A Rare Market Setup

Stocks' best first quarter in five years... Inflation is on pace for 5% growth in 2024... Could the Fed 'pivot' – higher?... The 'Next Warren Buffett' is headed to prison... A rare market setup... Don't miss Porter's free presentation...

The S&P 500 just finished its best first quarter in five years...

The "churning higher" U.S. stock market, as we described about a month ago, continued trending upward in March. The U.S. benchmark index moved higher by another 3% last month, bringing its year-to-date total to around 10%.

That's good for the best first quarter for the S&P 500 Index since 2019, which was also the last time a year began with three consecutive positive months.

I (Corey McLaughlin) could almost repeat our analysis from the last time we took a "step back" and looked at the breadth, or market "health" indicators, back in the February 27 edition...

Long-term technical trends have remained bullish, and market breadth is still relatively strong. Roughly 60% of stocks listed on the New York Stock Exchange ("NYSE") are trading above their 200-day moving averages, and the equal-weighted S&P 500 just hit a new all-time high on Friday.

As we write today, roughly 64% of NYSE-listed stocks are above their 200-day moving averages and the equal-weighted S&P 500 closed out last week by hitting a new all-time high.

This isn't to say there aren't risks to consider in the market today...

Consider the "bearish catalyst" that Dan Ferris described on Thursday, for instance... or high(er) inflation, which I'll explain momentarily... or escalation of wars in Ukraine and the Middle East (just today, an alleged Israeli air strike on an Iranian consular building in Syria killed a high-ranking Iranian military official) and what that could mean for higher prices in the world.

But based on nominal stock prices and trends, Mr. Market is taking the stairs higher, which you typically see in a bull market.

The other end of this analogy is that the market likes to take the elevator down.

Inflation is on pace for nearly 5% growth in 2024...

The biggest economic data to watch last week was the latest round of the Federal Reserve's preferred inflation gauge: the core personal consumption expenditures ("PCE") price index. It came out on Friday morning when the U.S. markets were closed for the Easter holiday weekend...

Core PCE, which the Fed purports to use to make decisions, showed 2.8% annual growth and rose 0.3% for the month. (Core PCE excludes food and energy prices – two huge costs for people and businesses, of course. As we've said before, ignoring these points makes little sense.)

These numbers mean that inflation keeps coming down from its peak of a few years ago, but as we've reported recently, inflation numbers in the shorter term have been picking up in the past few months.

Monthly growth of 0.3%, coming after 0.5% growth in January, puts annual inflation on pace for nearly 5% (a monthly average of 0.4%, for a 4.8% annual pace) rather than the Fed's 2% annual goal.

Yet Fed Chair Jerome Powell and the central bank's other members have remained steadfast in all recent public statements and projections in saying rate cuts are coming later this year. Maybe they will, particularly if the labor market weakens more. (The next key "nonfarm payroll" report for March comes this Friday, by the way.)

But if higher inflation numbers persist and unemployment remains low, the markets could be in for a major shock if the central bank ends up "pivoting" higher rather than lower – much like in 2022. Or the Fed could lose more credibility by cutting rates even amid strong economic growth.

In any case, here's a scenario to consider: High(er) inflation continues, which might not be entirely bad news for the stock market in the short term... But eventually, the higher inflation would become recognized as a big problem again – much like in the 1970s, or when the Fed finally got around to acknowledging it in late 2021.

The case for inflation hedges...

Dan and I talked about this on this week's episode of the Stansberry Investor Hour, which just came out. (Our guest is George Gammon of the Rebel Capitalist Show, and we talked about a bunch of different topics, but first Dan and I talked about inflation.) As Dan said...

We could be on the verge of making a pretty big mistake here. It could be the Arthur Burns moment from the 1970s, when [the Fed] thought they were OK and weren't. Inflation was up and to the right, but in a sinusoidal pattern. It was up, then it was down, then up higher, then down not quite as lower, then up way higher – and it was really, really difficult.

The market didn't seem too concerned with this scenario today, though, but maybe a little...

In the first trading day in the U.S. since PCE numbers came out Friday morning, the S&P 500 closed down slightly, the Russell 2000 Index was off 1%, and energy stocks (a good inflation hedge) showed the most significant gains, up nearly 1%.

Meanwhile, another proven inflation hedge – gold – continues to rise in price. After breaking above the key $2,000-per-ounce level about a month ago, a price that had been the technical "resistance" level for the past few years, gold is trading higher than $2,200 now.

Gold is up another 2% since the latest U.S. inflation data came out Friday.

A quick note on 'SBF'...

We covered the Sam Bankman-Fried/FTX scandal from the very beginning in November 2022, and I like to follow through with the resolution of a major story. So let's put a bow on the "SBF" saga now that we can.

On Thursday, the 32-year-old Bankman-Fried – who engineered a multibillion-dollar fraud using the cryptocurrency exchange FTX – was sentenced to 25 years in prison and ordered to forfeit $11 billion.

Before the sentence was handed down, Bankman-Fried addressed a New York City court directly for about 20 minutes. He said his "useful life is probably over," said customers' money should be returned in full, and apologized to those who worked for him...

I'm sorry about what happened at every stage... It haunts me every day.

Judge Lewis Kaplan didn't buy SBF's remorse, saying it was an "act"...

He did it because he wanted to be a hugely, hugely politically influential person in this country. He knew it was wrong, he knew it was criminal, he regrets that he made a very bad bet about the likelihood of being caught.

And that's that. The "Next Warren Buffett?" as Fortune magazine asked on its cover before the scandal broke... Bankman-Fried is not. He's expected to serve his time in a Northern California prison, close to his family's home.

Lastly, don't miss Porter's free presentation...

As you may have heard, our founder Porter Stansberry debuted a free presentation last week, and it will go offline by later this week... So make sure you check it out if you haven't made time yet...

In short, as we've said recently, Porter has spotted a "market anomaly" that has emerged in a select group of stocks that could lead to unparalleled returns... and soon. And if you know Porter, or even if you don't, you'll want to listen.

For new readers who might not be familiar, Porter started Stansberry Research more than 20 years ago. If you've never heard him give a presentation before, well, you should...

Among other things, he famously predicted the fall of General Motors... recommended bitcoin when it traded around $10,000... and foresaw much of the financial and cultural unrest we've seen in the U.S. over the past few years. He wrote books about it that have proved prescient. And there's much more we could say...

In this new presentation, Porter sits down on camera with our friend Joel Litman, founder of our corporate affiliate Altimetry. They share what this market "anomaly" is... how to take advantage of it in your portfolio... and why the opportunity for unparalleled profits might not last much longer...

This story doesn't concern one that you've likely heard already...

It's not about a market crash or a banking crisis... the "Magnificent Seven" or the presidential election... or options or cryptocurrency. Yet it could create enormous wealth for those who position themselves correctly, Porter and Joel say.

It does have something to do with one of the deepest and longest corrections in one area of the market in more than 20 years... something that shouldn't even exist in the market... but does because of today's interest-rate environment.

It's a rare market behavior that folks on Wall Street are quietly talking about, and it recently caused several small stocks to shoot up as much as 170% in a single day... 100% in a month... and 275% in about two weeks.

Porter has been trying to bring this story to the public's attention because it happens only once or twice in a lifetime. He says it could be the most important investing story of the year – and much more. As Porter explains during the broadcast...

If you understand what is happening today... if you understand why it is happening... and if you have the courage to take advantage of it... it could be the only investing story you need to pay attention to, ever again.

So, be sure to check out the free replay now. Because of this setup's short-term nature, the opportunity won't last forever, and the presentation won't be online for much longer. Click here to get all the details from this free, can't-miss event.

New 52-week highs (as of 3/28/24): AbbVie (ABBV), Amazon (AMZN), Grupo Aeroportuario del Sureste (ASR), Atkore (ATKR), Alpha Architect 1-3 Month Box Fund (BOXX), Berkshire Hathaway (BRK-B), Brown & Brown (BRO), Sprott Physical Gold and Silver Trust (CEF), Chord Energy (CHRD), Colgate-Palmolive (CL), Pacer U.S. Cash Cows 100 Fund (COWZ), Copart (CPRT), Cintas (CTAS), Commvault Systems (CVLT), D.R. Horton (DHI), Disney (DIS), Western Asset Emerging Markets Debt Fund (EMD), Enterprise Products Partners (EPD), Equinox Gold (EQX), Enerplus (ERF), Enstar (ESGR), Edwards Lifesciences (EW), Diamondback Energy (FANG), First Trust Natural Gas Fund (FCG), Freeport-McMoRan (FCX), Fidelity National Financial (FNF), SPDR Gold Shares (GLD), iShares Core S&P Small-Cap Fund (IJR), iShares U.S. Aerospace & Defense Fund (ITA), JPMorgan Chase (JPM), Kinder Morgan (KMI), Lennar (LEN), VanEck Morningstar Wide Moat Fund (MOAT), Motorola Solutions (MSI), NVR (NVR), PulteGroup (PHM), Sprott Physical Gold Trust (PHYS), Phillips 66 (PSX), Pioneer Natural Resources (PXD), Ryder System (R), Sherwin-Williams (SHW), SPDR Portfolio S&P 500 Value Fund (SPYV), Summit Materials (SUM), Cambria Shareholder Yield Fund (SYLD), Target (TGT), Travelers (TRV), ProShares Ultra Gold (UGL), ProShares Ultra Financials (UYG), Viper Energy (VNOM), W.R. Berkley (WRB), Energy Select Sector SPDR Fund (XLE), and SPDR S&P Oil & Gas Exploration & Production Fund (XOP).

In today's mailbag, feedback on Dan Ferris' Thursday Digest... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Dan's comments in the Digest about the risks of tightly coupled systems made me think of the video of the Key Bridge falling. The boat only took out one or two pillars... I hope we don't see that happen to the stock market." – Subscriber Jim S.

"Your post about circuit breakers and potential big market moves down was a great read... on a micro level you're seeing this already, e.g. if you owned Palo Alto Networks or Lululemon earlier this year you saw 'after hours' reaction to earnings reports that dropped each stock 75 points before you had your cereal in the AM!! No wonder folks don't trust those Wall Street types!" – Subscriber Jerry G.

"Throughout most of the 1990's the economy was strong. The internet made its debut and there was growing optimism about the ways the new technology would transform the way people live. The tech-heavy Nasdaq increased from approx. 1,000 to more than 5,000 from 1995 to 2000. Companies that had nothing to do with technology or the internet changed their name to include '.com' in the hopes that investors would bid up their shares.

"Today, the Fed assures us that the economy is strong. There is growing optimism about the ways that new AI technology will transform the way people live. The tech-heavy Nasdaq has reached all-time highs, increasing from 9,500 [in early February 2020] to more than 16,300 [in] 2024. Companies that have nothing to do with technology are changing their mission statements and for some their names to include 'AI' in hopes that investors will bid up their shares.

"On April 14, 2000 the Nasdaq fell nearly 10 percent, its second-biggest single-day decline ever at the time. By the time the market bottomed in October 2002, the index had lost nearly 80 percent of its value.

"April 2024? Red sky in the morn, sailors be warned..." – Subscriber Jerry P.

All the best,

Corey McLaughlin
Baltimore, Maryland
April 1, 2024