33 Days to the Next Stock Market Crash [Do This Now]

Summary

Joseph Hog provides a detailed analysis of the stock market in his weekly update, highlighting a record 9-day S&P 500 rally amid concerns of a potential market crash. He discusses a hedge fund's warning about an impending recession, focusing on inflation, consumer sentiment, and tariff impacts. Hog shares insights on key stocks like Super Microcomputers, AMD, and Soundhound, offering investment strategies, including options and risk management. He emphasizes the importance of balancing portfolios with cash and bonds while preparing for market volatility.

Takeaways

• 😀 The S&P 500 saw its longest winning streak in over 20 years, with stocks up nine consecutive days, fueled by hopes for the end of a tariff-driven correction.
• 😀 Despite recent gains, some experts, including Apollo Global Management, are warning that a market downturn could be imminent, potentially within a month.
• 😀 Economic indicators suggest a looming recession, with slowing manufacturing activity, rising costs, and a sharp drop in shipping from China signaling economic contraction.
• 😀 Consumers are facing increased financial strain, with many concerned about job loss and accumulating debt, including rising credit card delinquencies.
• 😀 Stagflation is becoming a concern, with inflation rising and economic activity slowing, creating the perfect conditions for a market crash.
• 😀 The next few weeks are critical, as earnings reports and data like CPI and jobs reports will reveal the extent of the recession and market conditions.
• 😀 Investors are advised to be cautious about chasing the recent rally and should hold some cash and bonds to cushion against potential downturns.
• 😀 For long-term investors, the strategy is to hold onto stocks that have growth potential, even if short-term market volatility persists.
• 😀 Hedge fund strategies, such as using call options and put spreads, can help offset short-term losses during market crashes.
• 😀 Stocks to watch include Super Microcomputers (SMCI), AMD, and Soundhound, with updates on earnings reports expected this week, particularly in the AI and tech sectors.
• 😀 The market's reaction to tariff impacts will be crucial in the coming weeks, with retailers facing increased costs from tariffs, particularly from Asia and Central America.

Q & A

What is the significance of the S&P 500 closing up for nine consecutive days?

This marks a record not seen in more than 20 years, since 2004. The consecutive rise indicates that investors are returning to the market, driven by optimism about the end of a tariff-driven correction.

What warning did Apollo Global Management send to its clients regarding the stock market?

Apollo Global Management warned that the market could experience another significant downturn, with a potential stock market crash happening within a month. They outlined various economic indicators that suggest a looming recession.

How does the ISM Manufacturing Survey contribute to understanding the economy?

The ISM Manufacturing Survey, particularly its new orders component, signals future manufacturing activity. A significant drop in this index from 70 to under 50 indicates that the economy is moving toward recession, as it enters contraction territory.

What impact does the decline in shipping from China have on the U.S. economy?

The sharp drop in shipments from China to the U.S. could cause shortages of goods and components, driving up prices. Since the U.S imports a large volume of goods and parts from China, this reduction could lead to higher costs and inflationary pressures.

Why is consumer sentiment a critical indicator for the economy?

Consumer sentiment reflects confidence in the economy. Currently, the U.S. has seen a sharp decline, with nearly 70% of people worried about job security, which typically signals a recessionary environment.

What is the risk of stagflation as mentioned in the warning from Apollo Global Management?

Stagflation refers to a situation where inflation rises while economic growth stagnates, leading to a recession. Apollo warns that this could lead to a significant economic downturn, further driving stock prices down.

How is the recent job market performance affecting the outlook for the economy?

Although job numbers were stronger than expected, with 177,000 jobs added in April, the overall economic outlook remains concerning. If layoffs increase and the labor market weakens, the recession could deepen, which would negatively impact the stock market.

What role do tariff increases play in the current market outlook?

Higher tariffs on imports, especially from China, are driving up costs for U.S. companies. This has already led to higher prices for consumers and lower earnings for companies, which could contribute to a broader market slowdown and potential recession.

What investment strategy is Joseph Hog recommending in light of the market volatility?

Joseph Hog suggests having a diversified portfolio with a mix of cash, bonds, and long-term growth stocks. He also advocates for using options strategies like selling call options and employing bear spreads to mitigate short-term market risks.

What are the prospects for Super Microcomputers (SMCI) despite its recent earnings disappointment?

Despite a disappointing earnings report, Super Microcomputers remains a strong growth stock with expected revenue growth of 34%. Joseph Hog sees potential for the stock to increase significantly, as it is trading at an undervalued price relative to its growth prospects.