There have been some stunning developments in the stock market over the past two days. Just yesterday, the S&P 500 broke above 3,000 – 3,002.98, to be exact – an historic new high. And then this morning, the Dow cracked 27,000, a record-breaking all-time high, too.
Remember, just a few months ago the financial talking heads were giving all kinds of reasons to scare investors out of the market. The U.S.-China trade war… the (briefly) inverted yield curve… an earnings recession… All of which triggered an increase in market volatility and had investors running to the sidelines. But now, that fear of jumping in has been replaced with the fear of missing out, or as the younger folks like to say, “FOMO.”
Now, if you’ve been following me here or are subscribed to Growth Investor, then you know I’ve strongly encouraged folks to ignore the financial media and stay invested, even on the big market down days.
Here are just a few examples…
Back in early January, we saw some major market gyrations. Folks were nervous, but I knew that the foundation of the stock market remained quite healthy. You see, I saw that after the big selling a lot of buying pressure, or the “smart money,” was emerging. Simply put, the smart money came to rescue the market. I encouraged my subscribers to buy the dip. As expected, the stock market proved to be very resilient. Both the S&P 500 and Dow ended the month up over 7%.
We saw some more market oscillations in May when the U.S.-China trade wars and European Union (EU) elections triggered panic sell-offs. Again, I viewed the weakness as an incredible buying opportunity. I encouraged my subscribers to hold on and stay invested. By June, the market had rebounded strongly.
In between the choppy market action, subscribers across all my services were still able to lock in stunning triple-digit gains in companies like NVIDIA (NVDA) for a 274% return in January, a 115% profit in Worldpay (WP) in March, a 150% gain in World Wrestling Entertainment, Inc. (WWE) in May, a 122% return in Netflix, Inc. (NFLX) in June and a hefty 211% return in IntriCon, Inc. (IIN) in June, too.
We did this by putting our emotions to the side and investing in companies with strong fundamentals, earnings and sales growth, rather than waiting for the market to turn around. The truth of the matter is it’s nearly impossible to time the market bottom or top. So, you invest in the crème de la crème of stocks, as these companies will come out on top in the end. And that’s exactly what we did.
And now, here we are, with two major indexes sitting at record highs. When you tally up the numbers, this means that the S&P is up over 20% and the Dow is up over 15% since the opening bell rang in the New Year.
The Rally Isn’t Over Yet
However, I think this market rally is just getting started.
There are two big positives that should continue to drive the broader market higher. July, overall, is historically a seasonally strong month – and this year should be no different. Second-quarter results will start to be released around mid-month. And since the best quarterly results tend to be reported early in the season, we should see a nice boost to the stock market overall towards the end of July. So, the second half of July should benefit from wave-after-wave of positive earnings.
A key interest rate cut by the Federal Reserve would also be a very good thing for the market. In last month’s Federal Open Market Committee (FOMC) statement, the Fed removed the word “patient” and cited that slowing global growth is influencing the FOMC’s interest rate decisions. I said last week that the Fed never fights market rates. So, as the Treasury yields collapse, the Fed has no choice but to slash key interest rates. This is an ideal environment for stock appreciation.
Consider this: Due to falling Treasury yields, the average median forecasted price-to-earnings (P/E) ratio for the S&P 500 could expand from 15.5 to 20, or higher. So, when you couple falling interest rates with the fact that major central banks like the European Central Bank (ECB) and Federal Reserve will be cutting key interest rates, then it is very possible that the S&P could appreciate another 30% on the recent global interest rate collapse.
Bottom line: There’s a lot of potential upside in the current market environment. So if you haven’t invested yet, then I strongly encourage you begin investing now so you don’t miss out on the big gains ahead.
If you’re not sure where to get started, I recommend checking out Growth Investor. I recently recommended a new stock and released my fresh list of Top 5 Stocks, all of which are great places to park new money. You can sign up here.
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