Chris’ note: With sky-high inflation… spiking interest rates… and raging market volatility… it’s no wonder folks are feeling rattled.
And I don’t blame you. This year’s upside-down markets are enough to make even seasoned investors dizzy.
But things aren’t as gloomy as they seem. Today, you’ll hear from Palm Beach Research Group analyst Michael Gross.
He explains what’s got things so backwards right now… and a strategy you can use to take advantage.
He’ll also share details on an urgent event colleague Teeka Tiwari is hosting on Wednesday, October 26, at 8 p.m. ET.
It has to do with a window Teeka sees coming that can turn the tides of these chaotic markets in your favor. And folks who are prepared could capture decades’ worth of wealth in just 30 days.
So go here to sign up, then read below from Michael on what exactly has the markets in a twist…
The market is topsy-turvy right now.
What seems like bad news in the economy is good… And the good news can be misleading.
It’s like we’ve fallen down a rabbit hole and ended up in Wonderland.
If you’re feeling like Alice right now – where up is down and down is up – I don’t blame you.
That’s why today, I’ll help you make sense of what’s happening in the markets… and share details of a strategy we’re using to take advantage of it.
The ISM Manufacturing Purchasing Managers Index (PMI) measures the strength of the U.S. manufacturing sector. When the index dips below 50, it signals a decline in manufacturing activity.
On October 3, the index came in at 50.9… well below Wall Street’s forecast of 52.4. That suggests the U.S. manufacturing sector is slowing down. It’s not a good sign.
And the bad news kept coming. The next day, the U.S. Department of Labor announced job openings came in around 10.1 million. That’s 10% lower than the 11.2 million job openings in August. And when business slows, job openings dry up.
Again, not a good sign.
But despite this flood of seemingly bad news… the market bounced.
The S&P 500 roared higher, going up 6% over two days. You’d have to go all the way back to the 2020 pandemic bottom to see a sharper rise in just two days.
That’s what I mean by “bad” economic news turning out to be “good” market news. But things got crazier later in the week.
The next three days delivered relatively strong economic news.
On October 5, human resources management firm ADP released its monthly jobs report. It showed the private sector added 208,000 jobs in September.
More good news came later that day. The Institute of Supply Management (ISM) showed growth in the U.S. service sector was better than expected.
And that Friday, the long-awaited payrolls report showed an added 263,000 jobs in September – higher than expected – and unemployment dropped to 3.5%.
But despite this “good” economic news, investors panicked and sold.
The S&P 500 dropped 3.3% during the week’s second half – giving back nearly all its two-day gains.
We saw another topsy-turvy market last week… so we’re not out of Wonderland yet.
On Thursday, the CPI report showed inflation was up 8.2% in September. That’s slightly down from the 8.3% reading in August.
But bad news came from the Core CPI, which doesn’t look at more volatile food and energy prices. It rose by 6.6% in September, its highest rate of growth in 40 years.
That means prices across goods and services like rent, medical care, and education are still rising.
Another 75-basis point Fed rate hike next month to contain out-of-control inflation seems likely. And when the Fed raises rates, the market typically tanks.
However, despite the high reading, the market actually bounced 2.6% on Thursday.
Then reality sank in again on Friday when the market erased much of the previous day’s gains for fear of more rate hikes.
The volatility continued into this week… with stocks soaring on Monday ahead of earnings reports.
So what’s going on? Why is good economic news bad for the market… and bad economic news good? Why are we seeing such wild swings every day?
It all has to do with inflation.
As we explained above, the inflation rate for core goods and services is at multi-decade highs… with prices in September soaring at an annualized rate of 6.6%.
To cool the economy and rein in inflation, the Fed is raising interest rates.
Investors saw the “bad” economic news at the start of October as a sign that the economy was cooling down. They believed it would force the Fed to pivot from its hawkish rate hike policy to a more dovish policy of interest pauses or cuts.
When the Fed pauses or cuts rates, stocks tend to rally. And when the Fed raises rates, stocks generally fall.
When interest rates rise, it becomes more difficult for companies to raise capital to grow their business. In addition, valuations and share prices are crushed as higher rates result in a lower current value of a company’s future cash flows.
The opposite is true with interest rate cuts. Lower interest rates allow companies to finance their growth at lower costs. And those lower rates create higher current values of those future cash flows.
That leads to higher valuations and share prices.
That’s why the market bounced on “bad” economic news but dropped on “good” economic news.
Investors just don’t know what to make of things. And when investors are confused, volatility increases, creating an “Anomaly Window” in the markets.
If you’re not familiar, “Anomaly Windows” are brief periods in the markets where the normal rules of investing no longer apply…
These windows happen every few years, and they’re a rare chance to pull life-changing crypto-like gains from boring blue-chip stocks.
In recent Anomaly Windows, blue-chip companies like Coca-Cola, Whirlpool, and Caterpillar saw gains of 1,050%, 1,174%, and 1,700%, respectively… all in 30 days or less.
And in the months ahead, we’ll see an Anomaly Window of epic proportions… one that’ll give investors a shot at 30 years of S&P 500 gains in about 30 days.
But you’ll need to prepare for it ahead of time… because once the rest of the market catches on, the biggest gains will be off the table.
That’s why Daily editor Teeka Tiwari is holding an urgent event on Wednesday, October 26, at 8 p.m. ET to tell you all about it.
He’s calling it Retirement Recaptured: 30 Years of Wealth in the Next 30 Days, and everyone that attends will learn what this Anomaly Window is… how it works… and how to potentially recapture 30 years of wealth in 30 days.
You’ll even get the name of Teeka’s top 3 stocks to target for maximum potential gains.
You can reserve your free spot right here.
Look we know this year’s upside-down market “Wonderland” has been difficult to navigate…
Inflation is at record highs… The S&P 500 and Nasdaq are the lowest they’ve been since the pandemic… And the Fed is poised to hike rates and push us further into recession.
So this is your chance to turn that chaos in your favor… and end the year wealthier than you started it.
Go here to join Teeka next Wednesday, October 26, at 8 p.m. ET… This event is free to attend, but you must reserve your spot as soon as possible.
Analyst, Palm Beach Daily