Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Many experienced investors are a little concerned about the S&P 500 (SPY) stock price soaring to 5,100. This is because the stock price has reached a high level due to little growth in profits. This could signal a troubling adjustment ahead. That’s why you should check out Steve Reitmeister’s latest market commentary, trading plans and top picks. Read below for the full text.
Yes, the S&P 500 has soared to 5,100 (spy) was impressive. But just like last year, we can see that too much of the recent gains have gone to the Magnificent 7 stocks. Much of that is thanks to “.off the chartsNVDA Earnings Report.
Unfortunately, the more you broaden your horizons, the harder it becomes to be extremely bullish. This is especially true of the Fed’s signals suggesting June will be the first rate cut (and also…)maybe it’s later than that).
This creates an interesting investment environment where stock prices are at all-time highs but earnings growth is very low. Not a great recipe for future stock market progress.
In this week’s Reitmeister Total Return Explanation, we dive deeper into this important topic.
Market commentary
The conversation should start with this provocative chart from FactSet comparing forward-looking S&P 500 EPS to stock index movement.
We can see that for most of the past decade, the dark line in earnings has been above the price movement. This means that the improved earnings outlook has pushed up the stock price. But every time we find the stock index rising above EPS estimates, it shrinks in size again, like in 2022.
So it’s interesting to think that the recent rally in stocks that started in November came under the auspices of the Fed’s upcoming interest rate cut. But as time goes by, the start date is pushed back more and more and we find out that’s not true.
FOMC minutes released last week reaffirmed the Fed’s hawkish intention not to act too early in cutting rates to avoid the risk of inflation staying above trend for too long. This news, on top of last month’s higher-than-expected CPI inflation, is causing investors to recalculate when the Fed will officially start cutting interest rates.
Currently, the probability that the first interest rate cut will occur on May 1st iscent The chance of meeting is now just 19%, down from 88% a month ago. With the market pegging the probability at 63%, there is widespread belief that June will be the starting line, which is good but not an overwhelming certainty.
Returning to the S&P 500 earnings chart above…I believe the stock price is significantly outperforming its fundamentals. If the lessons of history hold true, they point to two possible outcomes.
First, the stock price will be revised to more closely match the actual state of the earnings outlook. For some inflation stocks that can withstand more severe penalties of 20% or more, staying in the 10% range should do the trick.
On the other hand, stocks may remain flat for a while as they patiently wait for a rate cut. This action is a well-known catalyst for greater economic growth and should ultimately boost returns and restore equilibrium to the index price.
Yes, there are 3rd A case where stock prices continue to rise because investors are not completely rational. Unfortunately, these periods of irrational enthusiasm led to even more painful corrections in the future. So let’s hope that doesn’t happen here.
trading plan
i believe 2n.d. The above scenario is the most likely. At this point, the S&P 500 index will remain flat for a while. It is probably holding on in a tight consolidation below the recent high of 5,100. Alternatively, the trading range to the previous breakout level of 4,800 may widen further.
My biggest hope is that the recent rotation into small-cap stocks continues. For example, over the past three sessions, the S&P 500 has actually fallen a bit from its highs. All the while, the small-cap stocks in the Russell 2000 produced a far more impressive +2.2% gain, finally returning to positive territory this year.
The important point is that we are rightfully in a bull market. However, sometimes price fluctuations can outpace fundamentals. Therefore, this will result in a suspension period or a rectification period. I feel the former scenario is the most likely.
In such an environment, the market as a whole does not move much, but overvalued stocks generally fall and value stocks rise.
Thanks to the 31 value factors within the PoWR Value model, you’re in a great position to find these top value stocks. Neither you nor I have enough time in the day to manually evaluate these 31 factors for all 5,300 stocks measured by the POWR Ratings model.
Thankfully, it’s much easier to manually select stocks to include in your portfolio, as a computer does the heavy lifting every night.
What is currently in my portfolio?
Read below for the answer…
What’s next?
Check out my current portfolio of 12 stocks packed with great benefits from the unique POWR Ratings model. (Nearly 4x better than the S&P 500 through 1999)
This includes five under-the-radar small-cap stocks that have been recently added with tremendous upside potential.
Additionally, I have one particular ETF that is incredibly well-positioned to outperform the market in the coming weeks and months.
This is all based on my 43 years of investing experience, having seen bull markets, bear markets, and everything in between.
If you want to learn more and see our handpicked 13 lucky deals, click the link below to get started today.
Steve Reitmeister’s trading plans and recommendations >
I wish you success in your investments.
Steve Reitmeister…but everyone calls me Leity (pronounced “righty”)
StockNews.com CEO, and Editor, Reitmeister Total Return
SPY stock was trading at $506.93 per share on Tuesday afternoon, up $0.94 (+0.19%). Year-to-date, SPY has increased 6.65%, compared to the benchmark S&P 500 index’s increase of % during the same period.
About the author: Steve Reitmeister
Steve is better known to StockNews readers as “Reity.” He is not only the CEO of the company, but also talks about his 40 years of investment experience in the world. Reitmeister Total Return Portfolio. Learn more about Reity’s career and find links to his latest articles and stock picks.
post Does this chart show a stock price correction? It first appeared stocknews.com
