It Ain't Over Till It's Over

Editor's note: Everyone wants to be the one to call the bottom. We've seen a recent rally in stocks. But according to Marc Chaikin, founder of our corporate affiliate Chaikin Analytics, it's not time to get excited just yet. In this essay, he shares what he predicts is next for the market – including a glimpse of what he expects in 2023...

We just saw a surge of optimism in the markets...

The latest inflation report came out last Thursday. And notably, the numbers came in a little bit better than the experts predicted.

Specifically, the Consumer Price Index ("CPI") experienced its smallest monthly increase since January. Unfortunately, the year-over-year increase in CPI was still more than 7%.

In other words, inflation remains really high. It's still near its highest level since the 1980s. But despite that, another bear market rally has been playing out in stocks.

You might be wondering if it's time to go "all in." Today, I'll look at what this recent jump really means...

The latest surge of optimism was huge for stocks. The CPI news sent the S&P 500 Index up more than 6% in two days.

Some folks even believed the Federal Reserve would end its tightening cycle. Take a look...

Now, I'm not trying to be a curmudgeon. I'm glad people are looking for reasons to be hopeful.

After all, we've endured a brutal year as investors. Even with the recent rally, the S&P 500 is still down roughly 17% this year.

But bursts of hope and optimism are normal during bear markets. And a brief reprieve doesn't mean the pain is completely over.

In fact, recent history shows us that these types of rallies can be incredibly fragile...

It's amazing how quickly investors forget.

The slightest bit of good news can send stocks soaring during a downturn. And that can happen even when major economic headwinds remain.

With just a quick look at the S&P 500's chart, you can tell that we've taken this road before. Heck, we've already seen it twice in the current downturn. Take a look...

Starting in early March, the market rallied nearly 11%. But unfortunately, overly optimistic investors got burned again when the market's longer-term downturn resumed.

Next, a major rally started in June. The S&P 500 soared more than 17% from its bottom.

I think all of us hoped that would be the end of this bear market. But inflation persisted. And the Fed had little choice but to keep tightening its grip in response.

Today, the market is up about 11% from its latest bottom. And as I said, another huge outpouring of investor optimism pushed stocks higher. Folks are ready to get excited again.

But that doesn't change the big picture...

The war in Ukraine is still disrupting the oil and gas sector, as well as other global commodities. Serious inflation problems remain for much of the world. And Fortune 500 companies are in one of the deepest layoff cycles in decades.

Not only that, but hopes for a dovish Fed are already fading, too. Fed officials have said inflation needs to slow down more... And they're willing to keep hiking rates to make that happen.

Will the economic picture get better eventually? Of course.

We can still be realistic about what's happening, though...

After the historic stock market bottom in 2009, the market soared. The Fed kept interest rates low for years. And that bull run turned into one of the greatest asset booms in history as a result.

Today, we're facing a very different reality. The Fed is still battling high inflation. And that's a major headwind for stocks.

So, caution is still important today. But while all of this is true... it doesn't mean we've run out of opportunities, either.

In fact, I believe 2023 could be the best year yet for a certain type of investor.

For now, remember that bear market rallies are normal. And it's common to feel like "everything is getting better" right before the market turns lower yet again.

More simply... It ain't over till it's over.

Good investing,

Marc Chaikin

Editor's note: Earlier this week, Marc stepped forward with what he's calling the culmination of all his predictions dating back to 2020, when he successfully called the crash that year...

Simply put, the No. 1 priority of 2023 will be to protect your money... But investors could grow their wealth at unprecedented rates, thanks to a specific event he sees coming. When this happened in the past, folks had a chance to triple or even quadruple their money.

Marc shared everything you need to know – and even gave away a free recommendation. So if you missed it, don't wait... You can still watch his presentation right here.

Further Reading

"Even a handful of winning trades can offset an otherwise terrible year," Marc Chaikin says. Recently, he shared one way to pinpoint the top bullish opportunities that are bucking the trend today... Read more here.

"The era of passive gains is over," Marc Gerstein writes. Investors today can't just sit back and let the easy money roll in. A specific measure shows why you need to make sure that your strategy fits this market... Learn more here.