Things are still pretty tough in the market, but we’re seeing a few silver linings in all those storm clouds.
The market is dropping because investors think the Fed will raise rates so fast that the economy will go into recession.
Obviously, no one wants that.
However, there is a good chance that investors will turn bullish in the near future if energy prices continue to fall. This would prove that the Fed is making progress and may not have to keep raising rates as quickly.
Given the prices at the pump, we expect energy stocks to remain profitable, along with healthcare and consumer discretionary stocks. These sectors tend to outperform in periods of economic contractions because they are services and goods that people must consume.
This week, viewers of our Learning Markets YouTube channel enjoyed a few extra shorts, along with our usual twice-weekly updates. Here are a few of the topics we covered…
- Profit from Rising (or Falling) Gas Prices
Do what the airlines do and use futures, stocks, and ETFs to profit from rising gasoline and oil prices. This is not just a bullish strategy.
When recessions come, gasoline historically crashes 70 to 80%. Considering the recent extreme price spikes, if we have a recession in 2022, shorting gasoline ETFs or stocks could go a long way to protecting your portfolio from more losses.
- 4 Key Economic Announcements Stock Traders Will Be Watching
Can the S&P 500 bounce back out of bear-market territory? The answer to that question will depend on the results of four key economic factors…
- Mortgages: 30-year fixed-rate mortgages rates were at 5.78% at the end of last week, up from less than 3% at this time last year. Mortgages are a positive economic driver, so it’s important to watch this number.
- Fed Chair Testimony: What Fed Chairman Powell tells Congress this week may indicate how aggressive the Fed is likely to be when it comes to interest rates through the rest of the year. The market is pricing in another 0.75% interest rate hike in July. Predictions have settled around .50% to 75%.
- Purchasing Managers Index Report: This report, released yesterday, gives investors an idea what purchasing managers in the manufacturing industry are going to be acquiring for their companies to create the products they feel they’ll need in the future. The projected number was 56.2; Thursday’s report came in at 56.1. A PMI reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally declining, so we’re still in good shape here.
- Consumer Sentiment Index: This report, released Friday, measures consumers’ confidence in the current economy, including whether they’re spending more, have adequate discretionary income, and how inflationary pressure is affecting spending. Unfortunately, Friday’s report clocked in at 50, from an initial reading of 50.2 earlier in June and a drop from May’s 58.4 level. Economists expected a reading of 50.2, but instead were shocked with the lowest measure since the 1970s. The market reacted by trading a bit higher Friday morning, but it’s obvious that rising prices on gas and other goods have soured consumers’ economic outlook.
Making Money in Shoddy Markets
We’ve gotten a lot of reader questions lately about making money in a bear market because frankly, most stocks have been heading in one direction: down.
Shorting is one option, but it is an advanced technique that can turn sour on a dime (especially if the market climbs back up as rapidly as it plummeted).
The truth is, too, that there is no “bear-market-proof” investing or trading strategy. Losses will happen, but it’s the scale of those losses that matter.
Take a look at what we’ve done in our elite trading research service so far this year.
From the third day in 2022, our readers have had the chance to close out 64 trades… and only three of those trades closed at a breakeven of 0.00%.
All the rest were winners, with an average annualized win of 134.89%.
Like we said, losses happen in any market condition. But you’d be surprised at how easy it is to cushion the impact of market drops with the right strategies.