Bad News for the Economy, Good News for the Market

by Andrew Zatlin November 07, 2023 12:51 pm ET

Forgive my appearance today…

I’m home, recovering from surgery!

Speaking of recovering…

Today I need to bring a major market opportunity to your attention.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

Bad News for the Economy, Good News for the Market

How about that stock market?

I’ve been banging on the table recently, telling you that October was the time to get in.

And last month, the market jumped — and now I believe it has more room to run.

What’s going on here? And how can we ride this rally for maximum gains?

Bad News is Good News

Let me kick things off by explaining why we’re seeing this rally and why it’s likely to continue.

Simply put, it’s because bad news for the economy has become good news for the market.

What’s the bad news? Let’s start with manufacturing, where data from the ISM Manufacturing Index was just released.

This index tracks economic activity based on purchasing habits of more than 300 manufacturing firms. It’s a key indicator of the state of the U.S. economy.

Based on the latest data, a clear contraction is taking place in new orders, in inventory builds, and in employment. It’s all bad news.

Speaking of employment…

Hitting the Trifecta

Employment data was also released recently. And we hit the trifecta of bad news here:

Payroll numbers slipped below the 100,000 mark in the private sector. In other words, fewer jobs were added.
Unemployment numbers ticked up.
And wages went down.

The wages element is particularly important. That’s because wages are now growing at a slower rate than inflation. And when that happens, consumers stop spending.

Need proof? Let’s look at the data…

Down, Down, Down

Take a look at this:

This shows the level of non-revolving credit carried by Americans over the past 12 years. This type of credit applies to debt that you pay back in either a single installment or multiple fixed installments. It includes things like mortgages and auto loans.

Notice how this level of credit has fallen off a cliff. And it’s likely to continue collapsing. Why?

Simple: Affordability has slipped away. People can’t afford to buy homes, cars, or other big-ticket items, especially while interest rates are so high.

Not only are people having trouble making payments on new purchases, but they’re also having trouble paying for their existing purchases.

According to Fitch Ratings, a credit-rating agency, the percentage of subprime auto borrowers who are at least 60 days delinquent surpassed 6% in September, the highest level since 1994. And Cox Automotive, a market-researcher for the auto industry, forecasts that repossessions are going to jump 22%.

Ignore the “Experts”

A lot of pundits will come out and say that this data isn’t cause for concern. Our economy is simply normalizing after COVID skewed the landscape.

I say they’re wrong. Remember, the Federal Reserve wants us to enter a recession. It’s essential for curbing rampant inflation, as well as curbing exorbitant prices for homes and cars.

This economic data indicates that the Fed’s actions are working and that long-awaited rate cuts may not be far off. The market is already reacting positively to this scenario...

And I expect it to continue climbing as the anticipation builds.

So, how can we play this as investors?

Instead of focusing on what’s happening, concentrate on what’s not happening.

In other words, pay attention to the fact that cars aren’t being sold. Neither are appliances, electronics, or home-improvement materials.

As a result, retailers are about to struggle mightily. And to salvage sales, companies in this sector are about to slash prices. A major buyer’s market awaits.

Additionally, remember that manufacturers are also in trouble. Production levels are down. And the only way for these companies to stay afloat will be to trim prices.

If you’re a Moneyball Pro subscriber, I’ll reveal a specific opportunity to take advantage of.

This is an opportunity that delivered more than 10% returns in the last year, and has the potential to do the same this year.

We’re in it to win it. Zatlin out.