We’re only a few days into Q4. And it’s off to a great start.
The market has performed exceptionally well so far this year.
And I’m expecting it to finish even stronger by year’s end.
YTD, the Dow is up 9.91%; the S&P is up 14.2%; the Nasdaq is up 18.0%; and the small-cap Russell 2000 is up 11.0%.
Each one hitting a series of new all-time highs, one right after another.
In fact, ever since the April sell-off following the tariffs announcement (which stocks quickly recovered from), the S&P has put in 33 new all-time highs, and the Nasdaq 32.
But the outlook is for much, much more.
And there’s a myriad of reasons why, not the least of which happens to be that Q4 is historically the best quarter for stocks.
Couple that with the tamer inflation reports, the resiliency of the economy, the better-than-expected earnings (not to mention the positive EPS growth outlook for the next four quarters), the recent interest rate cut and the two additional cuts expected in mid-October and then again in December, and of course, the ongoing AI boom!
For those who missed the recent rally, or wished they would have taken better advantage of it, the good news is the next leg up could be even more spectacular.
And that’s exactly what I’m expecting.
History Repeats Itself
Last year saw the S&P 500 soar by 23.3%.
That was the second year in a row of 20%+ gains. (2023 was up 24.2%.)
That’s a feat rarely seen in the past.
In fact, it was the first time it was up 20% or more for two years in a row since 1995-1996. (Prior to that, you’d have to go all the way back to 1954-55.)
In 1995 the S&P was up 34.1%. That was the beginning of the dot-com (technology) boom.
In 1996 it was up 20.3%.
So, what happened in 1997? It was up another 31.0%.
1998? Up another 26.7%.
And in 1999, it was up 19.5%.
A spectacular rally that lasted 5 long, glorious years.
Yes, the dot-com bubble arrived in 2000. But not before people got rich over the preceding 5 years with a 220% increase in the S&P, while plenty of individual stocks were up several hundred percent to several thousand percent.
And I believe we could possibly see the same thing again now. Maybe 5 years or more of boom times – for similar reasons, and some unique to the present day.
Tech Booms: Past And Present (AI Tech Boom Is Alive And Well)
The tech boom back then saw everybody go nuts for technology stocks, driven by the internet and dot-com companies.
It was new and exciting. And the internet was forecast to change the way people shopped, did business, and interacted with each other.
The promise was real, as we now know.
So, what’s the parallel?
In part, it’s another tech boom.
But this modern technology boom is being driven by Artificial Intelligence (AI).
And it’s forecast to be just as transformative as the personal computer, the internet and the mobile phone. And it’s expected to touch virtually every industry in some way shape or form, as well as impact ordinary lives.
The AI trade has worked so well for a reason -- because the AI boom is real, and is supported by real earnings, and real growth potential.
But there are plenty of other catalysts that make the market outlook even more exciting.
Continued . . .
------------------------------------------------------------------------------------------------------
Alert: Buy These Ultimate Four Stocks Now
There's still time to get in early. These aren't just 4 promising stocks. They were handpicked from hundreds of strong companies by Zacks' experts because they present the greatest upside for Q4:
Stock #1: Database Giant Awakens as AI Infrastructure Leader
Stock #2: Energy Producer Powers AI Revolution
Stock #3: AI Cloud Platform Expands Across Global Markets
Stock #4: Retail Transformation Story Breaks to New Highs
The deadline to download our just-released Ultimate Four Special Report is Sunday, October 5.
See Our “Ultimate” Stocks Now >>
------------------------------------------------------------------------------------------------------
Government Shutdown Should Have No Impact On The Market
Let me quickly speak to the recent government shutdown.
First, the markets generally don’t seem to care. It was looking like we were headed for a government shutdown for weeks, and the market soared. And when it finally happened, the market gained even more.
Since 1980, there have been 14 government shutdowns (10 if you exclude technical shutdowns, i.e., procedural delays, etc., that lasted less than 24 hours). The average length of those shutdowns is 9 days. The longest one was in 2018/2019 and lasted 35 days. 1995/96 was next at 21 days. And 2013 was third at 16 days. Other than that, they’ve usually lasted 2-3 days.
How did the market do during those shutdowns? The S&P averaged 1.69%. A full 9 of those 10 times was higher. Only decline was in October 1990, when it lost -3.60%. The government shut down for only 3 days. But recession fears had gripped the market, and stocks had been falling for months prior to that.
So, it’s no surprise that the market, so far, has given the shutdown a collective shrug.
Inflation And Interest Rates
While inflation is still too high, it’s been more moderate than the Fed had been worrying about.
Last month’s Consumer Price Index (CPI, retail inflation) showed core inflation (ex-food & energy) at 3.1% y/y, in line with the previous month and down from 3.3% a few months back.
The Producer Price Index (PPI, wholesale inflation), however, just eased to 2.8% y/y, down from the previous month’s 3.7%.
And the Personal Consumption Expenditures (PCE) index (the Fed’s preferred inflation gauge), came in at 2.9%, the same as the previous month and forecasts for the same.
These reports underscore the Fed’s latest narrative that inflation is not expected to go up substantially. And that recent price increases will be a “one-time” shift due to tariffs, rather than ongoing increases.
This gave the Fed the green light to cut interest rates by 25 basis points in September (the first cut in a year). And the confidence to forecast two more cuts (presumably by 25 bps each) by year’s end.
And given the market is a forward-looking mechanism, it does not seem to be wasting any time in acting on that.
Plus, when interest rates do begin to fall again, you can be sure plenty of money tied up in money markets will find their way back into equities, further supporting stock prices.
The Earnings Outlook Is For Growth
Let’s also not forget that earnings are the main driver of stock prices.
Ironically, while everyone was fretting over tariffs, the earnings picture never wavered and continues to point to growth.
Q2’25 earnings season, for example, showed S&P earnings up 12.5%.
Q3 earnings are forecast at 5.2%.
Q4 is forecast at 7.1%.
Q1’26 is forecast at 9.4%.
And Q2 is forecast at 10.5%.
While tariff fears and even recession fears shook the market previously, none of that is showing up in the aggregate earnings estimates.
And again, earnings are the key driver of stock prices.
Small-Caps Are Also On The Rise
The bull market rally, which is in its third year, is broadening.
Tech is still a big driver. And will be for years to come. But other industries are breaking out as well. And categories.
That includes small-caps.
Adding fuel to the small-cap rally will definitely be the aforementioned and expected interest rate cuts.
While it’s true that all-sized borrowers should see relief with lower interest rates, since small-caps tend to have a larger proportion of debt than their larger counterparts, and often borrow at less favorable terms, the resumption of interest rate cuts should have a sizable impact on small-caps.
Additionally, the budget bill that passed a few months ago, which included additional tax provisions for corporate America, not the least of which is the 100% immediate expensing of capital expenditures, will also have a positive impact.
Especially since small-caps are typically in their growth cycle. Those tax provisions should allow them to spend/invest more money, accelerate their growth plans, and get the entire tax benefit in year one.
In addition to the AI boom, I think we’re on the cusp of a small-cap renaissance as well.
And it’s already begun, with the small-cap Russell 2000 making 3 new all-time highs last month.
Stock Picking Secrets Of The Pros
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 37 years (a 78% 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.
It also killed in 1995 with a 52.6% gain; 1996 with 40.9%; 1997 with 43.9%; 1998 with 19.5%; and 1999 with 45.9%. It was also up in 2000 by 14.3% while the S&P was down.
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 a smaller, actionable list of 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.
Whether you’re a growth investor, or a value investor, prefer fast-paced momentum stocks, or mature dividend-paying income stocks, there are certain rules the experts follow to maximize their gains.
This 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 (aside from the returns), 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 Today
Here's an easy way to find them:
Download our just-released Ultimate Four Special Report >>
These are 4 stocks handpicked by our experts. Each has strong fundamentals and exceptional growth potential. They're ideally suited to soar through Q4 and far beyond.
Stock #1: Database Giant Awakens as AI Infrastructure Leader
Stock #2: Energy Producer Powers AI Revolution
Stock #3: AI Cloud Platform Expands Across Global Markets
Stock #4: Retail Transformation Story Breaks to New Highs
The total cost is only $1, and there's no obligation to spend a cent more.
Plus, that same dollar gives you full 30-day access to Zacks Ultimate. This includes the real-time buy and sell recommendations, along with expert market insights from all of Zacks' private portfolio services.
While future success isn’t guaranteed, Zacks Ultimate members recently had opportunities to close gains of +107.9%, +263.2%, +499.3%, and even +2,027.7%.¹
Don't wait. The deadline to download the Ultimate Four report and start your 30-day access to Zacks Ultimate — both for just $ 1— is midnight Sunday, October 5.
See Our Ultimate Four stocks now >>
All the best,
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 Zacks' just-released Ultimate Four Special Report before this weekend's deadline.
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. Access grants you a comprehensive list of all open and closed trades.
Image: Bigstock
Why I'm Expecting Stocks To Soar Over the Next 3 Months
We’re only a few days into Q4. And it’s off to a great start.
The market has performed exceptionally well so far this year.
And I’m expecting it to finish even stronger by year’s end.
YTD, the Dow is up 9.91%; the S&P is up 14.2%; the Nasdaq is up 18.0%; and the small-cap Russell 2000 is up 11.0%.
Each one hitting a series of new all-time highs, one right after another.
In fact, ever since the April sell-off following the tariffs announcement (which stocks quickly recovered from), the S&P has put in 33 new all-time highs, and the Nasdaq 32.
But the outlook is for much, much more.
And there’s a myriad of reasons why, not the least of which happens to be that Q4 is historically the best quarter for stocks.
Couple that with the tamer inflation reports, the resiliency of the economy, the better-than-expected earnings (not to mention the positive EPS growth outlook for the next four quarters), the recent interest rate cut and the two additional cuts expected in mid-October and then again in December, and of course, the ongoing AI boom!
For those who missed the recent rally, or wished they would have taken better advantage of it, the good news is the next leg up could be even more spectacular.
And that’s exactly what I’m expecting.
History Repeats Itself
Last year saw the S&P 500 soar by 23.3%.
That was the second year in a row of 20%+ gains. (2023 was up 24.2%.)
That’s a feat rarely seen in the past.
In fact, it was the first time it was up 20% or more for two years in a row since 1995-1996. (Prior to that, you’d have to go all the way back to 1954-55.)
In 1995 the S&P was up 34.1%. That was the beginning of the dot-com (technology) boom.
In 1996 it was up 20.3%.
So, what happened in 1997? It was up another 31.0%.
1998? Up another 26.7%.
And in 1999, it was up 19.5%.
A spectacular rally that lasted 5 long, glorious years.
Yes, the dot-com bubble arrived in 2000. But not before people got rich over the preceding 5 years with a 220% increase in the S&P, while plenty of individual stocks were up several hundred percent to several thousand percent.
And I believe we could possibly see the same thing again now. Maybe 5 years or more of boom times – for similar reasons, and some unique to the present day.
Tech Booms: Past And Present (AI Tech Boom Is Alive And Well)
The tech boom back then saw everybody go nuts for technology stocks, driven by the internet and dot-com companies.
It was new and exciting. And the internet was forecast to change the way people shopped, did business, and interacted with each other.
The promise was real, as we now know.
So, what’s the parallel?
In part, it’s another tech boom.
But this modern technology boom is being driven by Artificial Intelligence (AI).
And it’s forecast to be just as transformative as the personal computer, the internet and the mobile phone. And it’s expected to touch virtually every industry in some way shape or form, as well as impact ordinary lives.
The AI trade has worked so well for a reason -- because the AI boom is real, and is supported by real earnings, and real growth potential.
But there are plenty of other catalysts that make the market outlook even more exciting.
Continued . . .
------------------------------------------------------------------------------------------------------
Alert: Buy These Ultimate Four Stocks Now
There's still time to get in early. These aren't just 4 promising stocks. They were handpicked from hundreds of strong companies by Zacks' experts because they present the greatest upside for Q4:
Stock #1: Database Giant Awakens as AI Infrastructure Leader
Stock #2: Energy Producer Powers AI Revolution
Stock #3: AI Cloud Platform Expands Across Global Markets
Stock #4: Retail Transformation Story Breaks to New Highs
The deadline to download our just-released Ultimate Four Special Report is Sunday, October 5.
See Our “Ultimate” Stocks Now >>
------------------------------------------------------------------------------------------------------
Government Shutdown Should Have No Impact On The Market
Let me quickly speak to the recent government shutdown.
First, the markets generally don’t seem to care. It was looking like we were headed for a government shutdown for weeks, and the market soared. And when it finally happened, the market gained even more.
Since 1980, there have been 14 government shutdowns (10 if you exclude technical shutdowns, i.e., procedural delays, etc., that lasted less than 24 hours). The average length of those shutdowns is 9 days. The longest one was in 2018/2019 and lasted 35 days. 1995/96 was next at 21 days. And 2013 was third at 16 days. Other than that, they’ve usually lasted 2-3 days.
How did the market do during those shutdowns? The S&P averaged 1.69%. A full 9 of those 10 times was higher. Only decline was in October 1990, when it lost -3.60%. The government shut down for only 3 days. But recession fears had gripped the market, and stocks had been falling for months prior to that.
So, it’s no surprise that the market, so far, has given the shutdown a collective shrug.
Inflation And Interest Rates
While inflation is still too high, it’s been more moderate than the Fed had been worrying about.
Last month’s Consumer Price Index (CPI, retail inflation) showed core inflation (ex-food & energy) at 3.1% y/y, in line with the previous month and down from 3.3% a few months back.
The Producer Price Index (PPI, wholesale inflation), however, just eased to 2.8% y/y, down from the previous month’s 3.7%.
And the Personal Consumption Expenditures (PCE) index (the Fed’s preferred inflation gauge), came in at 2.9%, the same as the previous month and forecasts for the same.
These reports underscore the Fed’s latest narrative that inflation is not expected to go up substantially. And that recent price increases will be a “one-time” shift due to tariffs, rather than ongoing increases.
This gave the Fed the green light to cut interest rates by 25 basis points in September (the first cut in a year). And the confidence to forecast two more cuts (presumably by 25 bps each) by year’s end.
And given the market is a forward-looking mechanism, it does not seem to be wasting any time in acting on that.
Plus, when interest rates do begin to fall again, you can be sure plenty of money tied up in money markets will find their way back into equities, further supporting stock prices.
The Earnings Outlook Is For Growth
Let’s also not forget that earnings are the main driver of stock prices.
Ironically, while everyone was fretting over tariffs, the earnings picture never wavered and continues to point to growth.
Q2’25 earnings season, for example, showed S&P earnings up 12.5%.
Q3 earnings are forecast at 5.2%.
Q4 is forecast at 7.1%.
Q1’26 is forecast at 9.4%.
And Q2 is forecast at 10.5%.
While tariff fears and even recession fears shook the market previously, none of that is showing up in the aggregate earnings estimates.
And again, earnings are the key driver of stock prices.
Small-Caps Are Also On The Rise
The bull market rally, which is in its third year, is broadening.
Tech is still a big driver. And will be for years to come. But other industries are breaking out as well. And categories.
That includes small-caps.
Adding fuel to the small-cap rally will definitely be the aforementioned and expected interest rate cuts.
While it’s true that all-sized borrowers should see relief with lower interest rates, since small-caps tend to have a larger proportion of debt than their larger counterparts, and often borrow at less favorable terms, the resumption of interest rate cuts should have a sizable impact on small-caps.
Additionally, the budget bill that passed a few months ago, which included additional tax provisions for corporate America, not the least of which is the 100% immediate expensing of capital expenditures, will also have a positive impact.
Especially since small-caps are typically in their growth cycle. Those tax provisions should allow them to spend/invest more money, accelerate their growth plans, and get the entire tax benefit in year one.
In addition to the AI boom, I think we’re on the cusp of a small-cap renaissance as well.
And it’s already begun, with the small-cap Russell 2000 making 3 new all-time highs last month.
Stock Picking Secrets Of The Pros
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 37 years (a 78% 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.
It also killed in 1995 with a 52.6% gain; 1996 with 40.9%; 1997 with 43.9%; 1998 with 19.5%; and 1999 with 45.9%. It was also up in 2000 by 14.3% while the S&P was down.
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 a smaller, actionable list of 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.
Whether you’re a growth investor, or a value investor, prefer fast-paced momentum stocks, or mature dividend-paying income stocks, there are certain rules the experts follow to maximize their gains.
This 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 (aside from the returns), 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 Today
Here's an easy way to find them:
Download our just-released Ultimate Four Special Report >>
These are 4 stocks handpicked by our experts. Each has strong fundamentals and exceptional growth potential. They're ideally suited to soar through Q4 and far beyond.
Stock #1: Database Giant Awakens as AI Infrastructure Leader
Stock #2: Energy Producer Powers AI Revolution
Stock #3: AI Cloud Platform Expands Across Global Markets
Stock #4: Retail Transformation Story Breaks to New Highs
The total cost is only $1, and there's no obligation to spend a cent more.
Plus, that same dollar gives you full 30-day access to Zacks Ultimate. This includes the real-time buy and sell recommendations, along with expert market insights from all of Zacks' private portfolio services.
While future success isn’t guaranteed, Zacks Ultimate members recently had opportunities to close gains of +107.9%, +263.2%, +499.3%, and even +2,027.7%.¹
Don't wait. The deadline to download the Ultimate Four report and start your 30-day access to Zacks Ultimate — both for just $ 1— is midnight Sunday, October 5.
See Our Ultimate Four stocks now >>
All the best,
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 Zacks' just-released Ultimate Four Special Report before this weekend's deadline.
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. Access grants you a comprehensive list of all open and closed trades.