[Market Outlook] Economic Storms Ahead?

What To Do To Protect Your Investments [Company Logo] Economic Storms Ahead? What To Do To Protect Your Investments By Keith Schneider and Donn Goodman [image] Since early fall 2021, we at MarketGauge have been urging you to focus on the fact that many of the economic and market indicators we evaluate were just not adding up. As a subscriber, you may recall the numerous weekly Market Outlook issues that conveyed a puzzling sentiment that contrasted the fact that the market was going up while several concerning underlying technical conditions were questionable (at best) and more likely bearish (at face value). At the same time, our own Mish was repeatedly writing and speaking publicly about how to adjust your investment position to prepare for what was coming. Her message was simple. Inflation would soon exceed expectations (which veteran investors know is not good for growth equity valuations), and to make matters worse… Higher than expected inflation would lead to "stagflation" (it's a 70's thing) which would be the "surprise" problem that would finally weigh on the bull market in a way that could not be denied. She was early, but not wrong. And if you had been following her model portfolio throughout this period, you'd probably be saying that it was hard to deviate from what the consensus thinking was, but it was easy to see her trades were working. Mish's trades (which proved to be a solution) were focused on commodity related trends: energy, agricultural and precious metals. That was the right call, and that's why her model portfolio has been up every year despite the fundamental side of the market is still bearish. Some of Wall Street's best and brightest began ratcheting down their US GDP projections and company earnings forecasts. Two of the best, Mike Wilson, Chairman, Global Investment Committee of Morgan Stanley and Mike Hartnett, Bank of America's Chief Investment Strategist, have been warning of "inflation shock" and tough times ahead. They both came out Friday morning (June 3) and warned investors NOT to chase the market. In their words, this was nothing more than a "bear market bounce." The S&P 500 proceeded to drop over 1.5%, and the Nasdaq tech-heavy index fell by 2.5%. But it was the deeply troubling rhetoric of Elon Musk, founder and CEO of Tesla, and Jamie Dimon, Chairman of JP Morgan, that echoed the negative sentiment from all types of business owners and economists this past week. Even the Treasury Secretary, Janet Yellen, came out to admit that she got the Inflation scenario wrong. [image] In recent polls, 90%+ of Americans said their biggest concern for the near future was the price of goods and energy. One of the most prevalent subjects covered by TV newscasters is the price increases of EVERYTHING. Sad stories about people having to decide on whether to fill up their cars (to get them to work), or be able to buy food to eat are multiplying. This as gasoline hit a new national average on Friday of $4.76 a gallon. That factors in lower prices in certain states. Many states, including Washington, California, Nevada, and others are seeing gasoline prices at well over $5.00 and in some cases, close to $7.00 plus a gallon. Due to Europe's decision to begin to boycott Russian oil this past week, per barrel prices rose yet again to new highs near $120 a barrel. Even with OPEC's pronunciation this week that it would begin to increase production, nothing is stopping Oil and Natural Gas from continuing their weekly increases. Our own Sector Plus and Global Macro investment strategies have greatly benefited from the energy thesis this year. Our subscribers have profited handsomely from Oil (USO), Natural Gas (UNG), and diversified energy ETFs (ERX & XLE). It is expected that the Federal Reserve will continue to aggressively hike interest rates. This negative inflation narrative received another dose of unpleasant news on Friday morning when the May employment announcement included more jobs created than expected. Many economists were predicting that recent Fed action would soften the hot job market. The creation of 390,000 new jobs sent interest rates up 7 basis points and the realization that the Fed would need to remain aggressively hawkish. The lone bright spots were that hourly wage increases slowed a bit and consumer retailers hiring was down on the month, indicating that retailers are preparing for some demand destruction. This was another dagger in the stock and bond markets. It stopped Thursday's jubilant stock market rally dead in its tracks. There was no follow thru. In recent Market Outlooks we have been warning that the market (S&P 500) is in a bearish phase and not to get overly enthusiastic about chasing a "corrective wave" up. Oversold stocks can get more oversold. The S&P 500 needs to clear the 50-day moving average (see the blue line in the chart below) to have a better chance at a sustained rally. [image] Through her Mish's Daily Service, last week Mish offered insight about trading in a range-bound market. [You can get her article here.]() Additionally, Geoff hosted a webinar last week on identifying and trading major reversals on daily charts, short-term reversals using intraday charts using proprietary indicators and patterns. [You access that webinar replay here this weekend.]( Mish also discussed trading ranges and reversal in a couple of her recent national TV appearances here: - Fox Business with Charles Payne: [Should Investors Expect More Market Pain?](=) - BNN Bloomberg: [Why Investors Need to Lean Towards Alt-Energy and Watch for Trading Range Dips]( - Yahoo Finance: [Inflation Has Not Peaked](=) Use the links below to continue reading 10 things you can do to protect your portfolio, and get this week's market insights from Big View - bullets & video [Click here to continue to the FREE analysis and video.]( [Click here to continue to the PREMIUM analysis and video](. Best wishes for your trading, Keith Schneider CEO MarketGauge Get more - follow us here... 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