A Summer Full of Travel, Leisure and Buying Stocks Again!
But Is It All Smooth Sailing?

July 9, 2023

Weekly Market Outlook

By Donn Goodman and Keith Schneider

Hello Gaugers.  Hope that your Independence Day holiday was enjoyable!

It seems to be the summer of travel and vacations!  Last weekend the TSA reported that they screened more travelers than in 2019 before the pandemic.  People are on the move and of course with the weather not cooperating everywhere, many people have been stuck in airports on their way to resorts and cruises.

Having been an avid “cruiser” myself over the past 20 years, I understand the allure of a big ship with all the available activities, all you can eat food (food is expensive these days and to have an endless supply – who doesn’t want to just “dig” in?), music, sun, beaches, exciting new ports, and fun, fun, and more fun.  One can understand why cruise ships are full and their stock prices are soaring.  More about that in a minute.

Buying S&P 500 stocks is back in fashion.  Investors are scooping up stocks again and here are favorites (since June 1). 

Ten stocks in the S&P 500 have become the new investor favorites.  You would think Apple, Nvdia and Microsoft. But you would be wrong.

No matter how much the media is fixated on the purchases of the top 7 (we have covered this the past few weeks, click here to read last week’s article), investors are scooping up plenty of stocks outside those 7.  You would have to think a little less tech.  Enter travel & leisure.

Carnival Cruise Lines tops the list.

This operator of cruise ships that struggled mightily during the restricted travel pandemic of 2020 and part of 2021, has sailed right into the top of the list of June hot stocks.

Shares of the cruise ship operator of a fleet of more than 90 ships are up more than 67% in just about a month’s time.  (MarketGauge subscribers and MarketGauge Asset Management investors are big beneficiaries of our quant models catching this and another travel operator recently).

The company’s profitability is suddenly turning around.  Analysts think the company this September will report a profit of 76 cents per share for the August-ended quarter.  If that happens, it would be the company’s first profitable quarter since prior to Covid-19 in the quarter ended February 2020.  See Carnival 2023 stock chart below:

Big $ Inflows in stock ETFs in June.

More than $53 billion poured into stock ETFs in June-showing the strongest demand among all asset classes according to State Street Global Advisors.  That’s ETFs’ biggest inflow of free cash in a month since October 2022.

State Street points out that nearly $70 billion went into all ETFs in June.  That was the biggest inflow in eight months, and the first-time monthly flows topped the average.

But investors aren’t just bullish with their money.  “Bullish sentiment jumped to 46.4% from 41.9%, according to the weekly survey of individual investor sentiment from AAII,” Bespoke Investment Group said.

This week the indicator’s reading was the highest level of bullish sentiment since November 2021.

S&P Travel Stocks have taken off.

It’s the summer of leisure, adventure, and fun!  A similar story to Carnival Cruise lines is that of Norwegian Cruise Lines (NCLH), Royal Caribbean Cruises (RCL-another MarketGauge holding), Delta Air Lines (DAL), and Southwest Airlines (LUV).

Starting June 1 is an important time frame to consider.  This period kicked off a flood of investors’ interest in buying stocks again.  And the latest rally looks different than the big-cap tech focused rally raging so far in 2023.

Here is a chart showing the top 10 stocks in the S&P 500 since June 1:

Except for Tesla, there is really no mega caps on the list above nor any tech focused company.

“With the S&P 500 rallying into bull market territory and new 52-week highs, investors have become bullish,” says Bespoke.

This is a positive for the markets as it shows investors are branching out beyond the biggest, and mostly tech-oriented stocks and into areas of the market that they feared could falter from a (predicted) recession that has not yet materialized.  Here is a chart of the equal weighted S&P 500 ETF (RSP) versus the market cap-weighted S&P 500 (SPY):

Jobs and Inflation, at a crossroad.

By now, you are probably aware that the jobs report came out this past Friday, below expectations.  This followed the ADP report on Thursday that predicted that more than 500,000 jobs had been created.  This sent a shock wave to the markets and at one point the DJIA was down more than 500 points as interest rates on the 10-year rose above 4.0%.  Above 4% seems to be the “danger zone” for stocks.

Once again, ADP got the prediction very wrong.  I wonder why CNBC hangs its hat on wanting to broadcast the importance of the ADP number, which is not a great predictor of the real job market.

After Thursday Fed Fund “bets” rose above 90% that the Fed would raise by no less than 25 basis points at their next meeting.  Fortunately, the Fed Fund bets did not advance much for the September Fed meeting (no August meeting), so analysts and economists are still hoping for a complete STOP to the interest rate rise cycle.  We suggest, however, that nobody count on any interest rate cuts during 2023.

The market’s weakness was warranted. 

Stock markets do not go straight up.  Instead, they zigzag and periodically need to take a breather to consolidate recent gains.  It was not unexpected that we would see this over the past week, especially with the upcoming Fed meetings.  Remember the Fed SKIPPED a rate hike and said that they would be “DATA dependent” going forward.

One of our favorite analysts, Ryan Detrick posted the following this week after the brief pullback.  Perhaps you may want to record his pivotal areas for your own monitoring of potential market weakness:

Watch the CPI numbers this coming week.

This coming Wednesday, the CPI (Consumer Price Index) comes out.  We think it may surprise, especially to the DOWNSIDE.

Inflation has been persistent.

This writer has been consistently saying “higher for longer”.  Our firm (both Mish and I) have also been stating that inflation is sticky, persistent, and can last a lot longer than expected, especially when the Fed maintains its 2% long-term objective.  Mish was early in calling for the dreaded “STAGFLATION” in many of her commentaries on National TV back as far as late 2021.

According to Mish, an experienced reader of the tea leaves, it was an inevitable state for the economy to enter.  Of course, the current administration’s desire and ability to pass major spending bills has helped keep inflation higher for longer with added stimulus in the economy.

Then, of course, the Treasury’s need to create emergency liquidity for the regional banking crisis earlier this year probably contributed to inflation lingering longer.

Why my thinking has been changing.

Last week I said that inflation may soon break to the downside.  I maintain that position and want to reinforce why this writer believes that.  Much of my recent investigation into what might occur was gleaned from a Fisher Investment Report that recently came out (thank you Fisher Investments).

Forward-looking charts and indicators show that inflation is slowing much faster than many expected.  Please note the following explanations and charts:

  1. Money Supply:

Most economic theory over the last century of economic analysis demonstrates that inflation is caused by too much money chasing too few goods and services.  The below chart shows the broadest measure of money supply (M4 green).  As it declines it usually leads to CPI (yellow line) falling 12 to 18 months later.

  1. Global Supply Chain

The supply-chain bottlenecks, many of which originated during COVID-19, have begun to ease to record lows in May as measured by the New York Fed’s Global Supply Chain Pressure Index (GSCPI).  It spiked to record highs last year accompanied by surging inflation as people bid up prices for hard-to-get goods.  But with goods once again flowing freely through the global economy, this quagmire is subsiding.  Notice once again that CPI has a lagging effect but closely follows the GSCPI.  See chart below:

  1. Priced Paid Growth

One of the closest watched inflation indicators is the Institute for Supply Management services purchasing managers index (PMI).  We reference it often.  Why?  It represents 71% of US GDP.  The prices paid subcomponent of the PMI showed 56.2% of surveyed firms saw their input prices rising in May, a BIG cooldown from over 80% last year.

While still “hotter” then 50 and still in the majority, this indicator shows us that service prices paid is decelerating at a good pace.  This is a major contributor to helping bring down prices and inflation.  See chart below:

  1. The 5 Year Bond Breakeven Rate

The Bond markets project (and often predicts) the future state of the economy.  Inflation expectations are derived from 5-year Treasury and Treasury Inflation-Protected Securities (TIPS).  The TIPS’ payouts include the CPI inflation rate (after the fact) and many analysts believe that the difference between the rate of the 5-year and TIPS reflect what the market’s expectations for inflation are over the period of their maturities.

Therefore, when these yields are trending lower this often reflects the market’s expectations for the future rate of inflation.  See chart below:

  1. Shelter Rates

Probably the stickiest areas (and biggest part) of the CPI is Shelter.  Shelter makes up over a third of CPI and a subcategory of it-owners’ equivalent rent (OER) comprises a quarter.  A weird indicator, however, the OER it solely based on a survey of homeowners asking them how much they would pay to rent their own house.  It is very much a made-up metric, and with it being used for a big part of the CPI, it is given more importance than it deserves.  It lags true residential housing costs by a lot.

Nevertheless, it is watched closely.  And the OER decelerated in May for the first time since 2020.  It was a small decrease from 8.1% year over year to 8.0%.  However, as the chart below indicates, the National Home Price Index began to decline approximately 13-16 months ago. This suggests that the OER and shelter costs overall are slowing.  This will reduce CPI in the future.

Conclusion from above (on inflation).

I think the number released this Wednesday may be a shocker.  I might be wrong.  However, I believe that it might be a surprise to the downside.  It wouldn’t surprise me to see a 3 handle (from the most recent readings in the 4s).  In fact, the way that CPI is calculated, we could see a number below 3.5%.  We shall see.  Place your bets.

Regardless of where the CPI number comes in, I also believe that it is baked in the cake that the FED raises another 25 bp at their upcoming meeting.  That number is already reflected in the recent rise in interest rates this past week.  See chart below which came out after the market closed last Thursday:

Always remember that any material change (or rise) of interest rates, whether on the short end of the yield curve or longer-term interest rates like the 10-year, has a material effect on the value of stocks.  This chart shows how closely aligned asset prices were last year and the recent decoupling of interest rates and the NASDAQ 100 (QQQ) this year.  See chart below:

3 things that could negatively affect the economy, according to Bank of America says.

While the markets and the economy appear to be holding up, according to Bank of America, there are three material things that could send us into a recession late this year or early 2024.

On Friday, the bank’s team of economists released a note that recent data has surprised to the upside including positive trends in home sales, auto sales and production. But although these rate-sensitive sectors have outperformed expectations and the broader economy is growing around trendline, they believe there are enough pockets of concern that a mild recession starts in the first half of 2024.

Here are the three BofA concerns:

  1. Credit crunch

The failure of regional lenders earlier this year amid aggressive Fed tightening has made banks less willing to lend.  This spells future trouble for credit markets.

BofA cited the April Senior Loan Officer Opinion Survey that showed consumer and business loan growth had slowed across most categories with loan officers warning that credit conditions will likely keep tightening for the rest of 2023.  Morgan Stanley analysts echoed this sentiment saying that banks have tightened lending the most they ever have on record.

  1. Restart of Student Loan Payments

The Supreme Court shot down President Biden’s student Loan forgiveness plan in June.  Borrowers now have to prepare to resume payments on their student debt bills in the early fall.

There was a three-year pause on these payments and the resumption is likely to burden consumers.  BofA said that this could increase, significantly, the delinquency rate or the rate of late payments on these loans.  The effect could spill over to other areas of the debt market, such as outstanding card debt which remains huge.  Many borrowers are already in delinquency.

BofA economists said “given that lower-income consumers with higher marginal propensities to spend are most likely to be burdened by repayment, we think this could be a moderate headwind to growth”

  1. Slowing GDP Growth

Though the labor market and wage growth has stayed robust despite the aggressive Fed tightening, job growth has mostly been concentrated in lower-wage service jobs.  This has led to a decline in labor productivity.

The summary is that payrolls will begin to slow and possibly decline.  US GDP growth came in at an adjusted 2% for the first quarter.  Forecasters surveyed by the Philadelphia Fed expect GDP to grow just 1.3% for the WHOLE year, 2023.  If you extrapolate the numbers that means we possibly get to flat or negative GDP numbers the remainder of the year.

We would only add to the above points by suggesting that recent data from China and Europe show their economies are slowing down quite dramatically.  This will have a contagion effect on our own economy.

What to do now?

Since it may not be all smooth sailing over the course of the next 6-12 months, we offer a few suggestions to help steer your investment portfolio down the right path.

  1. Follow MarketGauge guidance and investment strategies

Our main goal is to help you know what is the most optimal path to take.  This includes simple to follow investment strategies that will put you in a position to take advantage of profitable conditions in certain sectors and market conditions.  If you are not yet a subscriber (what is stopping you), please contact Rob Quinn at [email protected], (407) 770-7637, or schedule a call here, and he will help you uncover which strategies may be best suited for your investment temperament.

  1. If you are a subscriber, make sure you review the Big View and its different sections a couple of times a week. This includes looking at the Risk Gauges as well as the Index and ETF screens.  This will speak volumes to you about the state of the markets, what areas are rising, where is more risk, and how you can position your portfolio to take advantage of certain emerging trends.  Make sure to review these Market Outlooks and watch Keith’s weekly video to get more in-depth analysis with actionable insights.
  2. Subscribe to Mish Daily. You can do that here.  She provides helpful insights and a constructive perspective to help you see the market from a different angle.
  1. Watch Mish’s replays of her recent media appearances, podcasts and interviews. You will get caught up on her strategy perspectives which also add invaluable information about how our strategies are positioned at the time. You’ll find links to them in every Mish’s Daily email and in the Media section of our site.
  1. Contact us if you want help managing your portfolio. We work with several different brokerage firms including Schwab and Interactive Brokers and can help you manage your assets. We offer unique All-Weather Blends which incorporate dynamic fixed income along with our quant- SMART methodology that utilizes discipline and formulaic based strategies.  These strategies have impressive long-term historical returns (some have audited attestation reports).  Email me at [email protected] and I will send you the latest updated investment strategy and All-Weather fact sheets.



  • All 4 key US indices closed slightly down on the week even with a rally in the latter half of the week in Small Caps (IWM). The S&P500 (SPY) and Nasdaq (QQQ) are still in strong bullish phases, while the Diamonds (DIA) are sitting at support on the 50-day moving average and the Russell (IWM) looks primed for a bullish cross on its own moving averages. (+)
  • Two highlights this week from Mish’s Modern Family are Retail (XRT) and Transportation (IYT) that continue to improve, a positive sign for the economy. (+)
  • Emerging foreign markets (EEM) briefly crossed into a warning phase but managed to regain a bullish phase by the end of the week. (+)
  • Risk Gauges faltered slightly mid-week, but are now back at a fully Risk-On reading. (+)


  • Volume patterns remain fairly weak across the key US indices as all 4 continue to show more than twice as many distribution days as accumulation days over the past 2 weeks. (-)
  • Metals and Energy plays were some of the strongest segments amongst global equities this week with Oil Services (OIH), US Oil (USO), and Silver (SLV) all providing strong performances. (-)
  • Cash Volatility ($VIX.X) rallied into resistance at its 50-day moving average this week, potentially providing an indication of increased fear in the market over the short-term. (-)
  • The number of stocks within the S&P500 that are above key moving averages looks to have topped out a bit and is now beginning to roll over on all timeframes. (-)
  • The 20-year US treasury bond (TLT) has broken down below its 6-month trading range and appears to have invalidated a long-term wedge pattern, which could spell trouble for equities if it can’t recover from these levels. (-)


  • About half of the sectors in our Sector Summary closed in the red over the past 5 trading days, with the 2 strongest performers being Utilities (XLU) and Consumer Discretionary (XLY), a fairly mixed read. (=)
  • Market internals according to the McClellan Oscillator have returned to neutral readings for both the S&P500 and Nasdaq Composite after briefly slipping into slightly negative territory. (=)
  • The New High / New Low ratio is beginning to gradually roll over for both the S&P500 and Nasdaq Composite. (=)
  • The short-term vs. mid-term Volatility Ratio (VIX/VXV) continued to break lower this week but recovered a bit thanks to Friday’s rally. (=)
  • Both Small Caps (IWM) and Mid Caps (MDY) recovered and closed above their 10-day moving averages by the end of the week, while Large Caps (DIA) closed below its own short-term moving average and is sitting right at support of the 50-day moving average. (=)
  • Soft Commodities (DBA) continue to trend higher on a longer-term basis and have managed to stay above the 50-day moving average for the past week, while Copper (COPX) continues to consolidate between its 50-day and 200-day moving averages. (=)
  • Gold (GLD) continues to selloff but may have found a bit of support for the time being as it has finally recovered back above its short-term moving average, while Oil (USO) has now retaken its own 50-day moving average for the first time in over a month. (=)

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