Porter's Next Big Predictions
The S&P 500 has sunk to a key level... A messy market... This has happened before recessions... The best-case scenario... He's back... Porter's next big predictions... Tune in Thursday for all the details...
The benchmark U.S. index is flirting with a key marker...
While we were in Vegas, Mr. Market had a fit.
Five straight down trading days for the S&P 500 Index, heading into today, have suddenly sunk the benchmark U.S. stock index just above its 200-day moving average.
I (Corey McLaughlin) have shared the below chart a few times over the past few months...
It's the one-year performance of the S&P 500, currently running from a bottom last fall to a recent downturn that kicked off in late July. The index first busted below its shorter-term 50-day moving average in August, and now it's sitting right on its key long-term trend indicator...
Yesterday marked the first time the S&P 500 closed below this level since March's banking crisis (and government rescue operations). But rising long-term bond yields, and renewed recession talk, over the past few months have roiled the markets once again.
This is a possible turning point, one way or another, worth watching... These technical averages aren't the be-all, end-all of stock market analysis. But in technical analysis, they very often do act as short-term levels of "support" and "resistance."
Folks like our Ten Stock Trader editor and chartered market technician Greg Diamond and DailyWealth Trader editor Chris Igou, who uses a blend of technical and momentum signals to make trades, are watching this and other indicators closely.
The S&P 500 gets a lot of attention, but...
Some investors and a lot of Wall Street computers and algorithms run by institutional firms actually have trading strategies based solely around this index and technical trend lines. But we caution against making a broad bullish or bearish call from looking at just one chart...
For instance, the tech-heavy Nasdaq is still above its long-term trend, but the small-cap Russell 2000 and Dow Jones Industrial Average have been trading below their 200-day moving averages for the most part since mid-September. As Greg wrote to subscribers yesterday...
Back in late September/early October, we were looking for stocks to bottom out, and some did. Now we're seeing the indexes make new lows, while some stocks are still holding those late September lows... That's setting up price divergence.
In technical-speak, price divergence means that certain sectors or even key individual stocks are acting differently and trading in different directions from others. Making sense of the mess can be difficult. You often see this during times of volatility and key turning points.
As Greg told subscribers, yesterday may ultimately mark an important low for stocks, but he's not convinced quite yet. He's patiently waiting before making any new recommendations to his subscribers.
All in all, as it is the benchmark for the broad market, we'll keep a close eye on the price action of the S&P 500 over the next few days as it flirts with a notable marker.
Today, the U.S. benchmark and the other three major indexes closed higher. The Nasdaq Composite Index gained the most, up 0.9%. The S&P 500 was up 0.7% to close just above its long-term average.
Regardless of the short-term direction for stocks, though...
It should not surprise regular readers to hear that we're seeing all kinds of warning signs and indicators of trouble ahead for the economy in the next six to 12 months...
This may be part of what has driven stocks lower lately. Namely, the yield curve has "reverted" sharply over the past few months, as longer-term yields have been heading higher while short-term yields have remained largely steady.
I won't rehash too many details about why this is happening, but just know this is typical pre-recession or early-recession behavior... In the 12 times the yield curve has "inverted" since the 1950s, a recession has followed on 11 occasions and began anywhere from six to 24 months afterward.
We're in the second half of that range now, 18 months on from the first inversion – of the 10-year/2-year Treasury spread – in April 2022... On top of that, the yield curve has begun to "normalize," which perhaps counterintuitively is another recession indicator.
What we're seeing today, with long-term yields moving higher being the difference maker, is what financial types often call a "bear steepener." That name has to do with the shape of the yield curve, and it's becoming steeper with longer-term yields going higher, to reflect rising inflation expectations... and higher interest rates.
Our Portfolio Solutions team covered this term and concept earlier this month in a terrific issue. Existing subscribers and Stansberry Alliance members can read it here.
As we cited via our Director of Research Matt Weinschenk earlier this month, investors are increasingly expecting the Federal Reserve to keep its benchmark bank lending rate closer to 5% into next year. That's about 50 basis points higher than the previous consensus thinking and projection from the central bank.
Higher for longer – and then...
The practical effect is that rising long-term borrowing costs significantly tighten financial conditions, regardless of the reasons.
In any case, given our economic circumstances today, what we're seeing in the bond market now is a good predictor of that erstwhile "below-trend growth" that Federal Reserve Chair Jerome Powell has been calling for since March of 2022...
As our Stansberry NewsWire editor Kevin Sanford wrote in his morning commentary today, long-term yields have risen faster than short-term yields during an inverted yield curve period only four other times in the past 60 years... 1966, 1969, 1981, and 2007. That's what we're seeing in the U.S. economy right now, and we're not in good company.
Here's what Kevin found...
In three of the four instances where a bear-steepening event followed an inverted yield curve, a recession was either already happening or was impending. For instance, in 1969, there was a two-month break before a recession started that year. In 1981, a recession was already two months in progress when the bear steepener ended. And in 2007, the recession began in December, half a year after the bear steepening.
The only deviation came in 1966, when a recession did not take place but a prolonged period of low economic growth followed. (This would be the most optimistic outcome for today's environment.)
So, while we may not know the exact timeline for when a recession may hit, we do know that we'll most likely be getting one.
History is not guaranteed to repeat, but it's worth considering...
We know a lot of analysts and talking heads have been calling for a recession for more than a year. We also know a lot of those same analysts and talking heads have given up on the idea, but perhaps are just impatient and are changing views too early.
I know I saw a lot of evidence to this point from speakers at our Stansberry Research conference last week. Many shared all kinds of indicators that at the very least paint a troublesome picture for the year ahead.
Stansberry Research partner Dr. David "Doc" Eifrig, editor of Retirement Millionaire among other newsletters, is among those concerned. As he said on stage at our conference in Las Vegas last Wednesday...
I'm leaning into the idea that interest rates at a higher level and 30% of U.S. debt is going to roll over, which reprices investing and savings and where you allocate savings. That's coming to roost.
Jobs are going to roll over and cause problems... and we can talk about inflation and commodities. The economy is still good, but it's about to roll over in the next 12 months.
He's not the only one who thinks so.
Our founder Porter Stansberry's next predictions...
As we wrote yesterday, if you missed it, Porter is back... After a few years away from the day-to-day operations of his business, he was back on stage at our Stansberry Research conference last week. And you'll be hearing more from him later this week.
There's a lot he wants to tell you... both about where he has been and why he left. But, most important, he wants to explain why a looming financial crisis could be just around the corner. It's why he's going live with a brand-new video presentation this Thursday.
Here is a brief preview of what to expect...
The event is free for Stansberry Research readers. We just ask that you register in advance. You can sign up here.
You'll want to tune in... When Porter took the stage at the Encore at Wynn in Las Vegas to kick off our conference last Monday, he left the room speechless with his predictions for the year ahead...
A major U.S. bank, he said, is sitting on billions of unrealized losses due to the higher-interest-rate era and will fail... unemployment will hit 10% "by this time next year"... and a major sector of the U.S. economy is a sitting duck, ripe to be overwhelmed by the next crisis. And this will come, he says...
The crisis in '08 wasn't the last crisis. The crisis in 2015 wasn't the last crisis. The crisis in 2020 wasn't the last crisis. And the crisis that we're going to see, I believe in 2024, will not be the last crisis. It's going to continue.
Whatever comes next, you will want to avoid the worst of the fallout to protect and grow your wealth... And the good news is, despite everything, you can put yourself in a position to do just that by preparing the right way with time-tested strategies.
As we shared yesterday, Porter has a few ideas... and we can't wait to hear them. Our founder is going live with a free video presentation at 3:30 p.m. Eastern time Thursday that will cover his concerns and critical suggestions for this moment in much more detail...
If you've never heard a presentation from Porter – or you're a longtime subscriber or Stansberry Alliance member and simply have been wondering what he has been up to – I urge you to tune in.
Once again, you can sign up for free here.
New 52-week highs (as of 10/23/23): None.
In today's mailbag, more feedback on our Stansberry Conference, which we covered last week live from Las Vegas. Check out our Day 1, Day 2, and Day 3 recaps, and our return flight takeaways... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Once again I would like to thank all of you for the nice event you put on in Las Vegas. I've been attending these for many years and have never been disappointed. The event is informational, well done, and on time. I hope to see all of you next year." – Subscriber Bob G.
Corey McLaughlin comment: Thanks for the note, Bob, and we're glad you enjoyed the conference – again. We're already looking forward to next year, too.
This reminds me: For anyone who didn't make it to Vegas or missed our livestream and is interested in getting access to the presentations, video replays will be available soon...
Click here for more information on how to access them and to get notified when they are ready. And Stansberry Alliance members, stay tuned to your inbox for an update on when your exclusive Alliance Day presentations are available, too.
All the best,
Corey McLaughlin
Baltimore, Maryland
October 24, 2023