Ever since the markets put in their key upside reversal on October 13 (just 6 months ago), stocks have been on a tear with the Dow up 17.9%, the S&P up 15.7%, and the Nasdaq up 18.7%.
Even after last month’s banking scare, the major indexes are near their highs for the year.
What prompted the turnaround back then? And why are stocks poised to move even higher?
Last year, after 3 quarters in a row of falling stock prices, and endless stories of doom and gloom, it appeared as if all the bad news had been priced into the market. And it was now time to go higher.
The recession had ended (after GDP fell in Q1 and Q2 of last year, Q3 was up 3.2% (it’s no longer a recession when the economy starts growing again), and Q4 was looking up as well (we now know it was up 2.6%).
And higher the market went.
The market continued to rally in January. Hit the pause button in February. Pulled back in early March on the Silicon Valley Bank collapse and fear of contagion. But after the Fed came out and said they would backstop all those depositors, and it became clear banks were well capitalized, the market promptly started to head back up and have been climbing higher ever since.
And quite frankly, none of this should have come as any surprise. Because there are plenty of positives in the market. And stocks are reacting accordingly.
The Outlook Is For Growth
The recession of 2022 has come and gone.
And while some continue to speculate that maybe we could see one in late 2023. The market, at the moment, does not seem to think so.
Q1 GDP is expected to come in at 2.2%. And while growth is expected to slow later in the year, virtually nobody is predicting a contraction. Slower growth is still growth. And you can’t have a recession when the economy is expanding.
Moreover, the labor market continues to impress. It has eased a bit from recent reports. But that is a benefit because it also eases inflation concerns.
Simply put, the outlook is for growth.
And that’s bullish for stocks.
Peak Inflation Is Behind Us
Last Wednesday’s Consumer Price Index (CPI), and Thursday’s Producer Price Index (PPI), both confirm that peak inflation is behind us and that it continues to moderate.
The latest CPI report showed headline inflation at 6.0% y/y, while core inflation (ex-food & energy), was at 5.5%. That compares to last month’s 6.4% headline number, and 5.6% core rate.
Moreover, that’s an even bigger decline from last year’s summer highs of 9.1% (headline), and 6.5% (core).
That was further underscored by the latest PPI report, which put the headline number at a sharply reduced 2.7% y/y vs. last month’s 4.6%, and the core rate at 3.4% vs. last month’s 4.4%.
That too is an even bigger decline from last year’s peak inflation rates of 9.8% (headline) and 8.2% (core).
Of course, inflation is still too high.
And the Fed is likely to raise rates another 25 basis points at their next meeting on May 3.
But according to the Fed, that could very well mark the end of their rate hike cycle as that will put the terminal rate at 5.1%, which is in line with their stated projections of such.
Additionally, the Fed also said they expect to cut the Fed Funds rate to 4.1% in 2024, and 3.1% in 2025, as they believe inflation will slow even further. In fact, the latest FOMC minutes noted that “core inflation was forecast to slow sharply next year.”
And that too is bullish for stocks.
More . . .
------------------------------------------------------------------------------------------------------
Saturday Deadline: Claim Your Free Copy of Finding #1 Stocks
One single idea changed Kevin Matras’ life as an investor, allowing him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin explains his top stock-picking secrets and strategies based on this powerful concept.
In 2022…while the market lost -18.2%...these strategies actually produced gains up to +15.6%, +38.9%, and even +39.7%.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, April 15.
Get your free book now >>
------------------------------------------------------------------------------------------------------
Are Stocks Undervalued?
Let’s also not forget that valuations are down.
In fact, the P/E ratio for the S&P is trading at multiyear lows, and below its five-year average.
And that makes stocks a bargain.
Of course, if earnings drift lower, valuations will become higher. But there’s plenty of room for stocks to remain relatively cheap.
And the earnings outlook, like the economy, is still forecasting growth.
In fact, this past earnings season, once again, came in better than expected.
And with a new earnings season upon us, the outlook is for more of the same.
Couple that with the fact that stocks typically go up during earnings season, and that projects more gains to come.
Seasonality Is On The Market’s Side
Also in the market’s favor are the seasonals. And they look great this year.
For one, the 4-year Presidential Cycle shows that year 3 (that’s 2023), is the best year of all 4 years. And historically, it’s amazing to see how favorable this cycle is for investors.
Since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%.
So, we are literally still at the beginning of one of the most bullish periods for the market.
Moreover, history shows a high probability of outsized gains following a down year for the market. The S&P was down by -19.4% last year. It was the first down year since 2018, and the worst down year since 2008, when it closed lower by -38.5%. (For those wondering, 2009 was up 23.5%.)
And there’s plenty of reason to believe we could see something like that again this year.
Do What Works
So how do you fully take advantage of the market right now?
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 29 of the last 35 years (an 82% win ratio) with an average annual return of more than 24% per year? That's more than 2 x the S&P, including 4 bear markets and 4 recessions. And consistently beating the market year after year can add up to a lot more than just two times the returns.
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.
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 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 38.7% vs. the S&P’s 6.2%, which is 6.2 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 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 46.4%, beating the market by 7.4 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 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 49.5%, which is 7.9 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
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 +15.6%, +38.9%, and even +39.7% in 2022 while the S&P 500 lost -18.2%.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, April 15, 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 of 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 individual strategies mentioned herein represent only a portion of the ones covered in the course.
Image: Bigstock
Don't Miss Out On The Next Leg Up In The Market
Ever since the markets put in their key upside reversal on October 13 (just 6 months ago), stocks have been on a tear with the Dow up 17.9%, the S&P up 15.7%, and the Nasdaq up 18.7%.
Even after last month’s banking scare, the major indexes are near their highs for the year.
What prompted the turnaround back then? And why are stocks poised to move even higher?
Last year, after 3 quarters in a row of falling stock prices, and endless stories of doom and gloom, it appeared as if all the bad news had been priced into the market. And it was now time to go higher.
The recession had ended (after GDP fell in Q1 and Q2 of last year, Q3 was up 3.2% (it’s no longer a recession when the economy starts growing again), and Q4 was looking up as well (we now know it was up 2.6%).
And higher the market went.
The market continued to rally in January. Hit the pause button in February. Pulled back in early March on the Silicon Valley Bank collapse and fear of contagion. But after the Fed came out and said they would backstop all those depositors, and it became clear banks were well capitalized, the market promptly started to head back up and have been climbing higher ever since.
And quite frankly, none of this should have come as any surprise. Because there are plenty of positives in the market. And stocks are reacting accordingly.
The Outlook Is For Growth
The recession of 2022 has come and gone.
And while some continue to speculate that maybe we could see one in late 2023. The market, at the moment, does not seem to think so.
Q1 GDP is expected to come in at 2.2%. And while growth is expected to slow later in the year, virtually nobody is predicting a contraction. Slower growth is still growth. And you can’t have a recession when the economy is expanding.
Moreover, the labor market continues to impress. It has eased a bit from recent reports. But that is a benefit because it also eases inflation concerns.
Simply put, the outlook is for growth.
And that’s bullish for stocks.
Peak Inflation Is Behind Us
Last Wednesday’s Consumer Price Index (CPI), and Thursday’s Producer Price Index (PPI), both confirm that peak inflation is behind us and that it continues to moderate.
The latest CPI report showed headline inflation at 6.0% y/y, while core inflation (ex-food & energy), was at 5.5%. That compares to last month’s 6.4% headline number, and 5.6% core rate.
Moreover, that’s an even bigger decline from last year’s summer highs of 9.1% (headline), and 6.5% (core).
That was further underscored by the latest PPI report, which put the headline number at a sharply reduced 2.7% y/y vs. last month’s 4.6%, and the core rate at 3.4% vs. last month’s 4.4%.
That too is an even bigger decline from last year’s peak inflation rates of 9.8% (headline) and 8.2% (core).
Of course, inflation is still too high.
And the Fed is likely to raise rates another 25 basis points at their next meeting on May 3.
But according to the Fed, that could very well mark the end of their rate hike cycle as that will put the terminal rate at 5.1%, which is in line with their stated projections of such.
Additionally, the Fed also said they expect to cut the Fed Funds rate to 4.1% in 2024, and 3.1% in 2025, as they believe inflation will slow even further. In fact, the latest FOMC minutes noted that “core inflation was forecast to slow sharply next year.”
And that too is bullish for stocks.
More . . .
------------------------------------------------------------------------------------------------------
Saturday Deadline: Claim Your Free Copy of Finding #1 Stocks
One single idea changed Kevin Matras’ life as an investor, allowing him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin explains his top stock-picking secrets and strategies based on this powerful concept.
In 2022…while the market lost -18.2%...these strategies actually produced gains up to +15.6%, +38.9%, and even +39.7%.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, April 15.
Get your free book now >>
------------------------------------------------------------------------------------------------------
Are Stocks Undervalued?
Let’s also not forget that valuations are down.
In fact, the P/E ratio for the S&P is trading at multiyear lows, and below its five-year average.
And that makes stocks a bargain.
Of course, if earnings drift lower, valuations will become higher. But there’s plenty of room for stocks to remain relatively cheap.
And the earnings outlook, like the economy, is still forecasting growth.
In fact, this past earnings season, once again, came in better than expected.
And with a new earnings season upon us, the outlook is for more of the same.
Couple that with the fact that stocks typically go up during earnings season, and that projects more gains to come.
Seasonality Is On The Market’s Side
Also in the market’s favor are the seasonals. And they look great this year.
For one, the 4-year Presidential Cycle shows that year 3 (that’s 2023), is the best year of all 4 years. And historically, it’s amazing to see how favorable this cycle is for investors.
Since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%.
So, we are literally still at the beginning of one of the most bullish periods for the market.
Moreover, history shows a high probability of outsized gains following a down year for the market. The S&P was down by -19.4% last year. It was the first down year since 2018, and the worst down year since 2008, when it closed lower by -38.5%. (For those wondering, 2009 was up 23.5%.)
And there’s plenty of reason to believe we could see something like that again this year.
Do What Works
So how do you fully take advantage of the market right now?
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 29 of the last 35 years (an 82% win ratio) with an average annual return of more than 24% per year? That's more than 2 x the S&P, including 4 bear markets and 4 recessions. And consistently beating the market year after year can add up to a lot more than just two times the returns.
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.
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 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 38.7% vs. the S&P’s 6.2%, which is 6.2 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 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 46.4%, beating the market by 7.4 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 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 49.5%, which is 7.9 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
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 +15.6%, +38.9%, and even +39.7% in 2022 while the S&P 500 lost -18.2%.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, April 15, 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 of 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 individual strategies mentioned herein represent only a portion of the ones covered in the course.