This 70-Year-Old 'Worry Indicator' Is Never Wrong

Always worrying about what could go wrong doesn't make me "bearish"... It makes me a market strategist. [Chaikin PowerFeed]( This 70-Year-Old 'Worry Indicator' Is Never Wrong By Pete Carmasino, chief market strategist, Chaikin Analytics Always worrying about what could go wrong doesn't make me "bearish"... It makes me a market strategist. For example, I'm worried about the unemployment rate right now. It's at 3.8%. That's not far from its all-time low. And it has stayed below 4% since the end of 2021. But layoffs have been on the rise this year... Microsoft (MSFT), CVS Health (CVS), FedEx (FDX), Tyson Foods (TSN), General Motors (GM), T-Mobile (TMUS), and Roku (ROKU) are some of the bigger companies to announce job cuts in the past two months alone. These moves account for thousands of positions. Just last week, tech giant Google reportedly let go of hundreds of recruiting staff members. That news is more significant when you consider that its parent company, Alphabet (GOOGL), already eliminated 12,000 jobs (about 6% of its workforce) back in January. When I start worrying about what could go wrong, it's easy to go down a rabbit hole of doom and gloom. But at some point, as market strategists, we need to be realistic as well... Recommended Links: ["All Signals Are Flashing Red!"]( The Pentagon consultant who predicted the 2008 and 2020 market crashes – days before they hit – is now stepping forward with another big warning: "This next crisis will affect $50 trillion and wipe out HUNDREDS of stocks. You don't need to panic... but you DO need to prepare – immediately." [Full story here](. [Can Kevin Kisner collect $4,000 in 60 seconds?]( Today, we're airing a Real Money Demo. A professional athlete will attempt to collect $4,000 in 60 seconds by selling put options. Will he succeed? Or lose money? Watch his transaction on Costco (COST) and find out – [including how to begin using this strategy yourself](. One thing on my radar is how the Federal Reserve will react if unemployment starts rising. The central bank typically lowers the federal funds rate when that happens. (In case you don't know, the federal funds rate is simply the interest rate that banks can earn when they lend money overnight to other banks. It's the benchmark interest rate in the U.S.) The combination of unemployment and the federal funds rate is my "worry indicator"... Specifically, I overlay these two key rates on the same chart. When I do that, a clear pattern emerges. You see, higher rates are a byproduct of a strong economy. But at some point, things get too hot. Then, inflation shows up. And it becomes the Federal Reserve's No. 1 enemy. That's what we've seen over the past year and a half. When rates are higher, risk increases as well. For nearly 70 years, since the mid-1950s, my worry indicator has activated every time. By that, I mean the unemployment rate always rises after the Fed hikes the federal funds rate. Then, when unemployment climbs, the Fed retaliates by lowering rates. Here's the important part... Every time the Fed does that, the markets react negatively – at first. But eventually, the benefits of lower rates jump-start the economy again. And the business cycle resumes. Look at the following chart of the S&P 500 Index since 1950... When a recession starts, stocks retreat. That's because the economy is slowing. Falling rates soon follow. And eventually, the markets recover and move higher. Take a look... [Chaikin PowerFeed] The reality is simple today... We're at least months away from the Fed cutting rates. And if history is any proof, the stock market won't like the move after everyone realizes it's because things are slowing down. But don't worry... That means we're still early in the process this time. It also means this rate cycle is working. And before we know it, stocks will be on sale again. Good investing, Pete Carmasino Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 -1.05% 8 17 5 S&P 500 -1.61% 87 284 127 Nasdaq -1.83% 29 57 13 Small Caps -1.55% 360 1060 512 Bonds -2.56% — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are somewhat Bearish. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Health Care -2.12% Utilities -2.79% Staples -2.93% Financial -3.06% Industrials -3.29% Communication -3.93% Energy -4.50% Information Technology -4.73% Materials -5.06% Real Estate -5.74% Discretionary -7.01% * * * * Industry Focus Dow Jones REIT Services 4 41 64 Over the past 6 months, the Dow Jones REIT subsector (RWR) has underperformed the S&P 500 by -9.36%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #20 of 21 subsectors and has moved down 2 slots over the past week. Indicative Stocks [rating] JBGS JBG SMITH Properties [rating] DEI Douglas Emmett, Inc. [rating] ADC Agree Realty Corpora * * * * Top Movers Gainers [rating] FDX +4.52% [rating] FOXA +3.18% [rating] VLO +2.33% [rating] CNC +2.14% [rating] HUM +1.92% Losers [rating] ARE -8.30% [rating] BXP -7.14% [rating] CZR -5.30% [rating] PLD -5.26% [rating] DLTR -5.21% * * * * Earnings Report Reporting Today Rating Before Open After Close GIS No earnings reporting today. Earnings Surprises [rating] FDS FactSet Research Systems Inc. Q4 $2.93 Missed by $-0.56 [rating] DRI Darden Restaurants, Inc. Q1 $1.78 Beat by $0.04 [rating] LPLA LPL Financial Holdings Inc. Q2 $3.94 Beat by $0.06 * * * * You have received this e-mail as part of your subscription to PowerFeed. 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