In spite of the recent pullback, stocks have been surging higher this year.
In fact, it was the S&P 500’s best first half in 4 years. And the Nasdaq’s best in 40 years!
And it looks like there’s still a lot more upside to go.
As you know, all of the major indexes have officially exited their bear market and have begun a new bull market.
The small-cap Russell 2000 was the first one to exit their bear market back in August of last year. Then the Dow followed suit in late November of last year. The mid-cap S&P 400 exited their bear market in late January of this year. The Nasdaq ended their bear market and started a new bull just 2 months ago in May. And the S&P 500 joined the party just last month in early June.
One of the key signs that the latest leg up was coming was watching how the small-cap and mid-cap indexes were performing.
Even though they were one of the first indexes to exit their bear market, they had been lagging the others for much of this year.
Quite frankly, the double-digit gains in the S&P and Nasdaq were being driven largely by the 10 biggest stocks in their indexes, which includes Apple, Microsoft, and Nvidia to name a few.
But in early June, the small-cap and mid-cap indexes came back to life and showed that the breadth of the market rally was finally widening. A very bullish sign.
That was further underscored by the rally in the equal-weighted S&P 500 index (which is different than the market-weighted S&P 500 we are all used to following). In fact, the equal-weighted S&P 500 was actually lower for the year in May until they turned it around in June.
It was now clear the scope of the rally was no longer confined to just the handfuls of biggest names. And the bullish sentiment was expanding to include all styles and sizes.
Those were telltale signs the next leg up was coming. And up it went.
And traders wasted no time piling back into stocks.
YTD, the Dow is up 1.77%; the S&P 500 is up 14.6%; the equal-weighted S&P 500 index (ETF) is up 5.15%; the small-cap Russell 2000 is up 5.87%; the mid-cap S&P 400 is up 7.11%; and the Nasdaq is up 30.5%. (Tech is still one of the driving forces as referenced by the outsized gains in the tech-heavy Nasdaq. But the other indexes have begun a serious game of catch up.)
And I’m expecting the gains in all of the indexes to continue throughout the rest of the year.
Here are some additional reasons why 2023 is shaping up to be a historic bull market.
Peak Inflation Is Behind Us
Last month’s better than expected Consumer Price Index (CPI), and Producer Price Index (PPI) confirmed that inflation is on the decline.
It’s still too high. But it’s definitely moderating with core (ex-food & energy) CPI (retail inflation) at 5.3% y/y vs. last year’s peak of 6.6%, while core PPI (wholesale inflation) came in at 2.8% y/y vs. last year’s peak of 8.2%.
And while last month’s Personal Consumption Expenditures (PCE) index (the Fed’s preferred inflation indicator), ticked up from the previous month, the core y/y rate was down from last year’s peak (4.7% vs. last year’s 5.3%), just like the CPI and PPI. And the Fed’s latest forecast is for core PCE to fall to 3.9% by year’s end, and 2.6% in 2024.
With inflation on the decline, the Fed hitting pause at their latest FOMC meeting, and it looking like we could be just 1 or 2 more rate hikes away from being done, the market has been rallying in anticipation of this rate hike cycle coming to an end.
Moreover, while the Fed has said they are not expecting to cut rates this year, they are forecasting a -1% cut in rates in 2024, and another -1% cut in 2025.
And all of that is bullish for the market.
Continued . . .
------------------------------------------------------------------------------------------------------
Alert: Buy Zacks’ Ultimate Four Stocks Monday AM
There's still time to get in early. These aren't just 4 promising stocks. They were handpicked from hundreds of strong companies by our experts because they present the greatest upside for Q3:
Stock #1: Look out NVIDIA, this chip rival is adding major partners and customers.
Stock #2: Flush with a billion in cash, this footwear company soared almost +1000% over the last 10 years and just launched a billion-dollar stock repurchase program.
Stock #3: While Artificial Intelligence sent NVIDIA through the roof, a much smaller company primes for the next generation of AI.
Stock #4: Dining/entertainment company completed a major acquisition and now targets a 20%+ ROI.
Deadline to download our just-released Ultimate Four Special Report is Sunday, July 9.
See Our “Ultimate” Stocks Now >>
------------------------------------------------------------------------------------------------------
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, which was previously forecast at 1.1%, was just upgraded to 1.3% in the latest report.
And the Federal Reserve Bank of Atlanta, via their GDP Now forecast, is estimating Q2 GDP to come in even higher at 2.1%.
It’s hard to make a case for a recession (defined as 2 quarters in a row of negative GDP), when the economy is expanding.
But even if we do see growth slow later in the year, it’s important to note that slower growth is still growth.
Additionally, the World Bank released a report last month, and they increased their global growth rate from 1.7% to 2.1%.
Moreover, the OECD (Organization for Economic Cooperation and Development), also released a report where they projected a global growth rate of 2.7% this year, and commented that the global economy is showing signs of improvement.
So that 2.1% or 2.7% growth rate could very well be upwardly revised yet again.
Turning our attention back to the U.S., it’s also worth noting that personal incomes are hovering near all-time highs. An important point when you consider that 70% of our GDP is driven by consumer spending.
And with the jobs market still so tight, that continues to underpin the economy.
None of that is consistent with a recession, and this is why the outlook is for growth.
Stocks Are Undervalued
Let’s also not forget that valuations are down.
While the P/E ratio for the S&P has risen from last year’s lows, they are still down sharply from 2021’s peak, and are below their five-year average.
And that makes stocks a bargain.
At the same time, the earnings outlook is one of stability.
Not only did this past earnings season come in better than expected, companies provided reassuring enough guidance for the coming quarters, with many upping their outlook.
While few are predicting rip-roaring sales and earnings (although, you might have a different take if you were looking at Nvidia and other companies keyed into the transformational generative AI industry), there are plenty of stocks and industries forecasting outsized growth.
You just have to know where to look.
Statistical Trends Are On The Market’s Side
Also in the market’s favor are the statistical trends. 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%.
And we are at the very beginning of the second half of one of the most bullish periods for the market.
Second: over the last 60 years, if a bear market in the S&P goes down by -25% or more (the S&P was down by -25.4% last year between their bull market high close and their bear market low close), stocks go up on average of 38% a year later (those stats encompass 9 bear markets, with 8 of those finishing in the green).
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 proven, profitable 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.
And one of the best ways to do that is to see what stocks the pros, who use these methods, are picking.
Stock Picking Secrets Of The Pros
Whether you’re a Growth investor, or a Value investor, whether you prefer fast-paced momentum stocks, or mature dividend-paying income stocks, there are certain rules the experts follow to maximize their gains.
If you're an Aggressive Growth investor, did you know that stocks with the highest growth rates perform almost as poorly as those with the lowest growth rates? It's true.
This is because the companies with the highest growth rates are often unsustainable. And once those sky-high growth rates start to come down, even though they may still be spectacular, the price of the stock will fall back down to earth as well.
For example, a company earning 1 cent a share that is now expected to earn 6 cents, has a 500% growth rate. But, if it receives a downward estimate revision to 5 cents, that’s a significant drop. Even though it still has a 400% growth rate, the estimates were just reduced by -16.7% and the price is likely to follow.
If you’ve ever wondered how a stock with a triple-digit growth rate could possibly go down -- that’s how.
Instead, stick with companies with growth rates above the median for their industry, but less than 50%. That range has produced some of the best results.
If you're a Value investor; do you know which valuation metrics produce the best results? Better yet, do you know what valuation ranges have the highest probability of success?
Testing has shown that the Price to Sales ratio (P/S) is one of the best valuation metrics out there. And stocks with a P/S ratio of less than 1, by far, produce the highest returns. Between 1-2 still produce stellar results. And between 2-3 outperform the market. But once you get over 4, there is a higher probability of losing on that stock than winning.
That, of course, does not mean all stocks with a P/S ratio above 4 will go down. But if the odds of winning are greater below 1 (or at least below 3) and worse above 4, then by simply focusing on stocks in the optimum valuation range, you are now one step closer to having a winner.
This type of factor analysis also applies to large-caps and small-caps, biotech and high-tech, ETFs, stocks under $10, stocks about to surprise, even options, and everything in between.
Regardless of which one fits your personal style of trade, just be sure you’re following proven profitable methods and strategies that work, from experts who have demonstrated their ability to beat the market.
The best part about these strategies and stock picks is that all of the hard work is done for you. There’s no guesswork involved. Just follow the experts and start confidently getting into better stocks on your very next trade.
The Pros’ Best Picks for Q3
It couldn’t be easier to find them. And it’s a very good plan to buy them at market open Monday morning.
The earlier you get in, the better your chances for maximum profit.
Download our just-released Ultimate Four Special Report.
These are the 4 stocks hand-picked by our experts to shine brightest this quarter. Each has strong fundamentals and exceptional growth potential. They’re ideally suited to soar in current trading conditions.
Stock #1: Look out NVIDIA, this rival “blew some doors off” in the 2020 chip industry – and continues to gain momentum with automation, mobile, autos, and AI. Recently, two industry giants became major partners and customers.
Stock #2: Shares of this footwear company have soared to record highs this year. In fact, they’re up almost +1000% over the last 10 years. Virtually immune to recessions, it has a billion-dollar stock repurchase program and nearly a billion in cash.
Stock #3: While Artificial Intelligence sent NVIDIA through the roof, a much smaller company primes for its own huge move in the next generation of AI. This stock shows rising earnings estimates, divergence between price and earnings trend, and technicals that scream “Buy!”
Stock #4: This expanding dining and entertainment company has been trading sideways, but we predict not for long. It recently completed a major acquisition and now targets a 20%+ ROI. It could really catch fire as it approaches the “Golden Cross” when its 50-day moving average soars above the 200-day average.
What’s the cost to see our Ultimate Four stocks? Only $1, and there’s not a cent of additional obligation.
Plus, you'll get full 30-day access to ALL Zacks private buys & sells with that same dollar.
You can be one of the first to see these promising recommendations when you download this Special Report today. But don’t delay. This opportunity ends at midnight Sunday, July 9.
See our Ultimate Four stocks now >>
Thanks and good trading,
Kevin
Kevin Matras serves as Executive Vice President of Zacks.com and is responsible for all of its leading products for individual investors. He invites you to download the just-released Zacks Ultimate Four Special Report before this weekend's deadline.
Image: Bigstock
Why 2023 Is Shaping Up To Be A Historic Bull Market
In spite of the recent pullback, stocks have been surging higher this year.
In fact, it was the S&P 500’s best first half in 4 years. And the Nasdaq’s best in 40 years!
And it looks like there’s still a lot more upside to go.
As you know, all of the major indexes have officially exited their bear market and have begun a new bull market.
The small-cap Russell 2000 was the first one to exit their bear market back in August of last year. Then the Dow followed suit in late November of last year. The mid-cap S&P 400 exited their bear market in late January of this year. The Nasdaq ended their bear market and started a new bull just 2 months ago in May. And the S&P 500 joined the party just last month in early June.
One of the key signs that the latest leg up was coming was watching how the small-cap and mid-cap indexes were performing.
Even though they were one of the first indexes to exit their bear market, they had been lagging the others for much of this year.
Quite frankly, the double-digit gains in the S&P and Nasdaq were being driven largely by the 10 biggest stocks in their indexes, which includes Apple, Microsoft, and Nvidia to name a few.
But in early June, the small-cap and mid-cap indexes came back to life and showed that the breadth of the market rally was finally widening. A very bullish sign.
That was further underscored by the rally in the equal-weighted S&P 500 index (which is different than the market-weighted S&P 500 we are all used to following). In fact, the equal-weighted S&P 500 was actually lower for the year in May until they turned it around in June.
It was now clear the scope of the rally was no longer confined to just the handfuls of biggest names. And the bullish sentiment was expanding to include all styles and sizes.
Those were telltale signs the next leg up was coming. And up it went.
And traders wasted no time piling back into stocks.
YTD, the Dow is up 1.77%; the S&P 500 is up 14.6%; the equal-weighted S&P 500 index (ETF) is up 5.15%; the small-cap Russell 2000 is up 5.87%; the mid-cap S&P 400 is up 7.11%; and the Nasdaq is up 30.5%. (Tech is still one of the driving forces as referenced by the outsized gains in the tech-heavy Nasdaq. But the other indexes have begun a serious game of catch up.)
And I’m expecting the gains in all of the indexes to continue throughout the rest of the year.
Here are some additional reasons why 2023 is shaping up to be a historic bull market.
Peak Inflation Is Behind Us
Last month’s better than expected Consumer Price Index (CPI), and Producer Price Index (PPI) confirmed that inflation is on the decline.
It’s still too high. But it’s definitely moderating with core (ex-food & energy) CPI (retail inflation) at 5.3% y/y vs. last year’s peak of 6.6%, while core PPI (wholesale inflation) came in at 2.8% y/y vs. last year’s peak of 8.2%.
And while last month’s Personal Consumption Expenditures (PCE) index (the Fed’s preferred inflation indicator), ticked up from the previous month, the core y/y rate was down from last year’s peak (4.7% vs. last year’s 5.3%), just like the CPI and PPI. And the Fed’s latest forecast is for core PCE to fall to 3.9% by year’s end, and 2.6% in 2024.
With inflation on the decline, the Fed hitting pause at their latest FOMC meeting, and it looking like we could be just 1 or 2 more rate hikes away from being done, the market has been rallying in anticipation of this rate hike cycle coming to an end.
Moreover, while the Fed has said they are not expecting to cut rates this year, they are forecasting a -1% cut in rates in 2024, and another -1% cut in 2025.
And all of that is bullish for the market.
Continued . . .
------------------------------------------------------------------------------------------------------
Alert: Buy Zacks’ Ultimate Four Stocks Monday AM
There's still time to get in early. These aren't just 4 promising stocks. They were handpicked from hundreds of strong companies by our experts because they present the greatest upside for Q3:
Stock #1: Look out NVIDIA, this chip rival is adding major partners and customers.
Stock #2: Flush with a billion in cash, this footwear company soared almost +1000% over the last 10 years and just launched a billion-dollar stock repurchase program.
Stock #3: While Artificial Intelligence sent NVIDIA through the roof, a much smaller company primes for the next generation of AI.
Stock #4: Dining/entertainment company completed a major acquisition and now targets a 20%+ ROI.
Deadline to download our just-released Ultimate Four Special Report is Sunday, July 9.
See Our “Ultimate” Stocks Now >>
------------------------------------------------------------------------------------------------------
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, which was previously forecast at 1.1%, was just upgraded to 1.3% in the latest report.
And the Federal Reserve Bank of Atlanta, via their GDP Now forecast, is estimating Q2 GDP to come in even higher at 2.1%.
It’s hard to make a case for a recession (defined as 2 quarters in a row of negative GDP), when the economy is expanding.
But even if we do see growth slow later in the year, it’s important to note that slower growth is still growth.
Additionally, the World Bank released a report last month, and they increased their global growth rate from 1.7% to 2.1%.
Moreover, the OECD (Organization for Economic Cooperation and Development), also released a report where they projected a global growth rate of 2.7% this year, and commented that the global economy is showing signs of improvement.
So that 2.1% or 2.7% growth rate could very well be upwardly revised yet again.
Turning our attention back to the U.S., it’s also worth noting that personal incomes are hovering near all-time highs. An important point when you consider that 70% of our GDP is driven by consumer spending.
And with the jobs market still so tight, that continues to underpin the economy.
None of that is consistent with a recession, and this is why the outlook is for growth.
Stocks Are Undervalued
Let’s also not forget that valuations are down.
While the P/E ratio for the S&P has risen from last year’s lows, they are still down sharply from 2021’s peak, and are below their five-year average.
And that makes stocks a bargain.
At the same time, the earnings outlook is one of stability.
Not only did this past earnings season come in better than expected, companies provided reassuring enough guidance for the coming quarters, with many upping their outlook.
While few are predicting rip-roaring sales and earnings (although, you might have a different take if you were looking at Nvidia and other companies keyed into the transformational generative AI industry), there are plenty of stocks and industries forecasting outsized growth.
You just have to know where to look.
Statistical Trends Are On The Market’s Side
Also in the market’s favor are the statistical trends. 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%.
And we are at the very beginning of the second half of one of the most bullish periods for the market.
Second: over the last 60 years, if a bear market in the S&P goes down by -25% or more (the S&P was down by -25.4% last year between their bull market high close and their bear market low close), stocks go up on average of 38% a year later (those stats encompass 9 bear markets, with 8 of those finishing in the green).
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 proven, profitable 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.
And one of the best ways to do that is to see what stocks the pros, who use these methods, are picking.
Stock Picking Secrets Of The Pros
Whether you’re a Growth investor, or a Value investor, whether you prefer fast-paced momentum stocks, or mature dividend-paying income stocks, there are certain rules the experts follow to maximize their gains.
If you're an Aggressive Growth investor, did you know that stocks with the highest growth rates perform almost as poorly as those with the lowest growth rates? It's true.
This is because the companies with the highest growth rates are often unsustainable. And once those sky-high growth rates start to come down, even though they may still be spectacular, the price of the stock will fall back down to earth as well.
For example, a company earning 1 cent a share that is now expected to earn 6 cents, has a 500% growth rate. But, if it receives a downward estimate revision to 5 cents, that’s a significant drop. Even though it still has a 400% growth rate, the estimates were just reduced by -16.7% and the price is likely to follow.
If you’ve ever wondered how a stock with a triple-digit growth rate could possibly go down -- that’s how.
Instead, stick with companies with growth rates above the median for their industry, but less than 50%. That range has produced some of the best results.
If you're a Value investor; do you know which valuation metrics produce the best results? Better yet, do you know what valuation ranges have the highest probability of success?
Testing has shown that the Price to Sales ratio (P/S) is one of the best valuation metrics out there. And stocks with a P/S ratio of less than 1, by far, produce the highest returns. Between 1-2 still produce stellar results. And between 2-3 outperform the market. But once you get over 4, there is a higher probability of losing on that stock than winning.
That, of course, does not mean all stocks with a P/S ratio above 4 will go down. But if the odds of winning are greater below 1 (or at least below 3) and worse above 4, then by simply focusing on stocks in the optimum valuation range, you are now one step closer to having a winner.
This type of factor analysis also applies to large-caps and small-caps, biotech and high-tech, ETFs, stocks under $10, stocks about to surprise, even options, and everything in between.
Regardless of which one fits your personal style of trade, just be sure you’re following proven profitable methods and strategies that work, from experts who have demonstrated their ability to beat the market.
The best part about these strategies and stock picks is that all of the hard work is done for you. There’s no guesswork involved. Just follow the experts and start confidently getting into better stocks on your very next trade.
The Pros’ Best Picks for Q3
It couldn’t be easier to find them. And it’s a very good plan to buy them at market open Monday morning.
The earlier you get in, the better your chances for maximum profit.
Download our just-released Ultimate Four Special Report.
These are the 4 stocks hand-picked by our experts to shine brightest this quarter. Each has strong fundamentals and exceptional growth potential. They’re ideally suited to soar in current trading conditions.
Stock #1: Look out NVIDIA, this rival “blew some doors off” in the 2020 chip industry – and continues to gain momentum with automation, mobile, autos, and AI. Recently, two industry giants became major partners and customers.
Stock #2: Shares of this footwear company have soared to record highs this year. In fact, they’re up almost +1000% over the last 10 years. Virtually immune to recessions, it has a billion-dollar stock repurchase program and nearly a billion in cash.
Stock #3: While Artificial Intelligence sent NVIDIA through the roof, a much smaller company primes for its own huge move in the next generation of AI. This stock shows rising earnings estimates, divergence between price and earnings trend, and technicals that scream “Buy!”
Stock #4: This expanding dining and entertainment company has been trading sideways, but we predict not for long. It recently completed a major acquisition and now targets a 20%+ ROI. It could really catch fire as it approaches the “Golden Cross” when its 50-day moving average soars above the 200-day average.
What’s the cost to see our Ultimate Four stocks? Only $1, and there’s not a cent of additional obligation.
Plus, you'll get full 30-day access to ALL Zacks private buys & sells with that same dollar.
You can be one of the first to see these promising recommendations when you download this Special Report today. But don’t delay. This opportunity ends at midnight Sunday, July 9.
See our Ultimate Four stocks now >>
Thanks and good trading,
Kevin
Kevin Matras serves as Executive Vice President of Zacks.com and is responsible for all of its leading products for individual investors. He invites you to download the just-released Zacks Ultimate Four Special Report before this weekend's deadline.