My goodness! I am glad that the week for the market is over! All the indexes we currently have been writing about took a beating. The NASDAQ was down 5.21% (921), the S&P 500 was down 3.6% (202), and the small-cap Russell 2000 was down 5.53% (122), and we told you it was coming!
We called it right the first time and we called it right again this time. On July 9th when the NASDAQ was at 18,429, we wrote that it would fall to around 16,200. We were correct! It hit 16,195 on August 5th. And we have been telling you the current correction was coming for a few weeks. This market isn’t close to the finish of the current correction. It could go deeper (lower) than my most recent projections on September 3rd tidbits. I’m not worried at this time but the sky is gray. I would expect some short covering sometime soon but don’t get suckered into believing this correction is over.
Below is the S&P 500 charting at Friday’s close. Once again, it shows no buying later in the day, which means institutional buyers are sitting on the sidelines and volume picked up a little. The most interesting aspect is what looks like a market in a close buy order. I’m guessing it is either some type of short cover or someone buying the index near the 50-day moving average. Either way, the chart looks horrible.
DON’T LISTEN TO THE PUNDITS!
If you listen to journalists and TV personalities, you are better off taking Valium or Midol (to fall asleep) than having a cup of coffee (stressing). My goodness! Everything I seem to read or listen to now since the market started this correction is “The growth is gone, the recession is coming, and the economy is in for a hard landing.”. I have heard so much of it this week. I stopped listening to “watching financial TV” and avoided every scare tactic journalist article. Remember, a lot of people who write about the financial world are journalists and not analysts! They are selling fear in their stories. Hopefully, very soon we will have my podcast going to dispel this Tomfoolery.
GROWTH/RECESSION/HARD LANDING – What is it then?
Let’s use the KISS principle (keep it simple, stupid). My father used to say that to me quite a bit. This is a correction for now and nothing has yet to point that it is anything more.
Let’s start first with the recession/hard landing. Market pundits have been saying for almost 2 years now we are going into recession. Fact! 2023 annual growth rate was 2.5% and thus far in 2024 annual growth rate was 1.6% for the first quarter and 2.8% in the 2nd quarter. And on August 15th, the Atlanta Fed GDP model recently projected 3rd quarter growth of 2.4%. That number is down slightly but still a very good growth number. These are not recession numbers! And those are not numbers that indicate a current growth scare. So turn off the TV and stop reading journalistic scare articles. Come here and we will decipher the truth.
GROWTH
I have mentioned in the past I have concerns about growth. Right now, as I write this, I have no immediate concern because it has not yet shown up in the numbers.
BUT!
It could. That possibility of a drastic slowdown if it occurs most likely will show up sometime around the first half of 2025. I have said I thought the Federal Reserve was behind the curve and he should have lowered rates in July. Remember, it takes time for rate cuts/increases to take effect on economic activity. (Lagging indicators) It’s important that the Federal Reserve cut rates at least 3-4 times before year-end (I feel we need 4). These rate cuts will not show any meaningful economic life until at least the late 2nd quarter or more likely the 3rd quarter of 2025. Markets get worried when they see a trend. Right now the trend is slowing growth. But we have not yet reached a point where it is falling off a cliff. If the tipping point were a ledge, I would expect that ledge to start to show some type of sign in the first quarter. I also expect service-type inflation to show up again next somewhere in the first quarter. That’s not to worry about now, but remember I said that!
UPSTART
Upstart had a week not to remember. I said it was coming and it will continue. It more than likely is going to present a great buying opportunity again. As I’ve said all along, its best moves higher are towards the end of 2024 and into 2025