Markets rallied into Friday's close following the strong April jobs report as investors increasingly saw a light at the end of the Federal Reserve's tunnel of rate hikes. However, you may want to take the renewed bullishness with a grain of salt.
In this sneak peek from the Action Alerts PLUS investing club, portfolio manager Chris Versace and AAP team member Bob Lang said today's euphoria could quickly become next week's selloff as Wall Street awaits a series of economic data points amid ongoing concerns about the stability of U.S. banks.
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"As much as most people want to believe that the market is turning into a bull phase here, I've never really seen the bull market get started when the Fed is still so hawkish as they are," Lang said.
Watch the video above for Lang and Versace's full take on the Federal Reserve's path forward, technical analysis of the S&P 500, upcoming data releases to watch and much more.
FULL VIDEO TRANSCRIPT BELOW:
CHRIS VERSACE: Now that we've heard from the Fed and seeing this month's Jobs Report. How are you feeling about the market?
BOB LANG: Well, strong jobs report, Chris, that you're going to be talking about a little bit later. But also with the Fed tightening, interest rates for a tenth time since March 17 of 2022 had they brought interest rates up to 5%. And I'll tell you, I've been saying it for quite a long time, as much as most people want to believe that the market is turning into a bull phase here, I've never really seen the bull market get started when the Fed is still so hawkish as they are. And they repeated their mantra this past week, saying higher for longer.
And certainly the data that we've seen this week and the past couple of weeks support that view that interest rates should stay up for a little while longer. Now, as it relates to the stock market, look, what we've been trapped in range for the past four months between 3,800 on the low side, which is where we started in 2023, and 4,200 on the upside, which we tried to break through last week and came down sharply earlier this week. So we'll have to see if one of those levels is penetrated here.
We did reach a pretty overbought reading last week as we closed out April for a positive month, Chris. But for right now, I think we're kind of in a no man's land. You could sell the top and buy the bottom when we want to reach those levels.
CHRIS VERSACE: Yeah, I think that's right, Bob. Like you said, we've been trapped in this trading range for quite a while. And candidly, all the data that we got this week from the PMI reports for manufacturing and services that showed inflation picking up to what we saw in this morning's April jobs report, not only were jobs stronger than expected, wages were stronger than expected, and the unemployment rate clearly ticking the wrong way. I don't think the Fed is going to like this report. But let's remember that the prospects for tighter credit is something that we need to navigate.
As we shared with members, that's the big wild card ahead for monetary policy. And I think that when we get the sleuths report on Monday, we'll start to have a better sense as to what that is looking like. But even there, we have to remember the headlines that we saw over the last several days about the banking industry. Odds are credit will be even tighter than what this report indicates.
