally in the Dollar, things are upside down. Other negative factors, including but not limited to high inflation, a contraction in the first quarter GDP (down -1.4%), rising labor costs, a collapse in the Japanese Yen and Chinese Yuan against the US Dollar, geopolitical turmoil (Russian-Ukraine war and Russia threatening all kinds of actions including shutting off oil and gas shipments to Europe) and other domestic issues (supply chains and food production) plaguing prospective economic growth, all weigh heavily on the markets. Earnings Matter According to FactSet, 55% of the S&P 500 companies have reported earnings, with 80% beating their earnings estimates and 72% reporting revenues above estimates. This should help the markets in the near term, and while we don't forecast what the markets may do in the future, our suspicion is that we may see some flowers bloom in May. Remember the markets do not react to what is going on currently as much as they begin to factor in what "could be" in the next year and beyond. Here is a snapshot of how our current market compares to past years using annualized returns (projected for 2022): [image] Our own Mish has been one of the few, if only, financial commentators on National TV, continuing to emphasize that "I wouldn't buy now as that might be trying to catch a falling knife" and that we remain rangebound. [Here is a replay from this past week's appearance on Fox Business with Charles Payne.](=) [image](=) Several of MarketGauge's investment strategies are positive on the year. This is largely because their emphasis (including Mish's discretionary service) on commodities, agricultural ETFs, miners, and energy from as early as last Fall. These are the themes that have worked. So far this year, there has been nowhere to hide. The typical asset classes offering safe refuge like fixed income, real estate, utilities, consumer staples, and municipal bonds have produced substantial negative returns. For those of you familiar with Mish's book [PLANT YOUR MONEY TREE]( and her [Modern Economic Family](=), the family members are used to gauge the health of the economy. The members (and a few other indicators like Junk Bonds) did not fare well in April. For example, Sister Semiconductor (and technology) had a complete breakdown. All remain in bearish phases. See below: [image] What's Next? We will go into some detail below on some things you can do to position your portfolio to take advantage of the upcoming Spring rally (flowers). We are probably not stuck in an extended bear market (yet), as earnings, the major driver of stock valuations, remain positive and above expectations. Other factors driving the markets (stock and bond) will continue to depend on interest rates and inflation. It is the uncertainty of these two overriding principles that are currently driving much of the negative expectations being factored into stock price multiples currently. Use the links below to continue reading about: - The statistical implications for the future when the market is down year-to-date and in April. - 8 steps to take to be prepared for any upcoming flowers (rallies) - The Big View weekly insights - The Market Outlook weekly video [Click here to continue to the FREE analysis and video.]() [Click here to continue to the PREMIUM analysis and video](. 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