{"id":22106,"date":"2024-08-27T07:30:20","date_gmt":"2024-08-27T11:30:20","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=22106"},"modified":"2024-08-27T07:30:20","modified_gmt":"2024-08-27T11:30:20","slug":"your-second-chance-to-trim-profits","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/your-second-chance-to-trim-profits\/","title":{"rendered":"Your Second Chance to Trim Profits"},"content":{"rendered":"

Now is your chance to sell.<\/p>\n

Actually… it’s your second chance.<\/p>\n

The market has staged a remarkable recovery. After peaking near 5650 in mid-July, the S&P 500 dropped to below 5200 in early August.<\/p>\n

It was a fast, hard drop. The action scared a lot of investors – and sent the Volatility Index (VIX), Wall Street’s fear gauge, above 65.<\/p>\n

In my video update on August 8<\/a>, I mentioned that traders who missed the chance to sell stocks at all-time-highs in July shouldn’t be too disappointed. They’d likely get a second chance to do so.<\/p>\n

Now is that chance.<\/p>\n

Your Second Chance<\/h2>\n

While the stock market’s recovery has been a lot faster than I expected, it doesn’t change the outlook. At 5640, the S&P 500 is trading at 23 times forward earnings expectations. That’s expensive. It’s at the upper range of its historic valuations.<\/p>\n

“But,” the bulls will argue, “the Fed is shifting to an easy money policy. They’re about to start cutting interest rates. And, that’s bullish for stocks.”<\/p>\n

But is it, really?<\/p>\n

Think about this for a moment…<\/p>\n

On Friday, the Chairman of the Federal Reserve Board, Jerome Powell, gave a speech at the annual summit in Jackson Hole. He made it clear the next direction for rates is lower. And, the market immediately priced in at least a 25 basis point cut in September, and a total of 100 bps by the end of the year.<\/p>\n

Yippee.<\/p>\n

The computers went into “buy mode.” The S&P 500 added even more to the rally it had been on for the previous two weeks. And, the market closed within spitting distance of the all-time-high from July.<\/p>\n

Because, as everyone is saying, lower rates are bullish for stocks.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Remember… History Rhymes<\/h2>\n

Some of us older traders, though, will remember the last Fed rate-cutting cycle – which took the Fed Funds target rate to 0% and kept it there for several years. <\/p>\n

That cycle started with the first rate cut in September 2007. And, the final rally associated with that cut took the stock market to all-time highs.<\/p>\n

Then came 2008 and the Great Financial Crisis – which cut the S&P 500 in half.<\/p>\n

I’m not saying we’re headed towards the same fate this time around. But, I am suggesting that history rhymes.<\/p>\n

And, maybe we shouldn’t get too excited about buying the S&P at 23 times earnings when the Fed typically only lowers interest rates during difficult economic times.<\/p>\n

So… if three weeks ago you were fretting that you didn’t sell some stocks at the all-time highs in July, you now have a second chance to do some trimming. It would be unfortunate to be fretting about the same thing a few weeks from now.<\/p>\n

Best regards and good trading,<\/p>\n

\"Signature\"<\/p>\n

Jeff Clark
\nEditor, Market Minute<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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