The Market Will Take a Hit Next Friday — Make Sure Your Portfolio Doesn’t

by Andrew Zatlin

The market’s been rallying for quite some time.

But I think we’re ripe for a pullback.

In fact, get ready for a significant selloff next Friday.

Here’s why…

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

The Market Will Take a Hit Next Friday — Make Sure Your Portfolio Doesn’t

The market is off to a strong start this year.

But hold the phone.

One week from today, I’m forecasting a major sell-off. And we need to get prepared.

Why am I so specific about the date?

Because next Friday, we’ll receive the latest jobs report. And the figures are going to be strong. In fact, I think they’ll be too strong for the market to handle.

Let me explain…

Why Good News Equals Bad News

It’s a situation that can confuse a lot of investors. After all, how can good economic news be bad for the stock market?

In this case, it centers around a topic that’s been in the headlines for much of the past year. I’m referring to interest-rate cuts.

You see, the market has been climbing since last November, partially due to the belief that the Federal Reserve’s plan to fight inflation was successful.

Remember, to combat historic inflation, the Fed raised interest rates to make borrowing more expensive and essentially cool off the economy. The stock market didn’t react well to these rate hikes, resulting in a turbulent year for stock-market investors.

But according to the plan, as soon as the economy worsened, the Fed could begin to pull back on rate hikes — and even start discussing the possibility of rate cuts — which would send the stock market climbing.

Did this strategy actually work?

A Work in Progress

Last fall, payroll numbers were weak, suggesting that the Fed’s rate hikes did, in fact, cool down the economy. The stock market blossomed at the news and began to rally.

Soon after, we heard talk of possible interest-rate cuts as early as March 2024. And that sent the market even higher!

The thing is, as I mentioned, I’m forecasting strong payroll numbers to come out next week. And that’ll cause the market to pull back in disappointment.

In a moment, I’ll explain why I’m predicting such a strong report. But first…

The Benefits of Lower Interest Rates

It’s important to understand why lower interest rates are welcomed on Wall Street. Essentially, it’s a factor that benefits companies and households.

Let’s start with companies. Most of them borrow money in order to grow. And when interest rates are high, it costs more to borrow this money — plain and simple. Lower rates make it more affordable to borrow money, and enable businesses to keep more money on their bottom lines. That’s great for their respective stock prices.

As for households, lower interest rates have a similar benefit. It’s cheaper to borrow money. And it makes major purchases like a home or a car more affordable. Consumers can then spend more money at businesses, which in turn helps things like earnings, profits, and stock prices go up, too.

But as much as we’re eager for the market to keep climbing, a setback is coming…

The Countdown Begins

Next week’s strong payroll number will cause the market to throw a tantrum. I’m not saying interest-rate cuts won’t happen…

It just means that rates will be higher for longer. And the market doesn’t want that to happen.

I’ve got two reasons why I’m projecting a strong payroll number.

  • First, January payrolls are always strong — usually reporting between 200,000 and 300,000 jobs. I think this year will be similar.
  • Second, I’m looking at data that tells me a strong number is coming.

Remember, I’m “Mr. Payroll.” I’m one of Bloomberg’s most accurate economic forecasters.

What makes me so accurate? Simple: My projections aren’t wild guesses. They’re based on my proprietary hiring data. Take a look:

 

I’ve taken hiring for companies in the S&P 500 and boiled it down to a single data point. And I track that data point in my S&P 500 Hiring Index.

If you notice on the right-hand side, companies have accelerated their hiring. And they don’t do that in a weak economy.

That tells me that the economy is stronger than the Fed thinks, and that strength will be reflected in next week’s jobs report.

You’ve Got Options

To be clear, we’re not in a weak economy. We’re in a mild one. Does that justify rate cuts? Certainly. Does it justify rate cuts right away? Hmm, maybe not.

We’ve enjoyed the market’s start to the year. But get ready for a pullback as the Fed continues to navigate a perplexing economic situation.

From an investment standpoint, you’ve got a couple of options.

You could bet against the market, specifically by targeting some overvalued tech stocks.

Or you could stand pat. Wait for the stock market to pull back and then scoop up some companies at a discount.

My advice? Stick with me to discover unique investment opportunities. We’re in it to win it. Zatlin out.

In it to win it,

Moneyball Economics