Recent pullback notwithstanding, the market has seen eye-popping gains since the pandemic lows a little more than a year ago, with the Dow up 91%, the S&P up 93%, the Nasdaq up 112%, and the small-cap Russell 2000 up 144%.
So, naturally, some have begun to worry if the market has run up too far and too fast.
Fair concern. But let’s put the run-up into perspective.
Prior to the pandemic, the U.S. economy was considered one of the strongest of our lifetime with 50-year low unemployment, 20-year high in household income, near record high consumer confidence, and record high corporate profits.
Then the coronavirus hit, and the world went into lockdown mode, sending the global economy into recession. (Although, it really should’ve been called an economic ‘suppression,’ as the forced restrictions on travel and forced closures of businesses is what tanked the economy.)
But because the U.S. economy was so strong going into the pandemic, we’ve been able to strongly spring out of it.
It’s been a record-setting move.
But if we look at the gains from the pre-pandemic highs in 2020, gone are the 100% moves. Instead, we have the Dow up 18%, the S&P up 25%, the Nasdaq up 44%, and the Russell 2000 up 38%.
Solid gains for sure. But the ‘too far, too fast’ concern disappears.
And quite frankly, with the growth forecasts ahead of us, stocks look like they have only just begun to move.
More . . .
------------------------------------------------------------------------------------------------------
Get Your Free Copy of Finding #1 Stocks – A $49.95 Value
One single idea changed Kevin Matras’ life as an investor, enabling him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin reveals his top stock-picking secrets and strategies based on this powerful idea. Now you can claim a free copy of the 300-page hardcover book.
Over the past five years (2016 through 2020), while the market climbed an impressive +103.9%, these strategies actually produced gains up to +130.5%, +381.1%, and even +580.6%.¹
You can take full advantage of them without attending a single class or seminar- in a lot less time than you think. Opportunity ends Saturday, May 22.
Get your free book now >>
------------------------------------------------------------------------------------------------------
Economic Boom
Full-year GDP forecasts were just raised to 6.5%, which would make it the fastest growth rate in 36 years.
Fed Chairman, Jerome Powell, in a recent interview said, “what we’re seeing now is really an economy that seems to be at an inflection point.” And that, “we feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming in much more quickly.”
Economic report after economic report continues to show an economy on the mend.
And as more of the U.S. economy reopens, and more people get vaccinated, the gains are expected to grow even more.
What About Inflation?
In the last few weeks, there’s been renewed talk of rising inflation.
And some have begun to worry that if inflation gets too hot, the Fed might have to raise interest rates sooner rather than later.
But let’s remember that some inflation is good. And this is something that the Fed is actively trying to stimulate. That’s because inflation has remained stubbornly low for years. And they are on the record as being more concerned over low inflation than high inflation.
The Fed is expecting inflation to tick up later this year. But they expect it to be transitory.
So any talk of runaway inflation is premature at best, if not misguided.
Moreover, inflation, in and of itself, doesn’t tank economies. High interest rates do.
But that’s literally years and years down the road.
Record Low Interest Rates
The Fed has injected trillions of dollars of monetary stimulus into the economy thru their bond buying, various liquidity measures, and record low interest rates.
They have repeatedly pledged to do whatever it takes to support the economy, and get back to full employment.
And in doing so, they have constantly reiterated that they plan to keep interest rates near zero for the foreseeable future – likely thru 2023.
Even when they do begin to raise rates, let’s say in 2024, they are essentially starting from zero. And it should be noted that over the last 50 years, there’s never been a recession (aside from last year’s pandemic-induced plunge), when the Fed Funds rate was under 4%.
And at quarter point moves (even half point moves), it would take years to get to that level.
The Fed’s unprecedented growth supporting measures and low interest rates point to a roaring economy ahead.
Unprecedented Fiscal Stimulus
The unprecedented monetary stimulus has only been outdone by the unprecedented fiscal stimulus.
Roughly $6 trillion in fiscal stimulus funds have already been approved by Congress.
Then add in the proposed $2.25 trillion infrastructure package that’s on the table.
And another $1.8 trillion for the proposed ‘Families Plan,’ that will address domestic issues.
Add all that up, and we’re about to see a record amount of pent-up economic demand meet a record amount of stimulus money. And that’s a recipe for explosive economic growth and stock market gains.
Jamie Dimon, CEO of JP Morgan Chase, is calling for “gangbuster” growth.
In fact, in his annual shareholder letter last month, he said we could be looking at a “Goldilocks moment” for the economy. And he went on to say that, “this boom could easily run into 2023 because all the spending could extend well into 2023.”
Sounds pretty bullish.
More Bullish Indicators
Stocks have been on a tear this year.
Already, the Dow has risen by nearly 14%. The S&P by 13%. The Nasdaq by 9%. And the small-cap Russell 2000 by nearly 20%.
In fact, just last month, more than 95% of the stocks in the S&P have climbed above their 200-day moving average.
It’s a rare occurrence to see that. So rare that it’s only happened three times since 2003. But when it did, the S&P climbed even higher and finished with gains 6 months later and 12 months later.
This shows a broadening rally. And that’s bullish for stocks.
According to Frank Cappelleri, a desk strategist and executive director at Instinet, it “typically has only happened at a beginning stage of a longer-term move.”
Moreover, Keith Lerner, chief market strategist for Trust Advisory Services, notes that 90% of the S&P 500 stocks crossed above their 50-day moving average as well.
He goes on to say that in the last 15 times that has happened, the market was higher in 14 of those 15 times 12 months later. And the average annual gain was more than 16%.
Granted, this usually takes place after a correction. And we’re up quite a bit from the pandemic lows.
But much of that gain was making up for lost ground.
And with forecasts for soaring economic growth ahead, one could make a case that the economic boom is just beginning.
History In The Making
What we’re seeing right now is history in the making.
And historic times typically lead to historic price gains.
So you need to make sure you’re taking full advantage of it.
And not squandering this opportunity with preventable mistakes.
If you ever wished you could have traded the market differently in the historic run-up that we’ve just seen, now is your chance to do that in the next historic run-up that could be upon us.
That means getting into the right stocks, and staying out of the wrong ones.
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 and put you well on your way to beating the market.
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
Now that the economic recovery is in full swing, 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.
With this fun, interactive online program, you can master the Zacks Rank in your own home and at your own pace. You don’t have to attend a single class or seminar.
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 +130.5%, +381.1% and even +580.6% over the past five years (2016 through 2020).¹
The course will also help you create and test your own stock-picking strategies.
Today is the perfect time to get in. I'm giving participants free hardbound copies of my book, Finding #1 Stocks, a $49.95 value. Its 300 pages unfold virtually every trading secret I’ve learned over the last 25 years to beat the market.
Please note: Copies of the book are limited and your opportunity to get one free ends Saturday, May 22, unless we run out of books first. If you're interested, I encourage you to check this out now.
Find out more about Zacks Method for Trading: Home Study Course >>
Thanks and good trading,
Kevin
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 strategies developed by Zacks Investment Research.
Image: Bigstock
Are We At The Beginning Of A Multiyear Boom?
Recent pullback notwithstanding, the market has seen eye-popping gains since the pandemic lows a little more than a year ago, with the Dow up 91%, the S&P up 93%, the Nasdaq up 112%, and the small-cap Russell 2000 up 144%.
So, naturally, some have begun to worry if the market has run up too far and too fast.
Fair concern. But let’s put the run-up into perspective.
Prior to the pandemic, the U.S. economy was considered one of the strongest of our lifetime with 50-year low unemployment, 20-year high in household income, near record high consumer confidence, and record high corporate profits.
Then the coronavirus hit, and the world went into lockdown mode, sending the global economy into recession. (Although, it really should’ve been called an economic ‘suppression,’ as the forced restrictions on travel and forced closures of businesses is what tanked the economy.)
But because the U.S. economy was so strong going into the pandemic, we’ve been able to strongly spring out of it.
It’s been a record-setting move.
But if we look at the gains from the pre-pandemic highs in 2020, gone are the 100% moves. Instead, we have the Dow up 18%, the S&P up 25%, the Nasdaq up 44%, and the Russell 2000 up 38%.
Solid gains for sure. But the ‘too far, too fast’ concern disappears.
And quite frankly, with the growth forecasts ahead of us, stocks look like they have only just begun to move.
More . . .
------------------------------------------------------------------------------------------------------
Get Your Free Copy of Finding #1 Stocks – A $49.95 Value
One single idea changed Kevin Matras’ life as an investor, enabling him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin reveals his top stock-picking secrets and strategies based on this powerful idea. Now you can claim a free copy of the 300-page hardcover book.
Over the past five years (2016 through 2020), while the market climbed an impressive +103.9%, these strategies actually produced gains up to +130.5%, +381.1%, and even +580.6%.¹
You can take full advantage of them without attending a single class or seminar- in a lot less time than you think. Opportunity ends Saturday, May 22.
Get your free book now >>
------------------------------------------------------------------------------------------------------
Economic Boom
Full-year GDP forecasts were just raised to 6.5%, which would make it the fastest growth rate in 36 years.
Fed Chairman, Jerome Powell, in a recent interview said, “what we’re seeing now is really an economy that seems to be at an inflection point.” And that, “we feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming in much more quickly.”
Economic report after economic report continues to show an economy on the mend.
And as more of the U.S. economy reopens, and more people get vaccinated, the gains are expected to grow even more.
What About Inflation?
In the last few weeks, there’s been renewed talk of rising inflation.
And some have begun to worry that if inflation gets too hot, the Fed might have to raise interest rates sooner rather than later.
But let’s remember that some inflation is good. And this is something that the Fed is actively trying to stimulate. That’s because inflation has remained stubbornly low for years. And they are on the record as being more concerned over low inflation than high inflation.
The Fed is expecting inflation to tick up later this year. But they expect it to be transitory.
So any talk of runaway inflation is premature at best, if not misguided.
Moreover, inflation, in and of itself, doesn’t tank economies. High interest rates do.
But that’s literally years and years down the road.
Record Low Interest Rates
The Fed has injected trillions of dollars of monetary stimulus into the economy thru their bond buying, various liquidity measures, and record low interest rates.
They have repeatedly pledged to do whatever it takes to support the economy, and get back to full employment.
And in doing so, they have constantly reiterated that they plan to keep interest rates near zero for the foreseeable future – likely thru 2023.
Even when they do begin to raise rates, let’s say in 2024, they are essentially starting from zero. And it should be noted that over the last 50 years, there’s never been a recession (aside from last year’s pandemic-induced plunge), when the Fed Funds rate was under 4%.
And at quarter point moves (even half point moves), it would take years to get to that level.
The Fed’s unprecedented growth supporting measures and low interest rates point to a roaring economy ahead.
Unprecedented Fiscal Stimulus
The unprecedented monetary stimulus has only been outdone by the unprecedented fiscal stimulus.
Roughly $6 trillion in fiscal stimulus funds have already been approved by Congress.
Then add in the proposed $2.25 trillion infrastructure package that’s on the table.
And another $1.8 trillion for the proposed ‘Families Plan,’ that will address domestic issues.
Add all that up, and we’re about to see a record amount of pent-up economic demand meet a record amount of stimulus money. And that’s a recipe for explosive economic growth and stock market gains.
Jamie Dimon, CEO of JP Morgan Chase, is calling for “gangbuster” growth.
In fact, in his annual shareholder letter last month, he said we could be looking at a “Goldilocks moment” for the economy. And he went on to say that, “this boom could easily run into 2023 because all the spending could extend well into 2023.”
Sounds pretty bullish.
More Bullish Indicators
Stocks have been on a tear this year.
Already, the Dow has risen by nearly 14%. The S&P by 13%. The Nasdaq by 9%. And the small-cap Russell 2000 by nearly 20%.
In fact, just last month, more than 95% of the stocks in the S&P have climbed above their 200-day moving average.
It’s a rare occurrence to see that. So rare that it’s only happened three times since 2003. But when it did, the S&P climbed even higher and finished with gains 6 months later and 12 months later.
This shows a broadening rally. And that’s bullish for stocks.
According to Frank Cappelleri, a desk strategist and executive director at Instinet, it “typically has only happened at a beginning stage of a longer-term move.”
Moreover, Keith Lerner, chief market strategist for Trust Advisory Services, notes that 90% of the S&P 500 stocks crossed above their 50-day moving average as well.
He goes on to say that in the last 15 times that has happened, the market was higher in 14 of those 15 times 12 months later. And the average annual gain was more than 16%.
Granted, this usually takes place after a correction. And we’re up quite a bit from the pandemic lows.
But much of that gain was making up for lost ground.
And with forecasts for soaring economic growth ahead, one could make a case that the economic boom is just beginning.
History In The Making
What we’re seeing right now is history in the making.
And historic times typically lead to historic price gains.
So you need to make sure you’re taking full advantage of it.
And not squandering this opportunity with preventable mistakes.
If you ever wished you could have traded the market differently in the historic run-up that we’ve just seen, now is your chance to do that in the next historic run-up that could be upon us.
That means getting into the right stocks, and staying out of the wrong ones.
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 and put you well on your way to beating the market.
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
Now that the economic recovery is in full swing, 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.
With this fun, interactive online program, you can master the Zacks Rank in your own home and at your own pace. You don’t have to attend a single class or seminar.
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 +130.5%, +381.1% and even +580.6% over the past five years (2016 through 2020).¹
The course will also help you create and test your own stock-picking strategies.
Today is the perfect time to get in. I'm giving participants free hardbound copies of my book, Finding #1 Stocks, a $49.95 value. Its 300 pages unfold virtually every trading secret I’ve learned over the last 25 years to beat the market.
Please note: Copies of the book are limited and your opportunity to get one free ends Saturday, May 22, unless we run out of books first. If you're interested, I encourage you to check this out now.
Find out more about Zacks Method for Trading: Home Study Course >>
Thanks and good trading,
Kevin
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 strategies developed by Zacks Investment Research.