What's Next After the "Fed Pause

Meet the New Bull Market – And One Stock That'll Help You Win It may not feel like it, but the S&P 500 Index (SPX) is on a bull-market run. Officially. The broad bellwether achieved this status last Thursday, having risen a full 20% from its October 2022 closing low. Of the three most-closely-watched indexes, the S&P was the last to traverse that 20%-rally threshold — joining the Dow Jones Industrial Average and Nasdaq Composite as it did so. But when it comes to markets, sectors, or individual stocks, it's “what comes next” that really matters. On Wednesday of this week — after a string of 10-consecutive rate hikes that represented the fastest credit-tightening sojourn in history — Team Fed finally gave investors a break and held rates steady. Whether this is just a “pause” or a “skip” — meaning the Fed hawks will resume their “hike-at-all-costs campaign” — remains to be seen. RECOMMENDED LINK New A.I. stock market algorithm "learns" like ChatGPT ChatGPT is the largest, most powerful A.I. language model ever created. If you ask it a question... it can give you an appropriate response all in context... it does this through a process called "pre-training" where it is fed billions of words and processes them. Well, a leading financial tech company called TradeSmith just unveiled a revolutionary A.I. algorithm called An-E that does the same thing... Only, instead of words... they "pre-trained" it with numbers and data. And, instead, of language processing, it analyzes financial data to predict stock prices. Click here to get the full story I'm not a Fed fan: It's perennially filled with academics who have zero real-world experience running a business or managing money — meaning they're disconnected from “real people,” and they don't understand the fallout of their institutional moves. But since the latest reports show that inflation is cooling, Team Fed staffers didn't feel as if their hand was being forced, meaning Chairman Jerome Powell didn't have to pull the interest-rate lever an 11th time. That brings us back to what comes next… and, more importantly, “what to do next.” History tells us we're looking at a good moneymaking window over the next year. But that same history tells us to expect some bumpy roads in the very near term. In 10 of the last 26 times a bear market ended and a new bull began (with that 20%-plus rally off the low), the S&P 500 was still buffeted by a double-digit decline at some point in the three to 12 months that followed. Here is a table of the full results, from Dow Jones Market Data: As you can see, the results one year after a bull market starts are fantastic, with median gains of 13.17% for the S&P, and only slightly lower average results. But the devil is usually in the details. If you scan down the columns labeled “three months” and “six months,” you'll see that several big interim declines showed up — even as stocks were marching their way to big, long-term gains. Go back to the 2008 bear market. The bear “officially” died on December 8 of that year. But the S&P still dropped almost 25% more to hit the March 2009 stock-market nadir. Even after that sharp drop, however, stocks still gained 20% over the next year. The performance of the stock market for the rest of this year may still be choppy, with strong rallies sometimes followed by sharp-and-swift declines. Now, the most important question I know you're wondering is, “What do I do now? What should I be buying and what should I be avoiding?” Let me start with the “what to avoid” part. What to Avoid There were five stocks to avoid at all costs to start the year because I said that inflation was here to stay even if was “cooling.” Outside of a meme stock that doesn't trade by logic, three of those stocks are down and one is barely up 2% and has not taken part in the broader market rally. You can see those five stocks and my insight here. RECOMMENDED LINK Warning: Major Hedge Funds Are Robbing Your Money... Warning! Your investments are under threat. Confirmed by a former data scientist at Citadel, the most profitable hedge fund of all time... Individual investors, no matter how savvy or strategic, are at the mercy of a rigged system. Thankfully, there's a glimmer of hope. One former Wall Street Insider is releasing a brand-new strategy that not only levels the playing field for you... But could massively transform your wealth as a result. So, before you place another trade... Click here now to see how this new groundbreaking technology works... What to Own For stocks to consider, I keep turning to companies like J.M. Smucker Co. (SJM). Granted, shares of the Orrville, Ohio-based SJM are down a bit year to date. But this is the type of high-quality business to own when you're looking at the long haul — and are willing to look past the near-term whipsawing we may have to navigate. For over 125 years, it has been a staple for regular American consumers. Smucker is probably best known as a breakfast-table companion (its jams and jellies are killer on toast or muffins… and it also sells coffee… what else can you ask for?) of the American consumer. It also serves the family members who lurk under the breakfast table — specifically, your dogs and cats — thanks to its robust line of pet foods, including 9Lives, Kibbles 'n Bits, Meow Mix, and Milk-Bone. Smucker's 2015 move into the pet-food market (through the acquisition of Big Heart Pet Brands) has worked like a booster rocket for the company's top line: We're talking about an added $3 billion in net sales — growing from $5.7 billion in 2015 to $7.8 billion in 2016. And that added $8 billion has held steady ever since. SJM is one of those “Steady Eddie” stock plays that won't give you a triple-digit gain in a year. But it will build wealth, year in and year out, over a long stretch. And it won't have you up worrying at night. More importantly, consumer goods stocks tend to perform well during those stretches when folks are counting their pennies — and spending on quality brands whose products they trust. It's also an income play — which is something I have an entire service centered around — that pays an annual dividend of $4.08. At Smucker's recent stock price of about $153 a share, we're talking about a healthy yield of 2.7%. One-year target prices range as high as $170. Put it all together and we're talking about a growth-and-income play that will butter your bread — with a caffeine chaser. Good investing, Mike Burnick Senior Analyst, TradeSmith More Investable Information at Your Fingertips TradeSmith's 2023 Guide to Beating Inflation Bitcoin Is Far from Dead (Here's Proof) This Could Be the Amazon of Gene-Editing Stocks 2023 Electric Vehicle Investing Guide Customer Support: 866.385.2076 |  support@tradesmith.com Customer Service Request ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. 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