Since the pandemic lows in late March last year, the Dow has surged by more than 71%, the S&P by 75%, the Nasdaq by 102%, and the small-cap Russell 2000 by more than 124%!
It’s been a record-setting move.
But the best part is that it looks like there’s a lot more upside to go.
That was echoed by Goldman Sachs when they forecast the market to hit 4,300 by the end of 2021 (+11.6% from here); and 4,600 by the end of 2022 (that’s another +7.0% on top of that). All in all, that represents a 19.4% increase from where we are today.
And if you get into the right stocks and industries, your gains could be far greater than that.
These are historic times for both the economy and the market.
And if you play it right, you could transform your portfolio.
History In The Making
Q3 GDP just showed a 33.4% growth rate, which was the largest in history.
Q4 GDP is forecast at 7.4%, which, aside from last quarter, would be the highest quarterly growth rate in 20 years.
Full year GDP for 2021 is expected to grow at the fastest pace in 38 years.
We’ve seen record job growth over the last 8 months (even with December’s decline).
Home sales recently hit a 15-year high.
Retail sales have hit an all-time high.
And interest rates, which are near zero, are at all-time lows, and are expected to stay that way for the next 3 years or longer.
With all of these bullish economic records being made, it should come as no surprise that stocks have been setting records as well with all of the major indexes having just recently broken out to new all-time highs of their own.
Continued . . .
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Vaccines Are Here and Stocks Should Skyrocket
As you know, the FDA has already approved two Covid vaccines – one by Pfizer/BioNTech and the other by Moderna.
The UK also approved a vaccine by Oxford/AstraZeneca. And they just applied for FDA approval here in the states. That will make it three.
And with a recent report that shows Johnson & Johnson’s vaccine showing promising results, it should soon be four.
These vaccines mark the beginning of the end of the pandemic.
Let’s also not forget the new therapeutics to treat the virus if you get infected.
All of these breakthroughs are being hailed as the catalysts that will finally let the world get back to normal.
That means, everybody going back to work, going out to eat, traveling, going on vacation, spending money, and just living your life.
Even though social distancing restrictions are still in place, the amount of pent-up economic demand that was unleashed when we came off total lockdown was historic.
But we all know that a large portion of our economy was left behind.
When restaurants, and airlines, and hotels start opening back up to full capacity, not to mention concerts and sporting events, tourism and travel destinations, and every business big and small that benefits from servicing these industries, the economy is expected to grow at unprecedented levels.
And that should send stocks skyrocketing.
But remember, the market is forward-looking. It won’t wait until it happens. It will start moving in anticipation of that.
And that means to the time to act in now.
Stimulus And More Stimulus
At the end of last year, the long-awaited stimulus package was finally passed and signed into law.
That money has already started going out. And that’s important because once that money gets into the hands of the people and businesses that need it, it will be spent immediately, helping to support the economy and jobs.
And that, of course, is good for the market as well.
But it looks like another stimulus bill could soon be on its way as a new $1.9 trillion proposal is expected to be put forth later this month or next.
What we are seeing right now is history in the making.
And that means the potential for historic gains ahead.
So don’t squander this opportunity with preventable mistakes.
If you ever wished you would’ve traded the market differently in the past, now is your chance.
And making money in the market is easier than you think. You only need to do a few things right.
Do What Works
So how do you fully take advantage of this historic opportunity?
By implementing tried and true methods that work to find the best stocks.
For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 26 of the last 32 years with an average annual return of 24.7% per year? That's nearly 2.5 x the S&P. But when doing this year after year, that can add up to a lot more than just two and a half times the returns.
And did you also know that stocks in the top 50% of Zacks Ranked Industries outperform those in the bottom 50% by a factor of 2 to 1? There's a reason why they say that half of a stock's price movement can be attributed to the group that it's in. Because it's true!
Those two things will give any investor a huge probability of success.
But you’re not there yet, as those two items alone will only narrow down a field of 10,000 stocks to the top 100 or so. Way too many to trade at once.
So the next step is to get that list down to the best 5-10 stocks that you can buy.
Proven Profitable Strategies
Picking the best stocks is a lot easier when there’s a proven, profitable method to do it.
And by concentrating on what has proven to work in the past, you’ll have a better idea as to what your probability of success will be now and in the future.
For example, if your strategy did nothing but lose money year after year, trade after trade, over and over again, there’s no way you'd want to use that strategy to pick stocks with. Why? Because it's proven to pick bad stocks.
On the other hand, if your strategy did great year after year, trade after trade, over and over again, you'd of course want to use that strategy to pick stocks with. Why? Because it's proven to pick winning stocks.
Of course, this won't preclude you from ever having another losing trade. But if your stock picking strategy picks winners more often than losers, you can feel confident that your next trade will have a high probability of success.
Here are a few of my favorite strategies that have regularly crushed the market year after year.
New Highs: Studies have shown that stocks making new highs have a tendency of making even higher highs. And this strategy proves it. The alignment of positive price action and strong fundamentals creates all the necessary conditions to see these stocks soar to even greater heights. Over the last 21 years (2000 thru 2020), using a 1-week rebalance, the average annual return has been 45.5% vs. the S&P’s 6.6%, which is nearly 7 x the market.
Small-Cap Growth: Small-caps have historically outperformed the market time and time again. Often these are newer companies in the early part of their growth cycle, which is when they grow the fastest. This strategy combines the aggressive growth of small-caps with our special blend of growth and valuation metrics for explosive returns. Over the last 21 years (2000 thru 2020), using a 1-week rebalance, the average annual return has been 51.2%, beating the market by 7.6 x the returns.
Filtered Zacks Rank 5: This strategy leverages the Zacks Rank #1 Strong Buys, and adds two time-tested filters to narrow the list of stocks down to five high probability picks each week. Over the last 21 years (2000 thru 2020), using a 1-week rebalance, the average annual return has been 51.3%, which is 7.7 x the market.
The best part about these strategies (aside from the returns) is that all of the testing and hard work has already been done. There’s no guesswork involved. Just point and click and start getting into better stocks on your very next trade.
Where to Start
With stocks poised for a historic move, there's a simple way to add a big performance advantage for your stock-picking success. It's called the Zacks Method for Trading: Home Study Course.
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Zacks Method for Trading covers the investment ideas I just shared and guides you to better trading step by step, plus so much more.
You'll quickly see how to get the most out of the proven system that has more than doubled the market for over three decades. Discover what kind of trader you are, how to find stocks with the highest probability of success, and how to trade them so you can consistently beat the market no matter where stock prices are headed.
You’ll get the formulas behind our top-performing strategies suited for a variety of different trading styles.
The best of these strategies produced gains up to +122.2%, +153.0%, and even +156.8% from 2017 through Q2 2020.¹
The course will also help you create and test your own stock-picking strategies.
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Thanks and good trading,
Zacks Executive VP Kevin Matras is responsible for all our trading and investing services. He developed many of our most powerful market-beating strategies and directs the Zacks Method for Trading: Home Study Course.
¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position.