We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Bull vs. Bear Debate: 3 Definitive Clues to Look For
Rigidity Versus Flexibility in Investing
Often, when you watch financial television, the anchors will ask an analyst, investor, or guest on their show whether they are bullish or bearish on equities into year-end. Because bold, rigid calls tend to attract eyes to the channel, it is the best way to keep viewers engaged. In other words, instead of being "taught to fish," amateur investors often prefer to be given a fish. However, investing professionals understand that this type of mindset is a fast way to go broke.
2023 is a prime example of the dangers of being rigid. For example, year-to-date, the Nasdaq 100 ETF is up 31.54%, while the Russell 2000 Index ETF is -6.37%. Even within the Nasdaq 100, there are massive divergences between strength in mega-cap names like Netflix, Microsoft and Nvidia versus smaller-cap names. Profitability comes from recognizing these trends, not making bold egotistical bets.
Adhering to an "If, then" Perspective
The best investors maintain an "if, then" perspective rather than adhering to a strictly bullish or bearish bias because they understand the complexity and fluidity of financial markets. Recognizing that a multitude of unpredictable factors influences the market, they remain open to various scenarios and are prepared to adjust strategies based on changing conditions.
This adaptability allows them to capitalize on opportunities in bullish markets while safeguarding their investments during bearish downturns. Instead of being confined by rigid beliefs, they assess a range of possibilities, considering the implications of different events or economic indicators. This nuanced approach enables them to make well-informed decisions, mitigating risks and maximizing returns in an ever-changing and unpredictable financial landscape.
With the Nasdaq, Russell 2000, and the S&P 500 Index ETF entering a correction (10% off highs) last week, US equities are at a crossroads. Before getting overly bullish, investors should only become bullish again until seeing proof. Here are 3 factors investors should look for to get bullish again:
A Return of Breadth
Market breadth measures how many stocks in a particular market index participate in a price movement, either upward or downward. If only a handful of stocks (like the "Magnificent 7") are driving a move, when they falter as they have in recent weeks, the entire market falls. Conversely, diverse participation across sectors indicates a balanced and resilient market, less vulnerable to external shocks or sector-specific issues.
What to Look For: Look for equal-weighted ETFs like the Nasdaq 100 Equal Weight ETF or the Invesco S&P 500 Equal Weight ETF to strengthen and work towards closing the performance gap versus their market-weighted counterparts (QQQ &SPY)
A More "Dovish" Federal Reserve
Rampant inflation caused the Federal Reserve to drive up interest rates rapidly after years of a near-zero interest rate, market-friendly environment. For a sustainable bull market to emerge, the Federal Reserve must become more "Dovish" (stop raising rates or even lower them).
What to Watch: The CME FedWatch tool is a market indicator that displays the probabilities of future Federal Reserve interest rate changes based on pricing in the Chicago Mercantile Exchange futures markets. The CME FedWatch tool shows a 95% chance that the Fed will keep rates the same when it announces its decision on Wednesday.
Improved Price Action
Thankfully, to achieve profitability, investors do not need to catch the bottom in the market. Instead, they can monitor how key indexes act around important levels. For example, the S&P 500 Index undercut its 200-day moving average last week.
What to Look For: Bulls want to see the S&P regain its 200-day moving average. While the 200-day has no magic, it is the best barometer for determining the long-term trend. As Paul Tudor Jones warns, "Nothing good happens below the 200-day moving average."
Bottom Line
To successfully navigate tricky markets like the 2023 market, investors must adopt an "if, then" mindset. Before forming a rigid, biased opinion, be patient and wait for the market to provide proof in the form of returned breadth, a more "Dovish Fed," and improved price action.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Zacks Investment Ideas feature highlights: QQQ, IWM, Netflix, Microsoft and Nvidia
For Immediate Release
Chicago, IL – October 31, 2023 – Today, Zacks Investment Ideas feature highlights Nasdaq 100 ETF (QQQ - Free Report) , Russell 2000 Index ETF (IWM - Free Report) , Netflix (NFLX - Free Report) , Microsoft (MSFT - Free Report) and Nvidia (NVDA - Free Report) .
Bull vs. Bear Debate: 3 Definitive Clues to Look For
Rigidity Versus Flexibility in Investing
Often, when you watch financial television, the anchors will ask an analyst, investor, or guest on their show whether they are bullish or bearish on equities into year-end. Because bold, rigid calls tend to attract eyes to the channel, it is the best way to keep viewers engaged. In other words, instead of being "taught to fish," amateur investors often prefer to be given a fish. However, investing professionals understand that this type of mindset is a fast way to go broke.
2023 is a prime example of the dangers of being rigid. For example, year-to-date, the Nasdaq 100 ETF is up 31.54%, while the Russell 2000 Index ETF is -6.37%. Even within the Nasdaq 100, there are massive divergences between strength in mega-cap names like Netflix, Microsoft and Nvidia versus smaller-cap names. Profitability comes from recognizing these trends, not making bold egotistical bets.
Adhering to an "If, then" Perspective
The best investors maintain an "if, then" perspective rather than adhering to a strictly bullish or bearish bias because they understand the complexity and fluidity of financial markets. Recognizing that a multitude of unpredictable factors influences the market, they remain open to various scenarios and are prepared to adjust strategies based on changing conditions.
This adaptability allows them to capitalize on opportunities in bullish markets while safeguarding their investments during bearish downturns. Instead of being confined by rigid beliefs, they assess a range of possibilities, considering the implications of different events or economic indicators. This nuanced approach enables them to make well-informed decisions, mitigating risks and maximizing returns in an ever-changing and unpredictable financial landscape.
With the Nasdaq, Russell 2000, and the S&P 500 Index ETF entering a correction (10% off highs) last week, US equities are at a crossroads. Before getting overly bullish, investors should only become bullish again until seeing proof. Here are 3 factors investors should look for to get bullish again:
A Return of Breadth
Market breadth measures how many stocks in a particular market index participate in a price movement, either upward or downward. If only a handful of stocks (like the "Magnificent 7") are driving a move, when they falter as they have in recent weeks, the entire market falls. Conversely, diverse participation across sectors indicates a balanced and resilient market, less vulnerable to external shocks or sector-specific issues.
What to Look For: Look for equal-weighted ETFs like the Nasdaq 100 Equal Weight ETF or the Invesco S&P 500 Equal Weight ETF to strengthen and work towards closing the performance gap versus their market-weighted counterparts (QQQ &SPY)
A More "Dovish" Federal Reserve
Rampant inflation caused the Federal Reserve to drive up interest rates rapidly after years of a near-zero interest rate, market-friendly environment. For a sustainable bull market to emerge, the Federal Reserve must become more "Dovish" (stop raising rates or even lower them).
What to Watch: The CME FedWatch tool is a market indicator that displays the probabilities of future Federal Reserve interest rate changes based on pricing in the Chicago Mercantile Exchange futures markets. The CME FedWatch tool shows a 95% chance that the Fed will keep rates the same when it announces its decision on Wednesday.
Improved Price Action
Thankfully, to achieve profitability, investors do not need to catch the bottom in the market. Instead, they can monitor how key indexes act around important levels. For example, the S&P 500 Index undercut its 200-day moving average last week.
What to Look For: Bulls want to see the S&P regain its 200-day moving average. While the 200-day has no magic, it is the best barometer for determining the long-term trend. As Paul Tudor Jones warns, "Nothing good happens below the 200-day moving average."
Bottom Line
To successfully navigate tricky markets like the 2023 market, investors must adopt an "if, then" mindset. Before forming a rigid, biased opinion, be patient and wait for the market to provide proof in the form of returned breadth, a more "Dovish Fed," and improved price action.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.