Investing during the non-stop rally from March to July was a lot of fun, but August has brought a much-needed correction to the S&P 500. Investors now need to figure out when to buy this dip and which stocks and ETFs are the best picks. Steve Reitmeister, CEO of StockNews.com and editor of Reitmeister Total Return, shares his thoughts on the current market situation and provides a preview of the 7 stocks and 4 ETFs he is recommending to investors.
In his recent market commentary, Reitmeister highlighted that stocks were struggling to regain ground above 4,400 for the S&P 500. However, on Wednesday, the market broke above this level with enthusiasm, only to give it all back and more on Thursday, closing at 4,376. Reitmeister explores the reasons behind this volatility and discusses where the market may be headed.
He explains that the popular narrative for breaking back above 4,400 on Wednesday was that bond rates had finally fallen significantly from their recent peak. This improved the value equation for stocks and gave hope that the recent pullback was over. However, on Thursday, despite little news and unchanged bond rates, stocks started the session in positive territory but gradually lost their gains, ending the day with a -1.35% decline.
Reitmeister suggests that the market has entered a new trading range, with 4,600 being too high for stocks and the recent retreat to 4,300 being too low. He believes that the market will now bounce around within this range until more clues emerge that could make investors more or less bullish. However, he notes that most price moves within a trading range are meaningless noise.
Reitmeister also addresses the topic of rising government bond rates, stating that there is a false narrative suggesting that investors see more long-term inflation on the horizon. He believes that the Federal Reserve's actions to raise rates and sell off its bond portfolio are leading to a return to a true market rate for bonds. He does not expect rates to go much higher, as inflation will eventually return to normal and the Fed funds rate will be lower.
In conclusion, Reitmeister asserts that we are still in the midst of a new bull market, but one that started off too hot given the current economic conditions. He advises investors to buy the recent dip and not worry too much about the day-to-day volatility within the trading range.
For those interested in Reitmeister's investment recommendations, he offers a portfolio of 7 stocks and 4 ETFs that are selected based on the outperforming benefits found in the POWR Ratings model. These trades are backed by his 43 years of investing experience.