[Market Outlook] A Summer Full of Travel, Leisure and Buying Stocks Again!

But Is It All Smooth Sailing? [Company Logo] A Summer Full of Travel, Leisure and Buying Stocks Again! But Is It All Smooth Sailing? By Donn Goodman and Keith Schneider [image] Hello Gaugers. Hope that your Independence Day holiday was enjoyable! It seems to be the summer of travel and vacations! Last weekend the TSA reported that they screened more travelers than in 2019 before the pandemic. People are on the move and of course with the weather not cooperating everywhere, many people have been stuck in airports on their way to resorts and cruises. Having been an avid “cruiser” myself over the past 20 years, I understand the allure of a big ship with all the available activities, all you can eat food (food is expensive these days and to have an endless supply – who doesn’t want to just “dig” in?), music, sun, beaches, exciting new ports, and fun, fun, and more fun. One can understand why cruise ships are full and their stock prices are soaring. More about that in a minute. Buying S&P 500 stocks is back in fashion. Investors are scooping up stocks again and here are favorites (since June 1). Ten stocks in the S&P 500 have become the new investor favorites. You would think Apple, Nvdia and Microsoft. But you would be wrong. No matter how much the media is fixated on the purchases of the top 7 (we have covered this the past few weeks, [click here to read last week’s article](), investors are scooping up plenty of stocks outside those 7. You would have to think a little less tech. Enter travel & leisure. Carnival Cruise Lines tops the list. This operator of cruise ships that struggled mightily during the restricted travel pandemic of 2020 and part of 2021, has sailed right into the top of the list of June hot stocks. Shares of the cruise ship operator of a fleet of more than 90 ships are up more than 67% in just about a month’s time. (MarketGauge subscribers and MarketGauge Asset Management investors are big beneficiaries of our quant models catching this and another travel operator recently). The company’s profitability is suddenly turning around. Analysts think the company this September will report a profit of 76 cents per share for the August-ended quarter. If that happens, it would be the company’s first profitable quarter since prior to Covid-19 in the quarter ended February 2020. See Carnival 2023 stock chart below: [image] Big $ Inflows in stock ETFs in June. More than $53 billion poured into stock ETFs in June-showing the strongest demand among all asset classes according to State Street Global Advisors. That’s ETFs’ biggest inflow of free cash in a month since October 2022. State Street points out that nearly $70 billion went into all ETFs in June. That was the biggest inflow in eight months, and the first-time monthly flows topped the average. But investors aren’t just bullish with their money. “Bullish sentiment jumped to 46.4% from 41.9%, according to the weekly survey of individual investor sentiment from AAII,” Bespoke Investment Group said. This week the indicator’s reading was the highest level of bullish sentiment since November 2021. S&P Travel Stocks have taken off. It’s the summer of leisure, adventure, and fun! A similar story to Carnival Cruise lines is that of Norwegian Cruise Lines (NCLH), Royal Caribbean Cruises (RCL-another MarketGauge holding), Delta Air Lines (DAL), and Southwest Airlines (LUV). Starting June 1 is an important time frame to consider. This period kicked off a flood of investors’ interest in buying stocks again. And the latest rally looks different than the big-cap tech focused rally raging so far in 2023. Here is a chart showing the top 10 stocks in the S&P 500 since June 1: [image] Except for Tesla, there is really no mega caps on the list above nor any tech focused company. “With the S&P 500 rallying into bull market territory and new 52-week highs, investors have become bullish,” says Bespoke. This is a positive for the markets as it shows investors are branching out beyond the biggest, and mostly tech-oriented stocks and into areas of the market that they feared could falter from a (predicted) recession that has not yet materialized. Here is a chart of the equal weighted S&P 500 ETF (RSP) versus the market cap-weighted S&P 500 (SPY): [image] Jobs and Inflation, at a crossroad. By now, you are probably aware that the jobs report came out this past Friday, below expectations. This followed the ADP report on Thursday that predicted that more than 500,000 jobs had been created. This sent a shock wave to the markets and at one point the DJIA was down more than 500 points as interest rates on the 10-year rose above 4.0%. Above 4% seems to be the “danger zone” for stocks. Once again, ADP got the prediction very wrong. I wonder why CNBC hangs its hat on wanting to broadcast the importance of the ADP number, which is not a great predictor of the real job market. After Thursday Fed Fund “bets” rose above 90% that the Fed would raise by no less than 25 basis points at their next meeting. Fortunately, the Fed Fund bets did not advance much for the September Fed meeting (no August meeting), so analysts and economists are still hoping for a complete STOP to the interest rate rise cycle. We suggest, however, that nobody count on any interest rate cuts during 2023. The market’s weakness was warranted. Stock markets do not go straight up. Instead, they zigzag and periodically need to take a breather to consolidate recent gains. It was not unexpected that we would see this over the past week, especially with the upcoming Fed meetings. Remember the Fed SKIPPED a rate hike and said that they would be “DATA dependent” going forward. One of our favorite analysts, Ryan Detrick posted the following this week after the brief pullback. Perhaps you may want to record his pivotal areas for your own monitoring of potential market weakness: [image] Watch the CPI numbers this coming week. This coming Wednesday, the CPI (Consumer Price Index) comes out. We think it may surprise, especially to the DOWNSIDE. Inflation has been persistent. This writer has been consistently saying “higher for longer”. Our firm (both Mish and I) have also been stating that inflation is sticky, persistent, and can last a lot longer than expected, especially when the Fed maintains its 2% long-term objective. Mish was early in calling for the dreaded “STAGFLATION” in many of her commentaries on National TV back as far as late 2021. According to Mish, an experienced reader of the tea leaves, it was an inevitable state for the economy to enter. Of course, the current administration’s desire and ability to pass major spending bills has helped keep inflation higher for longer with added stimulus in the economy. Then, of course, the Treasury’s need to create emergency liquidity for the regional banking crisis earlier this year probably contributed to inflation lingering longer. Why my thinking has been changing. Last week I said that inflation may soon break to the downside. I maintain that position and want to reinforce why this writer believes that. Much of my recent investigation into what might occur was gleaned from a Fisher Investment Report that recently came out (thank you Fisher Investments). Forward-looking charts and indicators show that inflation is slowing much faster than many expected. Please note the following explanations and charts: 1. Money Supply: Most economic theory over the last century of economic analysis demonstrates that inflation is caused by too much money chasing too few goods and services. The below chart shows the broadest measure of money supply (M4 green). As it declines it usually leads to CPI (yellow line) falling 12 to 18 months later. [image] 2. Global Supply Chain The supply-chain bottlenecks, many of which originated during COVID-19, have begun to ease to record lows in May as measured by the New York Fed’s Global Supply Chain Pressure Index (GSCPI). It spiked to record highs last year accompanied by surging inflation as people bid up prices for hard-to-get goods. But with goods once again flowing freely through the global economy, this quagmire is subsiding. Notice once again that CPI has a lagging effect but closely follows the GSCPI. See chart below: [image] Use the links below to continue reading about shifting inflation forces, 3 reasons the economy may weaken, how to navigate the next 6-12 months, and the Big View bullets and video by Keith. [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, Donn Goodman CMO, Market Gauge Asset Management Keith Schneider CEO, MarketGauge P.S. When you’re ready, here are 3 free ways we can help you reach your trading goals… - [Book a call with our Chief Strategy Consultant](=), Rob Quinn. He can quickly guide you to the resources that you'd like best. - Get the foundational building blocks of many of our strategies from Mish's book, [Plant Your Money Tree: A Guide to Building Your Wealth](, and accompanying bonus training. - [Review quick descriptions]() of our indicators, strategies, services and trading systems here. Get more - follow us here... 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