Editor's note: Marc Chaikin – founder of our corporate affiliate Chaikin Analytics – knows all about big market calls. He predicted the crash of 2022... called for the overnight collapse of a popular travel stock during a live CNBC debate... and said we'd see bear market rallies 24 hours before the market bottomed in 2020.
Today, in a recent piece from his Chaikin PowerFeed e-letter, Marc shares why his system turned bullish on stocks when even the pros were left in the dark... Plus, read on for details about an upcoming event in which he'll help us unpack one of the hottest trends in the market.
Our system made a very contrarian call a few months ago...
You see, the Power Gauge – our set of tools at Chaikin Analytics for rating assets' potential performance – flipped to a new "bullish" rating on the S&P 500 Index in late March.
That's important for one reason...
At the time, the professional forecasters thought things were as bad as they could get. These economic pros were the most negative they had ever been.
Of course, we now know how things worked out. Nearly four months later, the market is soaring. The S&P 500 is up roughly 15% so far this year.
Now, after hitting their all-time negativity extreme, the professional forecasters are backing off. And if anything, it looks like they're giving in with a shrug right now.
Today, we'll take a closer look at this idea. And we'll see why the Power Gauge was able to outmaneuver the eggheads...
Folks, I built the Power Gauge the way I did for a reason...
I wanted to bring high-level analysis to individual investors. To do this, the Power Gauge focuses on 20 individual factors. It combines both the financials and the technicals... And in the end, it assigns a "very bullish" to "very bearish" rating on nearly every U.S.-listed stock.
Using its stock ratings, the Power Gauge can also provide ratings for many exchange-traded funds ("ETFs"). That includes broad market ETFs – like the SPDR S&P 500 Fund (SPY).
The Power Gauge will assign a rating for these ETFs regardless of current market sentiment.
That's exactly what happened when it assigned the S&P 500 a "bullish" rating in late March.
I've noted the change in the Power Gauge's rating in the chart below. Take a look...
There's a lot to unpack here. But the basics are simple...
This chart shows us a survey of the eggheads' "probability of recession in four quarters."
The survey traces its roots back to the late 1960s. The Federal Reserve Bank of Philadelphia took it over in 1990. It covers what the professional forecasters expect. And as you can see, their predicted probability of recession hit its highest level at the start of this year.
The data for this survey comes out once a quarter. And the chart reflects the individual changes from quarter to quarter.
Most important, you can see that the Power Gauge assigned the broad market a "bullish" rating right as professional forecasters' sentiment reached an all-time extreme this year.
Since then, the market surged higher. And the professional forecasters have backed off...
We're starting to see what I would describe as "a forecaster's shrug." It's hard to see on the above chart, but the line dips back down on the far-right side after the recent extreme.
Now, the Power Gauge wasn't trying to be contrarian. It was simply looking at the market-performance data, as well as the 20 factors behind each and every stock it rates.
And its "bullish" flip happened at the right time.
Does that mean we're guaranteed to avoid the recession the eggheads fear? No. But it does mean the Power Gauge sees a high probability of strong returns in the coming months.
So, as always...
I'll listen to what the academics say. But I'll follow the Power Gauge with my money.
Editor's note: Right now, the market is buzzing with predictions. And the fiercest hype is all about artificial intelligence ("AI")...
The AI mania has driven the seven largest stocks in the S&P 500 to a combined valuation of $11 trillion. Is this just the latest bubble? We're doing something new to cut through the hype... and inviting Marc to sit down with Dr. David Eifrig next week – along with a special guest – for a deep dive into this controversial boom.
Marc has spent decades on the cutting edge of applying technological breakthroughs to the world of finance. So don't miss his take on what the rise of AI means for your money... Learn more about this free online event right here.
"These pros should know better than to double down on a losing trade," Brett Eversole writes. The bears kept betting against the market in droves in recent months, even as stocks rallied. It's an important lesson in what not to do when the market proves you wrong... Read more here.
The forecasters are just starting to get less bearish... And we're seeing a similar shift from individual investors. Folks are beginning to feel optimistic about stocks again – but, as history shows, this isn't a contrarian signal. Instead, the new bull market has plenty of room to run... Learn more here.