Yesterday's violent reversal; S&P 500 returns before, during, and after the last 12 recessions; Doug Kass is turning bullish; Herb Greenberg's Empire Real Wealth; Greetings from Carleton College

1) Yesterday was the type of violent reversal day that sometimes marks a market bottom.

After the higher-than-expected inflation number, the S&P 500 was down 2.4% in the morning, but then rallied and finished the day up 2.6% – a 5.1% intraday gain.

Time will tell, but it's one more data point that makes me more bullish...

2) Here's another one that Raymond James Financial posted on LinkedIn, showing a table of S&P 500 returns before, during, and after the last 12 recessions, dating back to 1948:

In short, even if we're in a recession right now, as many believe, it doesn't necessarily mean the market will do badly while we remain in it. More important, the evidence is overwhelming that stocks do extremely well afterward.

The lesson here is that, while I try to nail market tops and bottoms, I do so with the knowledge that it's impossible – and one shouldn't try to be too cute.

If the market has already puked out more than 20% and you find a cheap stock, buy it!

3) My friend Doug Kass of Seabreeze Partners has also become more constructive on stocks...

Following up on his two recent missives, Why I Have Turned More Bullish and The Gang That Couldn't Shoot Straight, here's his latest, which he published on Tuesday:

Minding Mr. Market – A Successful Test May Lie Ahead

• Swift and sizeable moves in the global risk-free rate of return have contributed to the tension of lower stock and bond prices and to fear – in a regime of heightened volatility
• All roads lead to interest rates – I remain of the view that both inflation and bond yields have or are close to peaking
• From my perch, the Fed is close to completing its tightening cycle – two more rate hikes – markets stop panicking when policy makers panic!
• The opportunity set and reward vs. risk have improved measurably with much lower asset prices and eroding investor sentiment
• For those, like myself, with an investing timeframe measured in months/years and not days/weeks – both stocks and bonds appear attractive
• Today, with market momentum clearly to the downside, the hardest trade is to buy
• Going forward, bad news may be good news
• Accordingly, I have continued to add to my longs in this morning's weakness in premarket trading

"A strategic inflection point is a time in the life of business when its fundamentals are about to change, that change can mean an opportunity to rise to new heights." – Andrew S. Grove, Only The Paranoid Survive: Lessons from The CEO of Intel Corporation

Early last week I delivered a more bullish message – and I have been methodically, but only on weakness, adding to my net long exposure. In premarket trading I added to SPY at $357.39 and QQQ at $264.28. 

Since then, the markets rallied magnificently – a week ago – only to fall back to new 2022 lows by yesterday... more confirmation that this is the most difficult market to navigate in years. 

In both bonds and equities, 2022 has been one for the record books – an unmitigated disaster and one of the worst performance years in history. 

Not surprisingly, investor sentiment is at multi-decade lows. In the past I have highlighted record bears in the AAII survey, all-time highs in put buying, high mutual fund cash positions, deleveraging of hedge funds, etc. Here is another more recent indicator:

It is very difficult to invest in an environment where the global risk-free rate is moving faster and more sizably than at any point in recent history.

But a disastrous year-to-date performance in bonds/stocks and an increasingly volatile backdrop may form the basis for opportunity as lower asset prices are the friend of the opportunistic and rational buyer. 

Importantly, as discussed below, though the job market remains strong, I see multiple signposts of deflation – in a slowdown in job openings, in home prices and secondhand car prices (Manheim Index), in freight rates, lower energy prices, rising retail inventory levels, a decline in soft commodities, etc. 

I am of the view that bad news is now good news. 

Thank you, Doug!

4) If you're looking for great investment ideas to take advantage of the market rally that's sure to come, check out my colleague Herb Greenberg's new publication, Empire Real Wealth.

While the thought of investing right now might feel counterintuitive, it's during market downturns like this that you want to be putting money to work.

Or, as legendary value investor Shelby Davis once said, "You make most of your money in a bear market. You just don't realize it at the time."

To help you with this, over the past three months Herb has assembled a portfolio of world-class, blue-chip stocks that will help you safely grow your nest egg without blowing you up. It's an ideal time for investors to shop for bargains among some of the best stocks in the world.

In the just-released inaugural issue of Empire Real Wealth, Herb recommends nine of his current favorite stocks, which you can gain access to by becoming a subscriber for only $49 for the first year... That's nine stocks to buy for less than a dinner at a restaurant!

Even better, you can check it out for zero risk. You can sign up, read all of the research and special reports, and e-mail our member service team within 60 days and ask for a full refund on your subscription. What's not to like?

Get the details right here.

5) Greetings from Northfield, Minnesota!

Susan and I flew to Minneapolis yesterday afternoon to spend Parents Weekend with our youngest daughter, who's a sophomore at Carleton College, a wonderful small liberal arts school located in rural farm country 45 minutes south of the Twin Cities. She's having a great experience here, as did our oldest daughter, who graduated in 2018. Here's a picture of us...

We were on the Parents Council from 2014 to 2018 and are back on it, which gives us a bit of an "insider's view" of Carleton, so we can see the challenges every institution of higher education is facing these days – and what an exceptionally well-run institution this is.

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.