I love investing. And generally, I root for a bull market. But even more than that, I root for logic and reason to rule the day, asserts Steve Reitmeister, editor of Reitmeister Total Return — and a participant in The Interactive MoneyShow Virtual Expo on Sept. 15-16.
That is why I was such an unhappy camper the last few months as stocks rallied nonstop to a new record high of 3,588 all the while the economy was in shambles. That was PURE insanity. Gladly we saw it unfolding and played ball by leaning into the best performing groups.
But now I say enough is enough. September was the right time to see the market get cut down to size. And gladly it is going fairly well according to plan.
Will that continue or will Mr. Market throw us a fresh curve ball? I don’t know for sure. However, if indeed the overall market is returning to more rational investment decision making, then lower prices the most sense.
If true, then our portfolio is well-calibrated for that outcome. For now, I am hedging my long stock positions with a balance of precious metals stocks and inverse ETFs.
Here is my current market outlook. I think the S&P will break below the 50 day moving average on a sell off that gets us closer to the 200 day moving average at around 3,100. There should be ample resistance there. But it will be hard to bounce too much higher until we see 2 things:
First, does the economy continue to heal from the Coronavirus recession or did the markets overestimate how quickly that will happen?
The second is about FINAL election results. Yes, I put the emphasize on FINAL. This is not about Trump vs. Biden. Or Republican vs. Democrat. This is about whether the growing concerns about mail in ballots turns into a contested election result and the pandemonium that would follow.
Both sides are already gearing up for that battle and thus it more and more appears to be an increasingly likely result. Let me say unequivocally that a contested election would be very bad for the country. And very, very bad for the stock market.
So at this time, I am hard pressed to imagine emerging into a bullish posture without holding hedges in place before the election.
