Are you bearish enough on the stock market?: Morning Brief

On Oct 4, 2021

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Monday, October 4, 2021

The weekend is always a good time to soul-search. Things tend to slow down just enough so you can think for a few minutes (or is this just me?).

So this weekend while I took a rare break to present my classic car at a local show, I popped down in one of those foldable camping chairs and pondered some of the things I have been spewing in these hallowed grounds and on Yahoo Finance Live.

A lot of you have emailed and tweeted that I have been too bearish on stocks this past month (despite the S&P 500 being down 4% from its Sept. 2 high). I carefully considered your views and heavily debated them, while people complimented me on how immaculate my car is and asked if it was for sale (it’s not).

My conclusion after this weekend of soul-searching? I haven’t been bearish enough. Sorry, but not sorry. When I see better trends in the market and the economy, trust me you will know it. But in the near-term, the grounds are planted with land mines that could potentially blow up your portfolio.

Let’s take this Friday’s jobs report, for example.

I would admit the market is still priced for a long-awaited strong re-acceleration in job growth. It’s unlikely coming in this report, hence presenting a risk to stocks.

“Real-time indicators suggest September was another soft month for hiring. We forecast a 300k payroll increase, with risks tilted to the downside. Nearly all indicators we follow were weak in September,” warned Jefferies Chief Economist Aneta Markowska.

In case you forgot, non-farm payrolls rose a meager 235,000 in August and stocks slid on the surprising miss.

Then there is the start of third quarter earnings season — my contacts continue to tell me it could be an ugly reporting season, full of misses and downward guidance. Bed Bath & Beyond’s results last week shocked everyone (though I appreciate CEO Mark Tritton owning it during a phone interview). More BBBY-like quarters (blame supply chain dislocations and unpredictable market demand) and brutal market reactions lie ahead.

What I could get behind is this bullish call on value stocks by market heavyweight Rob Arnott, founder of Research Affiliates. “The market is very fully priced … value stocks aren’t,” Arnott said on Yahoo Finance Live. Arnott’s research on value is impressive.

But other than that, it’s OK to be cautious on the market from time to time. Nowhere is it written that you have to be out there buying stocks every single day. Sometimes it’s OK to take profits or just sit tight on winners with solid fundamentals. Do a little soul-searching of your own this week … you may find that I am not a delusional market watcher sucking on the tailpipe of his 30-year-old classic car.

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