Education - Member Q&A

This website offers three (3) user-driven Question & Answer features. One is exclusively focused on questions related to our flagship newsletter product and only for subscribers. The FAQ (Frequently Asked Questions) feature also available in the Education menu is mostly for website use and general customer service questions. But THIS one is for ALL followers -- subscribers or not -- and is focused on investor-driven educational topics.


Our followers ask questions. We differ from many competitors by LISTENING and trying to answer up to every question. Sometimes the answers are better suited for delivery in an existing or future special report, webinar of investing insight topic. Sometimes the questions better fit in one of the other Q&A features. However, when we are asked a question that -- if answered well (which is the only way we do it) -- will be of interest to our followers as a whole, it very well may be posted here as soon as we can. Below find a batch of recently-asked questions and well-developed, all-original answers. Click the question bar to reveal the answer. Click another question bar to close one question and open another. 


What does the recent disappointing retail sales data tell us about the stock & ETF outlook?

With major stock indexes like the S&P 500 and NASDAQ at all-time highs driven by AI-mania (but most stocks still well below their 2021 highs), Wall Street was surprised this week when May retail sales disappointed and April retail sales were revised down.

May retail sales missed expectations with a 2.3% increase, a significant slowdown from the 5.5% increase in December. As shown in the chart below, this level of modest growth is consistent with the levels seen in the early months of the recessions in the early 2000s and 2008-2009.


Retail sales


Even worse, real retail sales, which strips out the “benefit” of the Fed’s inflation, declined -0.9%. Real retail sales growth has been flat to modestly negative since March 2022. Declining real retail sales are typically seen in recessions, as this next chart shows.


Real retail sales


One reason real retail sales are declining is that consumers are tapped out. A key sign of that is credit card delinquency rates among smaller banks are the highest in more than three decades. They are even higher than the default rates seen during the Great Recession and the covid panic, as this chart shows.


Card card deliquency


While declining real retail sales are a concerning sign for the economy that the Fed and Wall Street are ignoring, even more concerning is the damage the Fed’s aggressive rate hikes have done to the housing market, which is very sensitive to interest rates. Mortgage rates have skyrocketed from under 3% in early 2021 to nearly 7% now. As a result, the housing market is frozen, with few consumers able to take out new mortgages at those high interest rates.

The chart below shows pending home sales, which are a leading indicator for housing and the economy, collapsed nearly 8% in April. Pending home sales are now at the lowest levels of the past two decades, lower than during the housing bust of the 2000s and equal to the levels seen when most of the world was locked down during the covid panic. This is amazing.


Pending home sales


For those investors who think the Fed’s rate hikes don’t matter because the S&P 500 is at all-time highs, this chart begs to differ.


Consumer Discretionary Stock Performance Is A Key Warning Sign

The recent performance of Consumer Discretionary stocks is a major warning sign for the economy and overall stock market.

Consumer Staples companies sell essential goods and services to consumers, like food, beverages, toothpaste, etc. Consumer Discretionary companies sell non-essential goods and services to consumers like cars, restaurants, luxury goods, cruises, entertainment, etc.

When consumers have extra income and are optimistic about their personal finances and the economy, they tend to spend more on consumer discretionary items and Consumer Discretionary stocks outperform the market. Conversely, when consumer finances are tight and they are worried about the economy, they tend to spend less on consumer discretionary items and Consumer Discretionary stocks underperform the market. 

As shown in this last chart, the S&P 500 Consumer Discretionary Sector Index has been underperforming the S&P 500 since late 2020, including significant underperformance over the past year (top clip). It has also been underperforming the S&P 500 Consumer Staples Sector Index since the late 2021 stock market peak, including underperformance this year (bottom clip).

Notice how the S&P 500 Consumer Discretionary Sector Index underperformed significantly during the Great Recession bear market of 2008-2009 and then generally outperformed during the subsequent bull market and expansion for over a decade. This is a very important sector to watch and the message it is sending now is very concerning.


Consumer discretionary stocks​​​​​​​


Investment Implications

Real retail sales are declining, credit card delinquencies at smaller banks are at all-time highs and pending home sales are at the weakest levels in decades. 

This is the “strong” economy that Jay “Transitory Inflation” Powell raved about at his recent press conference. That is just more proof the Fed and the bureaucrats who run it either a) have no idea what they are talking about or b) are lying. Either way, they have no credibility and why anyone listens to them is a mystery to us.

But that is exactly what investors have been doing…listening to the Fed and believing that the most aggressive interest rates hikes in four decades and a deeply inverted yield curve won’t lead to a recession for the first time in history. As a result, they have bid stocks up to the highest valuation levels in history.

We continue to believe this will not end well for the Fed or most investors.






FREE WEBINAR ON "FORECASTING THE ECONOMY"

Our latest Members-only webinar is titled “BULL AND BEAR PROFITS STEP 2: FORECASTING THE ECONOMY". This is the second of four webinars where we discuss in detail our four key steps for profiting in bull and bear markets. This webinar focuses on the most important leading economic indicators for predicting the boom and bust business cycle.

Understanding how to forecast the economy, which even the Fed and most professional investors do not know how to do, will be incredibly powerful in helping you build conviction to prepare for and profit from bull and bear trends in all assets. It is on the “BULL & BEAR WEBINARS” page here: https://bullandbearprofits.com/Education/Bull-and-Bear-Webinars.aspx

How can there be a recession with incomes growing?

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What is the Duncan Leading Indicator telling us about the economic outlook?

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Why did The Conference Board rescind their recession forecast?

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What is Warren Buffett telling stock and ETF investors with his large cash hoard?

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What does the latest GDP and inflation data mean for stocks and ETFs?

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What are your thoughts on the recent undercover interview with a Fed economist?

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What does the latest inflation report mean for Fed policy and markets?

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How can there be a recession with the unemployment rate so low?

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Is the Fed inflating the market because it’s an election year?

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Why are small cap stocks lagging large cap stocks?

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How can you see a recession coming, while the Fed and others are so bullish?

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What do you think about the latest US Leading Economic Index report?

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What are the risks of buying the Magnificent Seven stocks?

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Are there any signs that inflation will reaccelerate and the Fed won’t cut rates?

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How can there be a recession with low initial unemployment claims?

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What are key signs of a possible trend change for the stock market?

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What is the risk inflation re-accelerates in 2024?

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Do you expect the stock market to generate 10%+ long-term returns?

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Why isn’t the Fed expecting a recession?

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What are some important recession signs Wall Street is ignoring now?

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How can there be a recession when the consumer is so strong?

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What do the latest employment indicators tell us about the economic outlook?

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What is the current outlook for the housing market?

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Is Bitcoin going to the moon?

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Are the “magnificent seven” tech stocks a safe place to hide going forward?

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Does the latest strong jobs report prove a “soft landing” is coming?

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How long and severe do you expect this recession to be?

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How can there be a recession with employment still growing?

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Given the current seemingly mixed signals in the markets, what should a prudent investor should do?

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What is the best stock index to monitor for bull and bear trends?

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What do current stock market valuation levels imply for future returns?

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What will the likely impact be from the US credit rating downgrade?

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What are the implications of the latest Fed rate hike and inflation data?

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What are key economic metrics telling us now about a recession?

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What are the investment implications of the latest employment report?

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What is the outlook for Fed rate hikes going forward?

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What are the implications of the latest CPI report for the stock market outlook?

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Why is China lending so aggressively to developing countries and what is the likely outcome?

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What are the most important recession indicators to focus on now?

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Can NVIDIA and AI prevent a bear market?

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What does the latest retail sales report tell us about the economy?

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What does the latest jobs report say about the employment outlook?

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Why is money supply growth important and what is it telling us now?

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Who will likely suffer most from the current banking crisis?

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What is the likely success of BRICS countries to replace the dollar and what are the implications for the US?

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Since balance sheets are healthier than before the Great Recession, won’t this recession be mild?

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Will the banking crisis cause the Fed to “pivot” and cut interest rates?

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What do you make of Fed Chair Powell’s recent comments?

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What are the implications of the recent stock market selloff?

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What are the economic and investment implications of the latest inflation data?

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Do you expect a global recession, as well as a US recession?

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Is this stock market rally the beginning of a new bull market?

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How are investment opportunities different between bull and bear markets?

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What are the implications of the December employment report?

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What is the current outlook for US home prices?

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What are some low-risk investment alternatives with a decent return?

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What do you think of the market’s reaction to Powell’s recent comments?

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Are there any signs a US recession has ALREADY started?

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What is the best indicator for anticipating and trading bear market rallies?

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When do you expect the Fed to “pivot” and cut interest rates?

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Vanguard will only allow me to profit from bear markets by trading options. Suggestions? Can you manage my money?

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Is it a good time to invest in real estate if higher inflation and interest rates cause a higher demand for renting?

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Given OPEC’s recent oil production cut, do you still believe oil markets have more bear market downside to come?

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What do you think about buying Palantir Technologies (PLTR) stock right now?

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What do ETF investors need to know about K-1 tax forms?

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What caused the current high inflation and what did the Fed do wrong?

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What does the European energy crisis mean for investors?

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What do you think about investing in Gold Mining stocks now?

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Do you think Bitcoin is likely to fall to new lows?

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What is Quantitative Tightening and how will it impact financial markets?

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What are the best and worst stock sectors in a bear market?

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How have your forecasts worked out over the past year? (Part 2)

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How have your forecasts worked out over the past year? (Part 1)

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How can you use volume as a technical indicator for investing?

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What problems are caused when banks create money out of thin air?

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Are dividend growth funds a good long-term investment at the moment?

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What do you think of Yellen’s comments that we will not have a recession?

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Do stocks always outperform T-bills and inflation in the long run?

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Are inverse ETFs worth considering as investment vehicles?

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Any thoughts on Bernanke’s recent inflation and recession comments?

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Is Bitcoin or gold a better inflation hedge now?

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Does the negative GDP report mean we’re already in a recession?

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Will the next bear market be one big disaster or a series of crises? And what will the Fed do about it?

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Is the Fed really trying to crash the housing, bond and stock markets?

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Given inflation and bear market risks and opportunities, how can those of us with 401k retirement accounts invest, given our limited alternatives?

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What is different between now and the 2020 stock market crash?

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In your “Stocks & Commodities” article, there were 4 times since 2009 that met your “sell short” criteria but were not major bear markets. Thoughts?

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Inverse ETFs providers say the holding period should be no longer than a single day. How long do you hold these?

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What are credit markets telling us now about stocks and ETFs?

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What impact will the Russia/Ukraine war have and is the stock market correction over?

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How are major ETF asset classes looking on your Trend and Trade analysis?

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What does the latest inflation report mean for interest rates and the economy?

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Is the stock market rally over?

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What do your measures of stock market sentiment and internals tell us about the outlook for stocks and ETFs?

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What are technical trend lines telling us now about stocks and ETFs?

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Is it better to invest in Growth or Value stocks now?

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What is the best indicator to determine if a stock or ETF is “overbought” or “oversold”?

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What can the “Santa Claus rally” and “January Barometer” tell us about the outlook for the stock market in 2022?

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How will the latest Fed announcement to fight inflation impact stocks and ETFs?

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What is the VIX, why is it important and what is it telling us now?

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How will new Covid variants impact the economy and stock market?

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What do you think about investing in TIPS versus traditional Treasury bond ETFs given high inflation?

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What are the implications of high inflation for stocks, ETFs and the economy?

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Are we in another housing bubble?

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Why is EPS growth so important in stock investing?

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What can stock and ETF investors learn from the fact that Japan’s stock market is still well below its highs of 30+ years ago?

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Do you think the economy is heading towards “stagflation”?

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Your MarketWatch.com interview seemed very bearish. Are there any stocks or ETFs you recommend buying right now?

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Shouldn’t stock and ETF investors focus on current money supply growth, since it drives the economy and stock market?

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Why shouldn't investors just follow the simple Wall Street rule of “don’t fight the Fed”?

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How can you make money — instead of lose money — in a major bear market with ETFs?

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How important is stock market seasonality for stock and ETF investors, particularly in September and October?

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How concerned should stock and ETF investors be about margin debt levels?

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Are US Treasury Bond ETFs safe long-term investments?

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What are the key characteristics of winning stocks?

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What are the best and worst trending stock sector ETFs right now?

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What is the likelihood the next bear market and recession will be even worse than the Great Recession of 2008-2009?

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What impact will the US government’s stimulus package have on the economy and stocks?

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I've never invested before in my life. How do I start?

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How do you place a GTC and T-Stop order?

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What is wrong with a “buy and hold” or “asset allocation” investment strategy?

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Why is it so important to keep investment costs low on stocks and ETFs and how can that be done?

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What is the best way to invest to retire early?

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What are the best ways for investors to profit from stock bear markets, such as the 2008-2009 Global Financial Crisis?

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What are the historical long-term returns of stocks, bonds, bills, REITs, housing, gold, commodities and inflation?

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How can technical analysis be helpful to profit from bull and bear markets in stocks and ETFs?

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What is the primary cause of bull and bear markets in stocks and ETFs?

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How do you use economic indicators to determine the outlook for the economy, stocks and ETFs?

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How can you estimate the long-term returns of stocks, bonds, REITs and other financial assets?

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A CALL FOR MORE QUESTIONS

If you have a good question likely to be of interest to Bull And Bear Profits followers as a group, first check to see if the topic might be covered in any of the other educational features. If not or if you are unsure, don't be shy about scrolling back up to the top right of this page and clicking the orange "Ask a Question" button to submit a new one.


We try to cover EVERY single topic asked ASAP as long as it likely to be or broad interest to our followers as a group. As a publisher and not an investing advisor, we are not allowed to offer individualized advice specific to any one person. 


This Member Q&A feature is focused on investor education. We also have a separate Frequently Asked Questions section for customer service and website usage questions. Special Reports, Webinars and regularly-posted, Investing Insights are all places where many questions are covered in depth. And our own Stock & ETF Education Course covers rich information for less-to-moderately-experienced investors and traders too.


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