We spent the last few weeks contemplating what it means for the S&P 500 (SPY - Get Rating) to break below the 200 day moving average.

The good news is that it rarely becomes a bear market.

The bad news is that when it DOES become a bear its because we spent too much time below the 200 day.

What does that all mean given current market conditions?

That will be the focus of today’s Reitmeister Total Return commentary.

Market Outlook

Here is the chart I shared a few weeks back to appreciate what usually happens after a break below the 200 day moving average like we had in early March.

As shared in the intro, it rarely devolves into a bear market. Only 2 out of the last 15 times.

BUT 5 out of 15 times we endured steep sell offs that proved wise to get more defensive.

The key was for stocks to break back above the 200 day within 12’ish. Gladly that did happen with 2 straight closes above on 3/24 and 3/25.

Since then stocks have fallen back under this key level as you will see in the updated chart below:

(Yellow = 50 Day Moving Average @ 5,886 / Orange = 100 Day MA @ 5,928 / Red = 200 Day MA @ 5,763)

The break back above the 200 day…and then faltering back down below since last Wednesday has us in unchartered territory. Meaning that the table at the top does not have that type of event recorded, and thus uncertain what that means for the future.

“Uncertain” was the phrase that pays from the 3/19 Fed statement as shared in my previous commentary.

Recent Trump administration plans for tariffs have been anything BUT certain…and thus the outlook for inflation…economy…stock market remains, you guessed it, uncertain.

Goldmans Sachs recently lowered their GDP view for this year to +1.7% and with that lowered their year end target for the S&P 500 to 6,200. However, they had their own silver lining in sharing this chart with subsequent commentary:

“Outside of a recession, history shows that S&P 500 drawdowns are usually good buying opportunities if the economy and earnings continue to grow,” Kostin writes. Our economists forecast US GDP growth of 1.7% in 2025. 

During the last 40 years, an investor buying the S&P 500 after it declined 10% from its high would have enjoyed a positive return in the subsequent six months some 76% of the time.”  The above gives one hope AS LONG AS we don’t fall into recession. That provides a good segue to the most recent update of the GDPNow model which tumbled again after Tuesday’s ISM Manufacturing and Construction Spending reports as it declined from a really bad -2.8% to a horrifying -3.7%.

Here is the one silver lining in this news. (maybe it should be called a “gold lining”). The Atlanta Fed has created a new model starting this March that removes the large swings that come from the import/export of gold. When you remove that it shows a more palatable -1.4% GDP decline.

Negative readings are never welcome. But with no signs of job loss in the air, then the recent lack of spending is likely just being stored up in savings that will be spent in subsequent quarters.

Here is a good way to think about that. Picture a long balloon that a clown uses to create funny shapes. If you squeeze that balloon at one end…the rest of the air just moves to the other side. Same amount of air in total…just distributed unevenly.

So, if Q1 economic growth gets squeezed because of recent uncertainty, it is quite possible that spending will just get shifted out to Q2 and beyond.

Kind of like the negative GDP readings from the first two quarters of 2022 that didn’t devolve into a recession because of the lack of job loss and subsequent rebound in spending and economic growth.

Again, the Fed and Goldman Sachs are in sync with expecting +1.7% GDP growth for the full year of 2025. And yes, this reading includes expected weakness in Q1 that gets rectified down the line.

Once again, I could easily make a bear case for the stock market. On the other hand, there is ample reason to believe that the bull scenario is equally if not more likely.

The key is the evolution of the Trump administrations trade plans and how well it will be received. I don’t have a crystal ball on that one…nor does anyone else. My hope from the beginning was that it will follow the path from the 2018/2019 tariff talks.

Rough at first…positive in the end.

If there is some strong reason to believe in a negative deviation from that path, then we will get more defensive in our investment approach. As in sell more aggressive positions and raise more cash. And the more it looks like a bear…the more likely we start using inverse ETFs to capitalize.

For now, we appreciate that the outlook is mixed, but more likely than not will end in bullish fashion.  And that is why we stay mostly invested in stocks with a modest cash position plus short of TSLA.

What To Do Next?

Check out my portfolio with hand selected picks for the current market environment:

• 8 stocks to buy
• 1 stock to short
• 1 ETF to buy

All the stocks have been selected using the proven outperformance that comes from our POWR Ratings stock selection model which has done 4X better than the S&P 500 since 1999.

Now add in my 44 years of investing experience seeing bull markets…bear markets…and everything between. This helps me pick the right stocks for the current environment.

If you are curious to learn more, and want to see my current 10 recommendations, then please click the link below to get started now.

Steve Reitmeister’s Trading Plan & Top 10 Recommendations >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
Editor, Reitmeister Total Return

SPY shares were trading at $560.97 per share on Tuesday afternoon, up $1.58 (+0.28%). Year-to-date, SPY has declined -4.00%, versus a % 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...

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