(Please enjoy the latest investment insights from the Reitmeister Total Return portfolio).

Our previous conversations have set the general background that we are now in a bear market til proven otherwise. And the length and depth of that bear market are unknown until we have a better view of the length and depth of the damage created by the Coronavirus.

Meaning the longer it goes on…the more we stay at home…the deeper the economic despair…the greater the stock market downside.

Yes, it is tempting to look for spots here or there for a bounce. But as we keep seeing the bounces are VERY short lived leading to another downpour to new lows. So I am resisting the temptation and just want to continue to rely upon our hedge to do the job.

Indeed it has with gains in all 3 of the past sessions:

+2.88% Monday when market tanked nearly 12%

+1.16% Tuesday which is surprising given it was a big bounce day.

+2.15% Wednesday as the market fell another -5.17%

Yes, I know that many of you are curious about the benefit of all the government/Fed programs being announced on a daily basis. We covered this in my commentary Monday after the close.

“I bet a lot of you are scratching your head as to why the market tanked so hard today after the Fed slashed rates to zero including a new round of quantitative easing valued at $700 billion??? Meaning it seems odd given the typical advice: “Don’t Fight the Fed”.

That’s because this move signals that the Fed believes the world is falling apart. Kind of similar to the actions taken in the wake of the Financial Crisis in 2008. Not that we were unclear about how bad things were beforehand, but it does show us that even the most level headed economists are scared silly.

Plus let’s look at the history of Fed actions at time of crisis and how long it really took to stem the tide of stock market losses. I spent some time Sunday researching the timeline of Fed/Treasury actions in the wake of the financial crisis in 2008. And here is the same for 2009. As you will see it took quite a while to really calm nerves as we didn’t find bottom on the bear market til March 9, 2009. That includes shrugging off the $700 billion bailout packaged announced on October 3, 2008.

And then you have zero interest rates on December 16th & TARP bailout package December 19^th. This did have some temporary benefit for stocks at first. Unfortunately that proved to only be a temporary detour as stocks tumbled another 30% from that little peak to the March valley.

To me it says we need more time for investors to assess the true damage to the economy. And until that is a tad more clear, then downside makes more sense than upside.”

So at this stage you should expect the Government and Fed to throw everything including the kitchen sink at the problem. And that includes bailout packages for airlines and potentially other industries like hotels etc that are most negatively affected.

But EVEN WITH all of these announcements, I don’t think we can find bottom on stock prices til we have a sense of bottom on the virus that allows us to start getting back to something that resembles normal life.

On that front there are nearly 20,000 new cases today across the world as I write the commentary. And 1644 in the USA alone. That is many X worse than the pace of last week. So until we see that daily # peak…it is hard to see a trough in stock prices.

Just a couple more things to share today.

On the economic front there the Coronavirus is slowly showing up in the data that includes events in March.

For example, the Consumer Sentiment on Friday was the first major report to show the negative effects of the coronavirus coming in at 95.9 down from 101. Note that the reading got as low as 89.8 in August in the midst of the China Trade war. So my sense is that this reading will be a whole lot worse the next time it comes around.

Empire State Manufacturing on 3/16 plummeted to -22.5 from +12.9 in February. I expect similar nasty numbers in the Philly Fed reading tomorrow.

Today we got the February Housing Starts numbers. The key number is new permits that would be negatively effected by any late February news on Coronavirus. There we see 1.464 million permits when 1.500 million were expected. Again, I bet that # is a whole lot worse the next time around.

Lastly, let’s consider some interesting price levels that may shows some temporary support:

2346 which is the Q4 2018 correction low. We danced around that # today. Then broke below all the way down to 2282 before surging to 2398 at the finish. I would say we have not seen the last of 2346.

2239 reflects the 34% decline in total which corresponds with the average bear market decline. I am not sure how many other investors will be watching this spot. And thus not sure about much support. I think its just a curious spot for us to keep an eye on.

Yes, at first, I did not appreciate the lengths that society would go to in order to avoid the virus. And thus how devastating that would be to the economy and the stock market.

And yes, I initially thought that the downturn would be brief and fairly shallow versus your average bear market.

I FULLY RETRACT THOSE PREVIOUS STATEMENTS!!!

You probably sensed that change from the tenor of my recent commentary. And certainly I made that view evident in my over the weekend article: Long Bear vs. Short Bear?

So the best way for me to end this week’s market commentary is to reiterate what I said at the beginning:

“Our previous conversations have set the general background that we are now in a bear market til proven otherwise. And the length and depth of that bear market are unknown until we have a better view of the length and depth of the damage created by the Coronavirus.

Meaning the longer it goes on…the more we stay at home…the deeper the economic despair…the greater the stock market downside.”

Portfolio Update

I already shared the day to day triumph of our hedge strategy in the previous section. In total it amounts to a +6.19% gain the last few days while the S&P fell -11.5%.

I’ll be honest, I would have predicted that our hedge would have squeezed out a 1-2% gain in that time. So this is a very pleasant surprise.

Now let’s dig in with some specifics on our individual picks:

(End of Free Preview)

The rest of the commentary with insights on the portfolio of 5 stocks and 3 ETFs is reserved for subscribers to the Reitmeister Total Return portfolio.

These positions have formed an effective hedge allowing subscribers to enjoy gains while the market tumbles lower. It is not too late to get on board this strategy if you have not protected yourself already.

Going forward I will look for spots to emerge from the hedge by buying more and more undervalued stocks for the eventual return to a bull market.

I know its crazy out there. And I am trying my best to help investors make sense and profit from the situation. The best way for me to do that is give you 30 days access to the Reitmeister Total Return.

This is my newsletter service where I share more frequent commentaries on the market outlook, trading strategy, and yes, a portfolio of hand selected stocks and ETFs to produce profits whether we have a bull…a bear…or anywhere in between.

Just click the link below to see 5 stocks and 3 ETFs in the portfolio now, and all the future trades as we find bottom on this bear and the new bull emerges.

30 Day Trial of Reitmeister Total Return

SPY shares fell $1.71 (-0.71%) in premarket trading Thursday. Year-to-date, SPY has declined -25.88%, versus a -25.88% rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...

More Resources for the Stocks in this Article