The S&P 500 (SPY) has actually fallen -2.13% over the past week. That’s not so good. But oddly the POWR Value portfolio actually rallied the exact opposite; +2.13%. How is that possible? Because the market is finally rewarding value stocks at this time after years and years of showering growth stocks with unsustainable premiums. This script will only continue to work IF the economy continues to expand keeping the bull market in place. That is why we will continue to focus on the economy in this week’s commentary to help us chart our investment course for the future. Read on below for more….
(Please enjoy this updated version of my weekly commentary published April 15th2022 from the POWR Value newsletter).
All major economic reports that show what is currently happening in the economy remain strong. That includes the early April reports for everything from:
Government Employment: 426,000 jobs added +3.6% unemployment rate
Weekly Jobless Claims: Lowest readings since 1968 (not a typo)
ISM Services 56.5 with an even better 60.1 for New Orders
ISM Manufacturing 57.1
Retail Sales +0.5% MoM vs. +0.4% forecast
This is actually fantastic news. Unfortunately, many indicators of potential future weakness continue to be alarming.
That list starts with still raging inflation leading to a Hawkish Fed. The fear is that the Fed will go too far in tamping down the flames of inflation that they actually produce a recession with bear market in tow.
Also emerging at this time is a counterbalance that there are signs of peaking inflation. Meaning it is at its ugliest now and will improve going forward.
If this is true, then it lessens the need for Fed intervention…and thus lessens fears that they will overly remove accommodation…and thus lessens the odds of recession and bear market.
To say that these are confusing times is an understatement. The very proof of that is showing up in “off the charts” market volatility.
Yet indeed the bull vs. bear answer lies in continuing to monitor the economic situation. Just remember that it is harder to create a recession and bear market then you might imagine.
That is just economic fact proven by the stock market being in bull market mode 85-90% of the time in the past century.
The above understanding leads to a need to keep a bullish bias in place until the preponderance of the evidence points bearish. That is currently not the case.
The more the bearish whispers grow into a scream…the more defensive we will become.
Conversely, the more the bearish whispers fade away…the more aggressive we will become.
This is the first time I have seen this happen…but so glad it did. I am referring to our returns being the exact opposite of the market this past week:
-2.13% for S&P 500
+2.13% for POWR Value
Its easy to note the continued momentum of our 2 energy momentum plays for the outperformance. The good news doesn’t stop there. Don’t forget that our 2 latest picks are in the plus column since inception as the market sank.
But really it comes down to this…a rising rate environment punishes growth stocks and rewards value. Truly it is our time to shine!
For as much as we all enjoyed the outperformance this week, lets remember that it’s still a volatile market with tons of sector rotation. That could mean that we end up on the wrong side of market action next week.
That is why we value investors need to display great patience at times like these to not overreact to things in the short run. Let’s keep our eyes fixed on the longer term horizon to help chart our course to continued outperformance.
What To Do Next?
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What makes these stocks great additions to any portfolio?
First, because they are all undervalued companies with exciting upside potential.
But even more important, is that they are all A rated Strong Buys according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +31.10% annual return.
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All the Best!
CEO StockNews.com & Editor of POWR Value trading service
SPY shares closed at $437.79 on Friday, down $-5.52 (-1.25%). Year-to-date, SPY has declined -7.54%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
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