Editor’s note: We’re doing things a little bit differently over the next three days…
In short, from today through Thursday, we’re turning the Chaikin PowerFeed over to longtime newsletter editor Dan Ferris from our corporate affiliate Stansberry Research.
Dan joined Stansberry Research in 2000. His strategy of finding safe, cheap, and profitable stocks has earned him a loyal following – as well as one of the most impressive track records in our industry…
His longtime subscribers have enjoyed a long list of double- and triple-digit winners. Dan’s best recommendations over the past two decades include Prestige Brands Holdings (406%), International Royalty (248%), and Berkshire Hathaway (125%).
But as Dan explains today, you shouldn’t be too optimistic about the markets right now…
Folks, it sure looks like we’re facing the ultimate contrarian setup right now…
I can’t deny that. After all, it’s pretty brutal out there…
This year, we ground through the worst first half for stocks since 1970. And according to Deutsche Bank data, in the first half of 2022, we also endured the worst six months for the 10-year U.S. Treasury note since before George Washington became our first president.
The parade of pain marched beyond the first half of 2022, too. According to Bloomberg data, roughly $15 trillion in value has been lopped off U.S. stocks since last November.
Financial data wizard Charlie Bilello noted on Twitter earlier this month that the typical “60/40” portfolio of stocks and bonds had lost 21% through the end of September.
That means this traditional investing strategy is on pace to log its worst performance since 1931. That year, in the throes of the Great Depression, it lost 27%.
All this bad news in one place surely must mean some type of market bottom is around here somewhere, right? And a ripsnorting rally certainly wouldn’t surprise me at any point.
That’s a typical feature of bear markets, after all.
But even though a short-term rally could happen, it’s still far too early to be too bullish…
You see, in the first third or half of a bear market, everybody wants to be a hero. Every market observer wants to be the person who “calls the bottom” and looks like a genius.
But just as bull markets don’t end until the last bear is gored, bear markets don’t end until all the bulls have been ground into burger meat and all the hero wannabes are gone.
Too many folks don’t seem to understand that markets can crash in both directions…
Panic selling is easy to spot, of course. The COVID-19 crash in March 2020 is a great example…
In the 10 trading sessions before the market bottomed on March 23, 2020, stocks fell as much as 12% in a single day.
But most folks forget that March 2020 had some huge “up” days as well. The S&P 500 Index rose nearly 5% on March 10, more than 9% on March 13, and about 6% on March 17.
That type of wild action happened during the Great Depression, too…
The Dow Jones Industrial Average fell roughly 13% on October 28, 1929. And the next day, it tumbled nearly 12%. But then, it rose more than 12% on October 30, 1929.
All but two of the top 20 one-day percentage gains in the Nasdaq Composite Index occurred on the way down to bear market bottoms. And the two exceptions occurred just days after the bottoms (March 23, 2009 and March 24, 2020). So for all that anyone knew at the time, it was still a bear market.
In other words… panic buying is just as common as panic selling during bear markets.
Yet folks are saying that the current bullish case seems to be that the end of the world is near… so you should buy stocks!
It sounds ridiculous when I put it like that. But think about it…
That’s the ultimate logic behind the “Fed pivot.”
As you likely know by now, the Fed pivot is the idea that the Federal Reserve will soon stop raising interest rates – and instead begin cutting them. And it will do that because rising rates have caused too much pain for too many folks.
Some people even say the Fed must pivot, as if it has no choice.
But here’s the deal… if anybody thinks the Fed will save us – if that’s your bull case – you’re not paying attention.
Everybody seems to think the market and the economy are machines that the Fed can tweak as it likes. But you, me, and the Fed are in markets the way fish are in water…
The fish don’t control the tides, currents, wind, and waves. They’re just along for the ride.
I still believe we’re closer to the beginning of the bear market than the end. And that means it’s prudent to remain cautious.
After all, we’re still in the stage of the cycle when all the highly speculative, boom-and-bust stocks are flaming out, going out of business, or otherwise longing for the good ol’ days.
So for now, let’s do what we’ve learned works best…
Continue to prepare for a wide range of potential outcomes. Hold plenty of cash, high-quality stocks, and precious metals. That’s the key to our survival in the long term.
If this really is the ultimate contrarian setup, we still won’t miss the boat. We’ll have plenty of time to capitalize.
But the evidence still points to the contrary. So if that’s the case, you’ll be glad that you’re ready when the next “worst” record strikes the markets.
Good investing,
Dan Ferris
Editor’s note: Dan wants to help as many folks as possible get ready for what’s coming. That’s why he’s hosting an urgent online briefing tomorrow night…
Dan will deliver what he calls “the most important stock market warning” he has ever issued. What’s coming will likely be worse than anything we’ve experienced. And ultimately, he believes it could ruin the retirements of millions of people over the next two decades.
Plus, everyone who tunes in will learn the names and ticker symbols of two well-known stocks that Dan says you need to sell immediately. They’re two of the most widely held stocks in the market, so there’s a really good chance you own at least one of them.
The action is set to begin promptly at 8 p.m. Eastern time tomorrow night. And best of all, it’s absolutely FREE for all Chaikin PowerFeed readers. Reserve your spot right here.
