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Please enjoy this updated version of weekly commentary from the Reitmeister Total Return newsletter. Steve Reitmeister is the CEO of StockNews.com and Editor of the Reitmeister Total Return.
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It been roughly 40 years since investors have been faced with high inflation as the cause of a recession and bear market. And yet we have been dealt 5 bear markets since that time.
The point being that the majority of today’s investors have either never seen inflation cause a recession… or it is so far back in the memory banks that they don’t know how to properly react to the information in hand.
This begs us to get back to KISS investing.
Instead of what it usually means: Keep It Simple Stupid
In 2023 we will go with: Keep Inflation Separate Stupid
The reason for this pearl of investing wisdom will be fully illuminated in this week’s Reitmeister Total Return commentary.
Market Commentary
There have been quite a few joyous bear market rallies this past year based on the notion that inflation was cooling…which would mean the Fed would pivot to more dovish policies soon… which eventually fell apart when the Fed dumped cold water on the situation.
I sense the same set up is taking place now coming into their February 1st rate hike decision and announcement. And that is why I continue to be bearish even as the S&P 500 (SPY) is flirting with a breakout above the long term trend like (aka 200 day moving average) @ 3,978.
Yes, one could say that we have closed above for 2 straight sessions. Yet hard to call it a breakout when the psychologically important 4,000 level looms large overhead. Until we break above that key hurdle, then the bears are still in control.
Back to the KISS theme: Keep Inflation Separate Stupid
Bulls continue to not appreciate the seriousness of the Feds higher rate mantra about “a long time”. I sense that message will be shouted again from the rooftops at their next meeting on February 1st leading to another stock sell off.
To be clear, there is a softening of inflation. No two ways about it. However, sticky inflation in wages and housing will have the Fed maintaining their restrictive policies a while longer only increasing the odds we descend into recession in the first half of the year.
And over the past couple weeks several Fed officials were quoted repeating this higher rates for “a long time” mantra. That includes Chairman Powell. So the idea that only a couple weeks later on February 1st they would say the long time is now over is borderline insane.
Thus, when that message does come through loud and clear in a couple weeks, we will likely see a retreat from recent highs just like we did in mid August and early December. This is why I remain quite bearish.
However, that is truly missing the main point of today’s commentary which we will pivot to now. That being a focus on inflation is completing missing the much more important signals coming from the economy.
That indeed we have an economy teetering on recession. And that should hold MUCH GREATER sway in investor decision making than the state of inflation.
You have heard me write enough on the worsening economic outlook to induce carpel tunnel syndrome. So today I am going to lean one of the industry’s heavyweights to help explain why the market outlook is not just about inflation. And why it should be separated from the bigger recession question that is usually at the forefront of the bull/bear debate… and in time will likely return to the center when investors realize their focus on inflation was misguided.
I have often quoted from John Mauldin in the past because he does such a great job of breaking down “wonky” economic concepts to make it understandable. He was at his level best once again this week with his article: The Punchbowl is Gone.
The title is mean to say that the good times afforded the economy by easy money policies are now gone. And thus the road is tougher from here for the Fed, corporations and yes, investors.
In this article he shares a lot of thoughts he rounded up from other leading investment thinkers. So now I am going to share the best of that article to help round out our understanding of the road ahead of us (spoiler alert: still quite bearish).
“…bond market wizard Jeff Gundlach placing this year’s recession odds at 75%. That seemed low to me…”
Samuel Rines of CORBU adds; “No one wants to say, ‘a recession is fine.’ But the FOMC is highly implying it.”
“Could worse conditions still be coming? Sure. Fed policy changes have lagging effects. But from the FOMC’s perspective, the current strategy seems to be producing the desired benefit (lower inflation) without undesirable consequences (unacceptably high unemployment or credit markets crashing). This gives them room to continue.”
David Rosenberg sees a 100% chance of recession this year for the following reasons: “The seeds for the 2023 recession were sown a while ago by the relentless decline in the Conference Board’s leading economic indicator, which has now fallen for nine consecutive months. The data go back to 1959 and I can tell you that at no time in the past have we seen a string of weakness like this, with a 5.6% annualized contraction over such a timeframe, that failed to presage a recession within a quarter or two. Call it nine for nine back to fifty-nine. The recession is staring us in the face (and if it is so ‘priced-in,’ why is the consensus calling for positive EPS growth for next year?).”
Tuesday provides yet more proof of the deteriorating economy with The NY Empire State Manufacturing report plummeting to -32.9. The lowest level since May 2020 when Covid was ravaging the economy. This and Chicago PMI are considered the most influential of the regional manufacturing reports and both are showing ill health.
So yes, bulls started 2023 in charge thanks to a combination of new year optimism plus signs of moderating inflation. And yes, they may keep the reigns a little longer with FOMO creeping higher.
Let’s sum it up.
To join the bull party now as recessionary odds are on the rise seems quite unwise. And the same could be said for getting bullish on the hopes of a Fed pivot on February 1st. This seems downright fanciful given the facts in hand.
This is why I remain bearish at this time. I even added a 3X inverse ETF to my portfolio the end of last week as stocks were bumping up against resistance.
Down makes more sense than up. Trade accordingly.
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Wishing you a world of investment success!
Steve Reitmeister… but everyone calls me Reity (pronounced “Righty”)CEO, StockNews.com & Editor, Reitmeister Total Return

About the Author
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.

Last week, crypto enthusiasts got a boost when the crypto market cap almost reached the mark of $1 trillion, the highest level since last November.
That very month, I shared with you the bullish signal in the Bitcoin chart I spotted then. It was a Bullish Divergence on the weekly chart of the main coin.
Below is the distribution of your opinions on that bullish alert.

The “I am Bearish” option had gathered the most votes. The second largest bet was to see Bitcoin bounce back towards its prior consolidation area at $30-$35k. The price of digital gold was $16.5k at that time.
Before we check what happened to the price of Bitcoin since then, let us review the major crypto market.  
Source: coinmarketcap.com
These are the five largest cryptocurrencies in the table above. Top coins are monumental at #1 Bitcoin with gain of 26% year-to-date (YTD) and #2 Ethereum with profit of 30% YTD. Binance’s native coin BNB has attained #3 spot (+28% YTD) long ago, surpassing the Ripple, which is now only #4 with gain of 20% YTD. Cardano closes the ranking at #5 with the largest gain of 47% YTD.
Source: TradingView
The chart of dominance has barely changed since November, with the main coin (orange) peaking up from a valley of 40% to 43%. Ethereum (black) keeps a stable share of 20% in the middle of its own range. BNB coin (green) dominance share has peaked at 6% and is cooling down now to 5%. This is about to enter the Ethereum area that starts at 7%. Ripple (purple) has been stuck around 2% for a long time. Cardano (blue) saw its maximum in the summer of 2021 at 4% and now is trying to push off the bottom of 1%.       Now let me show you the updated weekly chart of Bitcoin.
Source: TradingView
This is that very chart posted in November.
Firstly, let us quickly check the main alert that came from RSI in the sub-chart. Indeed, the Bullish Divergence has been playing out as projected.
The price finally established a higher low at $16.2k last December and a higher peak at $21.2k last week. The RSI indicator is crossing the 50-point line now and entering a bullish zone.
The price is moving north overcoming the largest volume profile barrier (orange) at $20k. The previous peak of $21.5k is within reach now. The next hurdle is the 52-week moving average (purple) which stands at around $27k.
The $30-$35k blue box area will be the next target for bulls. Price reaction in this zone will provide clues to the direction of a future move.      
Is ‘crypto spring’ finally coming after a long suffering ‘crypto winter’?
On hearing the news that the notorious FTX exchange has recovered over $5 billion, the crypto market exploded. It is too early to judge if this is the global reversal or just a ‘dead cat bounce’.
Despite mixed market sentiment, the bullish impulse should not fade until it touches the moving average around $27k to convince the trading community.
To attract more buyers, the price should show a strong rally followed by a minor correction to let FOMO buyers in. The $20k area would act as strong support when the price climbs high enough.                   
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Intelligent trades!
Aibek BurabayevINO.com Contributor
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Like the best-performing Exchange Traded Funds of 2022, the worst-performing ETFs of the year were all leveraged.
It is no surprise that leveraged ETFs would be the best and worst-performing ETFs each year. But, interestingly, three of the top first worst performing ETFs were leveraged funds that are bullish big technology stocks, and the other two were ETFs that are short oil & gas companies.
2022 was a year we saw many divergences occur compared to the past almost ten years.
The technology-heavy index, the NASDAQ, was the worst-performing major index, while the slow and sleepy Dow Jones Industrial Average, while still down, was the best performer. The Dow Jones Industrial Average fell 8.8% as the S&P 500 dropped 19.4%, and the NASDAQ sank 33.1%.
Let’s look at which ETFs finished in the top five worst performers of 2022.

The worst performing Exchange Traded Fund of 2022 was the ProShares UltraShort Bloomberg Natural Gas ETF (KOLD) which ended the year down 88.62%. KOLD provides two times short exposure to an index that tracks natural gas by holding second-month futures contracts.
In 2022 the price of natural gas went through the roof as Russia invaded Ukraine. That invasion led to almost all of Europe imposing a ban on Russian oil and gas, which led to price increases for any other country that also banned the importation of Russian oil and gas.
While KOLD was the worst-performing ETF, the ProShares UltraShort Oil & Gas ETF (DUG) was the fourth worst ETF of 2022 after dropping 72.99%. DUG offers investors two times short exposure to a market-cap-weighted index of large US oil and gas companies.
Since Russia is one of the largest oil and gas producers in the world, the bans on buying their products sent the price of both oil and gas higher in 2022. Thus oil and gas companies based in the United States benefited, and DUG rose substantially.
But, most experts claim the Russian-Ukranie conflict was not the only reason we saw oil and gas prices climb. Some of the increase was likely due to increased demand as most of the world came out of Covid-19 restrictions, and more people felt comfortable traveling.
Regardless, oil and gas companies were one shining spot in 2022, and those who owned DUG did not do well.
DUG’s counterpart, the ProShares Ultra Oil & Gas ETF (DIG), which provides two times long exposure to the same large-cap US oil and gas companies that DUG shorts, was one of the best-performing ETFs of 2022. DIG increased by 123.99% in 2022, making it the second-best-performing ETF for the year.
The second worst-performing ETF of 2022 was the ProShares UltraPro QQQ ETF (TQQQ). TQQQ is a three times leveraged long ETF that provides exposure to a market-cap-weighted index that tracks the 100 largest non-financial companies which are listed on the NASDAQ. TQQQ lost 79.08% last year.
One of the best-performing ETFs of 2022 was the opposite of TQQQ, the ProShares UltraPro Short QQQ ETF (SQQQ), which shorts the same portfolio of companies with three times leveraged. SQQQ ended 2022 up 82.36%, making it the fourth best-performing ETF for the year.
Coming in as the third worst-performing ETF in 2022 was the ProShares Ultra NASDAQ Cloud Computing ETF (SKYU). SKYU is a two-times leveraged long ETF that offers exposure to an equally-weighted index of US companies that operate in the cloud computing industry.
The fund ended in 2022 down 75.95% as the whole technology industry got sold off as interest rates rose and valuations came back to reality.
The ProShares Ultra Semiconductors ETF (USD) was the fifth worst-performing ETF, which dropped 68.56%. USD offers two times long exposure to a market-cap-weighted index that tracks large US semiconductor companies.
Similar to SKYU, USD is a very industry-specific focused ETF that was sent lower due to interest rates, valuation reductions, and the industry’s history of struggling during recessions.

With many market participants expecting a mild recession in 2023, investors sold off stocks that typically don’t perform well in a slowing or negative economy.
Remember, past performance is not a sign of future performance. So don’t base any investment decisions on what performed well or poorly in the past.
Have a game plan and a thesis based on facts and data about why something should move higher or lower in the future.
Hopefully, you only owned the ETF winners of 2022 and not the losers. Regardless, best of luck and happy investing in 2023.
Matt ThalmanINO.com ContributorFollow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

We’ve seen a better start to the year for the major market averages, with the S&P 500 (SPY) up over 3% year-to-date and the Nasdaq Composite enjoying an even more impressive 4.5% return.
While some of these gains could be whittled away if we see a disappointing CPI report with higher-than-expected inflation, this is certainly a welcome departure from last year’s mess, with both indexes down over 20% for the first time since 2008.
Unfortunately, not all stocks have participated, and one sector that continues to remain in the doghouse from a sentiment standpoint is the Retail Sector.
Within the sector, the restaurant group has outperformed on hopes of peak inflation and improving demand (lower gas prices), but other retail brands like Chico’s FAS (CHS), with the stock being one of the worst performers year-to-date.

While this is partially attributed to the company’s softer holiday sales numbers, the sell-off is starting to look overdone, and a lot looks priced in here, with the stock trading at a mid-single-digit PE ratio.
Meanwhile, within the restaurant space, Wingstop (WING) may be an outperformer but it is positioned to continue its outperformance with aggressive unit growth and deflation in its core commodity (bone-in chicken wings).
This allowed it to price less aggressively than peers and capture market share despite a challenging backdrop where traffic growth has been elusive, especially while gas prices are hovering above $4.00/gallon.
Let’s take a closer look at both names below:
Wingstop (WING)
Wingstop (WING) began as a small buffalo-style chicken wing restaurant in Texas and has since grown to 1,800+ restaurants, with more than 95% of its system being franchised.
Since going public, the company has outperformed nearly all other restaurant stocks with a 640% return in just seven years.
This move is largely justified by the stock posting a ~20% compound annual EPS growth rate and consistently growing its restaurant base at a double-digit pace.
However, the company is still growing and innovating, releasing a new chicken sandwich this year, maintaining an industry-leading digital sales mix (62%), and entering new markets.
In the company’s most recent quarterly report, Wingstop posted sales of $92.7 million (+41% year-over-year), and quarterly earnings per share [EPS] of $0.45, tying its previous record.
The strong sales performance has positioned Wingstoop to report annual EPS of $1.67 this year, a 23% increase during a year when many companies have struggled just to maintain earnings.
This divergence is related to benefiting from bone-in-wing deflation, which lifted margins in the period and gave the company the flexibility to price below the industry average.
The ability to price conservatively and still maintain strong margins is a huge benefit, given that most brands have no choice but to raise prices, which has impacted demand.
Understandably, many investors might see the stock as fully valued at ~75x FY2023 earnings estimates ($2.00).
However, WING has consistently grown annual EPS at 20% per year; its execution has been near flawless, and in a recessionary environment, I would expect the rare growth stories out there to command a premium multiple.
That said, although I believe that Wingstop could hit new all-time highs above $185.00 per share this year and I continue to like the long-term growth story (4,000+ restaurants globally), I believe the ideal area to buy the stock is closer to its 200-day moving average ($130.00), so I will be watching this area to start a new position.
Chico’s FAS (CHS)
Chico’s FAS (CHS) is a $580 million company in the Retail-Apparel industry group with a portfolio of three brands: Chico’s, White House Black Market [WHBM], and Soma, with the latter being its intimate segment.
The stock has seen a significant fall from grace over the past several years, with its share price falling 80% from a high of $17.00 in 2012.
However, things appear to be finally turning around. This turnaround has been helped by a complete revamp of the management team, focusing on growing its digital sales (up ~1000 basis points vs. 2020 levels), and right-sizing its store fleet, closing under-performing stores with 18 permanent net closures on a year-over-year basis as of Q3 2022.
Unfortunately, while key operating metrics and its financial results are trending in the right direction (2021 marked its best gross margins since 2017), the stock has come under pressure due to worries about consumer spending in more discretionary categories.
This was exacerbated by the company’s Q4 sales coming in a little softer than expected, with the most recent update suggesting sales would come in at $510 million at the mid-point vs. a previous outlook of $454 million.
The result is that the stock is one of the worst performers year-to-date in the Retail Sector (XRT), and FY2022 annual EPS estimates of $0.88 look too ambitious.

That said, while FY2022 annual EPS estimates could come in lower than expected, Chico’s FAS is still on track to see a 100% increase in annual EPS year-over-year ($0.84 vs. $0.40), and based on these earnings, the company is trading at just ~5.5x FY2022 earnings estimates.
This is a dirt-cheap valuation for a company that expects to grow annual EPS again next year, with its Soma segment continuing to thrive and ongoing work to increase market share in its other two brands.
So, while holiday sales were a little lighter than hoped, I see Chico’s FAS as a Buy below $4.45, with it sitting at just ~4.8x FY2023 earnings estimates ($0.93).
While several of the best deals are gone, with many sectors beginning to rebound after a rough 2022, Chico’s FAS is one example of a turnaround story at a very attractive price, and Wingstop is an example of a growth story that should continue to thrive given its exceptional execution.
That said, I prefer to buy on pullbacks when the S&P 500 is trading in a cyclical bear market, so I see the ideal buy points for both stocks being $4.45 and $130.00, respectively.
Taylor DartINO.com Contributor
Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing.