Codes Purple, Red, and Green

Smoky skies, backups in the water, and a rising stock market... European economists say a recession began – last year... Good for nothing... A recent bullish reversal for stocks... A perfect track record... The ultimate weight-loss drug...

Summer is off to a concerning start...

On land, in the air, and at sea, at least.

Here in the mid-Atlantic region of the U.S., we've spent a few days gazing at the red sun and Canadian wildfire smoke in the skies above us. Schools are keeping our kids indoors. And some people are pulling their face masks out of storage.

"Code Purple," it's called. That's a new one for many people I (Corey McLaughlin) know.

At the same time, on the West Coast, ships are getting increasingly stuck offshore as California seaport workers have stopped working to rally for better wages. The Port of Oakland was entirely shut down last Friday. According to global news service Reuters...

More than 22,000 dockworkers at ports stretching from California to Washington state have been working without a contract since July.

Contract talks between the employers' Pacific Maritime Association (PMA) and workers' International Longshore and Warehouse Union (ILWU) are in the final stretch, but frustrations are running high after more than a year at the negotiating table.

The issue is raising the specter of the supply-chain breakdowns last seen back when we were social distancing.

Large retailers and manufacturers are urging the White House to get involved to broker a deal, and railroad companies are warning about congestion on the tracks again (hello, inflation). In response to the backups, Union Pacific Railroad on Tuesday paused sending empty containers to the ports of Los Angeles and Long Beach and stopped U.S. exports.

Yesterday, a leading third-party-logistics company put a code "red" warning on the Pacific Ocean region of its U.S. Port/Rail Ramp Freight Index.

But the stock market doesn't care...

What is this, 2020 all over again? We kid, kind of. It's June, and the major U.S. stock indexes have been trending up since March... just like they were over the same span three years ago amid the stimulus-fueled days early in the pandemic.

The major difference now is that the economy is still dealing with 40-year-high inflation, and interest rates are higher than they've been in 15 years... as opposed to the near-zero rates the government offered banks throughout 2020 and 2021.

And, as opposed to being shocked that stimulus checks managed to keep consumer spending going during a pandemic, now a lot of people are bracing for higher interest rates to cause an "official" recession...

We've had a good discussion about that over the past few weeks... (Again, thank you for all your comments, and keep them coming, as always, to feedback@stansberryresearch.com.)

My take: It doesn't do a heck of a lot of good to get caught up in the definitions. Just see the environment for what it is – one with "more expensive" money than many have been accustomed to – and make investment decisions that align with your goals.

If that includes paying 50 times forward earnings for shares of everybody's sudden-favorite artificial-intelligence play – computer-chip company Nvidia (NVDA) – so be it... But we wouldn't suggest it.

Here's a perfect example of why you should ignore the common noise...

Today in Europe, the statistics agency Eurostat said a recession began in late 2022 (last year!). That determination is mainly based on data "revisions" from German economists. As our Stansberry NewsWire's Kevin Sanford wrote in his morning briefing today...

Revised Eurostat data reveals that the euro area experienced a mild recession this past winter, primarily driven by the surge in energy prices following Russia's invasion of Ukraine. Between January and March, the eurozone's economy contracted 0.1%, which, when combined with the same magnitude of decline in the previous quarter, resulted in the first six-month contraction since the onset of the COVID-19 pandemic.

And like in the U.S., the unemployment rate in Europe is still near lows. So, also like here, it seems they've had what economists call a "technical" recession... two straight quarters of declining GDP growth, like the U.S. economy experienced in the first two quarters of 2022.

That's a distant memory for Mr. Market, though...

We're seeing now that stocks can and have been going up in the current environment. Consumer spending is still strong (albeit increasingly with everyday expenses going on credit cards), unemployment remains low, and market analysts continue to debate what kind of "landing" the economy will enjoy (or endure) as the Federal Reserve tries to fight inflation.

We'll get a little more insight into macroeconomic land next week when the Fed meets and updates its policy and guidance again. Neither the Fed nor anybody else knows for sure what will come next, yet there are plenty of opinions.

Maybe it's as simple as the economy actually being able to handle higher interest rates... Perhaps the economy (save for those terribly run regional banks) is strong enough to blow off the effects of the roughly $10 trillion of fiscal and monetary stimulus Congress and the Federal Reserve came up with.

There are always risks in the market – and we see plenty of them. But as our colleague and Stansberry Research senior analyst Brett Eversole wrote in today's DailyWealth newsletter, the outlook for stocks may yet be getting brighter... And the market is behaving as if the worst for the economy is fading into our rearview mirror, not looming ahead.

A recent bullish signal...

As Brett pointed out today, the 12-month return for the benchmark U.S. index turned positive as of the end of April and stayed that way in May. This is notable because April's 12-month return marked the first positive number in a year, as Brett said...

Stocks consistently showed a negative trailing 12-month return from the end of April 2022 through March 2023. But that turned positive in April and May of this year. You can see it in the chart below...

In other words, stocks had been down year over year for a year. That's rare, happening only eight other times since 1950. So when these trends end and go into "code green," you're unlikely to see another one begin anytime soon.

And as Brett said, once this kind of trend turns, "stocks have a history of fantastic returns." They've averaged a 15.1% gain in the following year compared with a 7.8% historical average, and a 10.1% gain after six months compared with the 3.8% average.

Finally, Brett pointed out this nugget about this trend reversal...

What's more, stocks were higher in every case over the following year. It's tough to find an indicator with a perfect track record. But this one has it.

The three most recent times that this indicator triggered were especially powerful. Those cases were in 2009, 2003, and 1982. And they ended up being the three best buying opportunities of the past 50 years.

The setup is similar today. Stocks had been losing money across the board for a year. But the losing streak recently ended, meaning folks with money in stocks are making money again. In Brett's view, this is one more reason he is staying bullish.

If you're looking to put some new money to work...

As always, first think about your goals, risk tolerance, and time horizon before making any investment. But if you've done that and are looking to put some new money to work, here's one idea to consider...

It comes via Stansberry Research senior analyst Thomas Carroll and the rest of our Prosperity Investor team. They've just put together a new presentation on a company they believe is poised to profit from recent breakthroughs it has made with a new weight-loss drug, which could benefit 125 million Americans...

Longtime readers know Thomas has been a health care analyst for 20 years. Together with Dr. David "Doc" Eifrig and analyst John Engel, he launched the health-care-focused Prosperity Investor last year – in part as a way to share research on strong, growing businesses in a gigantic industry that has proven "inflation proof" over the decades.

This drug they are talking about is up for federal approval as early as June 26. With the scope of the obesity epidemic in this country, the potential market for a successful weight-loss drug can't be overstated. If you don't yet subscribe to Prosperity Investor, click here to hear directly from Thomas about this opportunity and how you can get started today...

Existing Prosperity Investor subscribers and Stansberry Alliance members can find more information here. As they wrote...

Health care and medicine are taking off exponentially. New therapies, methods of drug development, payment mechanisms, and even the real estate of health care offer vast investment opportunities that are only increasing.

A unique combination of technology, drug development, genetic understanding, massive new private investment, government funding, and more is on the verge of forever changing how we live and the quality of that life.

The breakthroughs we're seeing mean we can live longer, healthier lives. They also offer us a way to grow our portfolios. And whenever we see a good opportunity, we want to share it with you, our reader.

This is one of them.

And Thomas, Doc, and John pointed subscribers and Alliance members to all the details, including this special report, "The Ultimate Weight-Loss Drug." It explains why Wall Street is "lowballing" the value of this drug and the business behind it right now. Yes, an undervalued company poised for big growth. In this economy? Yep.

New 52-week highs (as of 6/7/23): Berkshire Hathaway (BRK-B), Ingersoll Rand (IR), iShares U.S. Home Construction Fund (ITB), MSA Safety (MSA), MasTec (MTZ), and MYR Group (MYRG).

In today's mailbag, another thought on the government's suit against crypto exchange Coinbase – which we wrote about the last two days here and here... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The reason for this suit is because the government wants a [central bank digital currency] and does not want any independent type of financial institutions that cannot be controlled..." – Paid-up subscriber Joe P.

All the best,

Corey McLaughlin
Baltimore, Maryland
June 8, 2023