How high can the S&P 500 Index (SPY) go without the Fed lowering rates? Steve Reitmeister says 5,000 is a limit on stock prices with pullback, trading range and sector rotation likely to follow. Why? Continue reading below for more information.
Last week’s headline exclaimed “5,000 or Bust!”. I still believe this to be true as it is easily reachable from today’s close at 4,954 (SPY).
The problem is that I don’t expect any further upside from that point on until the Fed starts lowering rates. If it doesn’t arrive in March…so how long do we have to wait???
This discussion will be the focus of today’s Reitmeister Total Return commentary. Furthermore, we will chart a path to profits even if the overall market is sluggish for a while.
Comment on the market
Chairman Powell put investors on the spot last Wednesday when he made it clear that rate cuts are highly unlikely to begin on March 21st.st encounter. Since then, stocks have been more volatile and less bullish.
I’ve even seen some market commentators calling for a bad correction or worse. It doesn’t seem necessary. A bit like when you pull the car over to a red light that you know will turn green at a certain point.
You don’t get out of the car or sit on the sidewalk. Instead, keep your eyes straight ahead and ready to hit the accelerator again.
When will the light for stocks turn green again?
Unfortunately, the combination of Powell’s speech and 3 strong economic reports (Government Jobs, ISM Mfg, ISM Services) pushes it to May 1st.st meeting to a minimum. Right now, investors are predicting a 65% chance of that happening. And 97% chance of cuts by June 28thth encounter.
These outcomes are certainly possible. However, I feel like the rate cut estimates are a little too optimistic given the facts at hand. And let’s not forget the immense patience that the Fed has shown so far, leading investors to postpone the date of the first cut more than once.
Until the first cut is in hand, it seems like the perfect environment for a range trading scenario where 5,000 will provide a pretty tight limit on stock prices. The downside is likely 4,800, which was a previous stubborn resistance point before the recent breakout on January 18th.th.
Stocks never truly sit idle in these trading ranges. More likely, it is a volatile period with constant sector rotations and changes in market leadership.
Often the strongest groups become the weakest and the weakest become the strongest. If so, then let’s check which sectors are hot and not so far away in 2024:
You may also want to check the year-to-date view by market cap:
To no surprise, mega-cap tech stocks are absorbing most of the gains, while other groups languish. This was the stock market picture for much of 2023, until the script flipped in the latter stages of the year.
I have a feeling a similar leadership change will happen at some point this year. Trading ranges offer a good opportunity for a changing of the guard. This means that everything could soon be at your fingertips.
So yes, I continue to have a small equity bias in my Reitmeister Total Return portfolio. But it’s not just small caps that will do well. They must showcase operational excellence as best expressed through an up and down earnings report this quarter.
Beyond that, pullbacks and periods of sector rotation usually have a greater focus on value than periods of large upside. Add all this up and it’s prime time for POWR-rated stocks.
These are consistently growing companies that exhibit operational excellence while trading at reasonable prices. This has always been the most consistent path to stock market profits, and there’s no reason why that can’t be the case in 2024.
What are my favorite POWR Ratings stocks right now?
Find 12 of them in the next section…
What to do next?
Check out my current 12-stock portfolio filled to the brim with the outperformance advantages found in our unique POWR Ratings model. (Nearly 4 times better than the S&P 500 Index dating back to 1999)
This includes 5 recently added hidden small caps with huge upside potential.
I also have 1 specialty ETF that is incredibly well positioned to outperform the market in the weeks and months ahead.
This is all based on my 43 years of investing experience watching bull markets… bear markets… and everything in between.
If you’re curious to learn more and want to see these 13 hand-picked lucky trades, click the link below to get started right away.
Steve Reitmeister’s Trading Plan and Top Picks >
Wishing you a world of successful investing!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO of StockNews.com and editor of Reitmeister Total Return
SPY shares were unchanged in after-hours trading Tuesday. Year to date, SPY has gained 3.93%, compared to a % gain in the benchmark S&P 500 index over the same period.
About the author: Steve Reitmeister
Steve is better known to StockNews audiences as “Reity.” He is not only the CEO of the company, but also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Find out more about Reity’s background, along with links to her most recent articles and headline picks.
Moreover…
The mail Are stocks on hold until summer? appeared first StockNews.com