What Sentiment Says About the Bull Market Now
The Fed stands pat (for now)... The rate-hike cycle is finished... What sentiment says about the bull market now... The perfect strategy for today's market...
The Federal Reserve wrapped up its June policy meeting today...
As expected, the Fed kept its benchmark short-term interest rate unchanged again this month.
This marks the fourth consecutive meeting that the central bank has held rates steady since its dovish "change of heart" back in January. But if the Fed's latest statement is any indication, that may not be the case much longer. As the Wall Street Journal reported...
Interest-rate projections released Wednesday showed eight of 17 officials project the Fed will need to cut the benchmark rate this year, with seven of those officials seeing two quarter-point reductions. Only one official projected the Fed would need to raise interest rates this year, with the remaining eight seeing that rates would stay unchanged.
A majority of officials projected the benchmark rate would sit below its current level by the end of 2020.
In short, if there were any remaining doubts that the Fed's rate-hike cycle was over, today's announcement should put them to rest.
Of course, whether or not the Fed should cut rates is a different matter entirely...
Longtime readers know we believe central banks have no business setting interest rates in the first place. It's absurd to think that a "politburo" of bankers and economists has any clue what the proper price of money should be.
But putting that aside, we'll remind you unemployment sits at 50-year lows... most other official measures of the economy remain strong... and stocks are trading just shy of all-time highs.
Meanwhile, the federal funds rate remains just 2.5% today. Even after two-plus years of rate hikes, monetary policy remains "easier" than virtually any time in the last 50 years.
How on earth can the Fed possibly justify a rate cut today?
If we didn't know any better, we might suspect it's simply catering to the market...
You see, despite today's elevated stock prices, most measures of sentiment suggest investors are anything but bullish today. In fact, according to the latest survey from Bank of America Merrill Lynch, big fund managers are actually more downright bearish right now. As Bloomberg reported on Tuesday...
Investors haven't been this pessimistic since the global financial crisis of 2008. That's according to a Bank of America Merrill Lynch survey of money managers with $528 billion between them.
Equity allocations saw the second-biggest drop on record, while cash holdings jumped by the most since the 2011 debt-ceiling crisis, the June poll showed. Concerns about the trade war, a recession and "monetary policy impotence" all contributed to the bearish sentiment, Bank of America said...
Global growth expectations collapsed, Bank of America said, with half of the surveyed fund managers forecasting weakness over the next 12 months.
Regular Digest readers know we've been urging you to be cautious...
By several measures, the broad market is trading near its most expensive valuations in history. Meanwhile, we're marching slowly but surely toward a massive debt crisis.
That hasn't changed. Sooner or later, this long bull market will end.
However, history also tells us bull markets tend to end with a "bang" rather than a "whimper." And today's broad investor pessimism suggests we're still not there yet.
For now, we'll continue to give the "Melt Up" the benefit of the doubt.
By the way, if you're looking for an ideal way to profit from the final 'inning' of this bull market, be sure to join us tonight...
During his first-ever trading "master class," our colleague Dr. David "Doc" Eifrig will be sharing a strategy tailor-made for today's market environment.
It's a way to make big, quick gains – up to 10 times more than you can make buying stocks the normal way – while risking much smaller amounts of capital. And you can use it to profit when stocks go up... down... or even trade sideways.
During tonight's FREE event, Doc will show you step-by-step how this strategy works and how you can put it to use for yourself immediately.
It all kicks off less than two hours from now at 8 p.m. Eastern time. Click here to join us.
New 52-week highs (as of 6/18/19): Automatic Data Processing (ADP), American Express (AXP), Dollar General (DG), Franco-Nevada (FNV), SPDR Gold Trust (GLD), Kirkland Lake Gold (KL), iShares iBoxx Investment Grade Corporate Bond Fund (LQD), Lundin Gold (TSX: LUG), Microsoft (MSFT), Motorola Solutions (MSI), NovaGold Resources (NG), Polymetal (LSE: POLY), Royal Gold (RGLD), ResMed (RMD), Travelers (TRV), Under Armour (UAA), Wells Fargo – Series W (WFC-PW), and W.R. Berkley (WRB).
In today's mailbag: One reader took offense to yesterday's Digest on CEO compensation, while another has a question about tonight's trading "master class." As always, send your comments and questions to feedback@stansberryresearch.com.
"Dear Matt, as a public company CEO it was slightly disappointing to see that upon gaining the seat the first thing you would mention is the person considers doing something illegal. Fortunately, there are honest CEO's out there that have integrity and value their roles as positive contributors to society. I happen to take my responsibility for our employee's livelihoods very seriously and want the company to be a stable place for them to prosper. I would not advocate for a compensation plan design that would put the company at risk by encouraging me to do stupid things while enriching myself. I realize there are some CEO's that may not feel the same way as me, and some do have ridiculous pay plans that may encourage bad behavior, but your Digest contribution paints us all in bad light." – Paid-up subscriber Joe H.
Matt Weinschenk comment: I didn't intend to suggest that most CEOs go and do something illegal.
Rather, given the structure of their compensation, the wealth-maximizing strategy would be to put it all on the line to boost your company's share price right now, if you had a Gordon Gekko, "greed is good," hardcore-capitalist philosophy. Some CEOs do follow this path. That is what's behind corporate disasters like Enron and Valeant Pharmaceuticals.
But most CEOs are great people and perfectly law-abiding citizens working to keep shareholders, customers, and employees reasonably happy.
The point is really two-fold: CEOs have worked themselves into a position to capture huge upside. And we think that salary-earners could stand to realize the benefits of such an arrangement and seek out similar opportunities.
"Doc, MANY of us are followers of Steve's Melt-Up advice. And MANY of us also appreciate Porter's advice that a correction (or worse) will be here between tomorrow and two years from now. And the Market is having some nice days for the last few days.
"SO, would you be able to provide some examples in your Webinar on Wednesday night of using Options to 'give up' some upside exposure to Steve's Melt-Up in exchange for some protection from my 401K's balance trying to imitate Sir Issac Newton's realization that Gravity also exists?
"I don't know what 32 feet / second / second looks like on my TD Ameritrade account balance. And I don't want to find out." – Paid-up Stansberry Alliance member Stan H.
Doc Eifrig comment: In a sense, that's exactly what we're looking to do. We want to use some more advanced trading techniques to tailor our returns in such a way that we can still get upside and change the way our downside looks. We've done this, very specifically, for subscribers of Retirement Trader. We used our techniques to design a portfolio that earned a similar return to the market but allows us to keep about 80% of our capital in pure cash. That helps us sleep well at night.
Tonight's webinar, though, is more about grabbing big gains. This isn't about safety... This is about big profits. Fortunately, we can use the strategy to earn those profits on a falling market as well.
Regards,
Justin Brill
Baltimore, Maryland
June 19, 2019