Despite the fact that I’m no fan of August, I have to say the month was surprisingly strong.
In fact, in late August, we saw small-cap stocks find their second wind.
Even better, I expect that the second half of September will be strong as well, since quarter-end window dressing will commence, along with the 90-day ETF rebalancing that tends to boost fundamentally superior stocks in the final days of the month.
Small-cap stocks are traditionally the strongest between November and April. But in recent years, small caps have been stronger for even longer bursts. In fact, between November 2020 and July 2021, the small-cap Russell 2000 soared more than 50%.
Considering this stunning eight-month surge, it’s not too surprising that small-caps hit a bit of wall and took a breather over the next seven weeks. The Russell 2000 dipped about 7.7% during the first seven weeks of the third quarter.
Naysayers in the financial media jumped on the pullback with dramatic headlines, but small caps were bidding their time, and ultimately used the pullback to find their second wind.
Over the past two weeks, the Russell 2000 has rallied 6.6%. In the past week alone, the small-cap index is up about 5%, versus the S&P 500’s 1.8% gain and the Dow’s 0.7% rise.
Part of the recovery in small-cap stocks recently can be attributed to the strength of the U.S. dollar. A stronger U.S. dollar can impede sales and earnings for multinational stocks. So, a stronger U.S. dollar may be causing a shift to more domestic, smaller-cap stocks this year, as more than half of the S&P 500’s revenue is from outside the U.S.
Plus, the fact is that the European Central Bank (ECB) and the Federal Reserve have started to diverge on their respective monetary policies.
While the ECB recently increased its quantitative easing, the latest Federal Open Market Committee (FOMC) minutes and Fed Chairman Jerome Powell’s comments during his virtual Jackson Hole speech allude to the Fed wanting to start tapering in 2022.
In his best “Fedspeak,” Chairman Powell also acknowledged that some inflation is a “cause for concern” and implied that higher prices could be permanent. Powell noted that despite impressive payroll growth, the rise of the Covid-19 Delta variant poised a risk. He also noted a major monetary move could be “ill-timed,” and implied that the Fed would begin tapering, but did not say it would commence this year.
I remain in the camp that no matter what the Fed announces at its upcoming Federal Open Market Committee (FOMC) meeting, the Fed will not commence any significant tapering until 2022 and will continue its quantitative easing, but at a reduced pace. Inflation effectively allows all central banks to print more money and the eventual risk is stagnation, especially after businesses and consumers have spent up a storm.
This divergence in monetary policies is due to the fact that the U.S. economy is growing at a much faster pace than the eurozone.
The Conference Board now anticipates that the U.S. economy will grow at a 6% annual rate in 2021.
On the other hand, the eurozone economy contracted at a 0.3% pace in the first quarter and grew at a 2% rate during the second quarter. The ECB still anticipates that GDP growth will accelerate in the third and fourth quarters, forecasting 4.6% GDP growth for full-year 2021.
Now, in my Breakthrough Stocks Monthly Issue, which comes out this afternoon (and is available to all Platinum Growth Club subscribers), I lay out more of the underlying reasons behind the small-cap surge, and how you can take advantage.
The bottom line: the party continues in small-cap stocks, particularly my stocks that post superior fundamentals.
For example, my average Breakthrough Stock is characterized by 53.7% forecasted annual sales growth and 225.1% forecasted annual earnings growth. And several Buy List positions have posted double-digit gains over the past four weeks.
Buying the Crème de la Crème
Looking ahead to September, I expect that the second half of the month will be strong, since quarter-end window dressing will commence, along with the 90-day ETF rebalancing that tends to boost fundamentally superior stocks in the final days of the month.
And due to the current “Goldilocks” environment of low Treasury bond yields and strong earnings, the remainder of the year remains very positive. So, any pullbacks in the upcoming weeks will likely be great buying opportunities.
And I’m pleased to say that my Platinum Growth Club subscribers are perfectly positioned to benefit from these trends and much more.
You see, I have more than 100 stocks across all of my services (plus 50 LEAPS call options, or Long-term Equity Anticipation Securities in my Power Options trading service), and each and every one boasts strong earnings and sales growth.
Of course, you don’t have to invest in all 100+ stocks. If you’d rather start small, I’ve got you covered there, too. My Platinum Growth Club service comes with my exclusive Model Portfolio.
I handpick all of my Model Portfolio recommendations from my different stock services – Growth Investor, Breakthrough Stocks and Accelerated Profits – so you can rest assured that you’re always invested in the crème de la crème.
In addition to access to my stocks and options recommendations, you can read every single Weekly Update, Monthly Issue, Market Alert and Trade Alert, as well as exclusive podcasts and Live Chat events. Plus, you’ll receive a Platinum Growth Club Monthly Issue at the beginning of each month.
And you couldn’t be joining at a better time as I just released my September Platinum Growth Club Monthly Issue yesterday.
In my latest Platinum Growth Club Monthly Issue, I recommend five brand-new buys that boast superior fundamentals and are well-positioned to climb higher in the months ahead. And in last Friday’s Growth Investor Monthly Issue for September, I unveiled two defensive, high-growth stocks with rock-solid fundamentals, and two elite dividend payers boasting yields of 1.5% and 4.5%, respectively.
The bottom line: If you want to make sure your portfolio is “locked and loaded” with fundamentally superior stocks that will do well in the turbulent month of September and the longer term, then I encourage you to sign up for Platinum Growth Club today.
PS: The InvestorPlace Media offices will be closed on Friday, September 3 and Monday, September 6 for the Labor Day holiday weekend.
The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below: