“Fed days” are usually action-packed.
But yesterday was a snoozer. (I had to poke myself to stay awake.)
Stocks couldn’t have been any flatter – the S&P 500 fell a sleepwalking 0.02% – even though the Federal Reserve’s quarter-point boost took interest rates to a 22-year high.
I know the interest-rate bump was pretty much universally anticipated, but even Chair Jerome Powell’s post-hike press conference couldn’t shake the lethargy. Maybe Wall Street headed to the beach beforehand. Or took a tranquilizer.
Please don’t let this “nonreaction reaction” lull you into a similarly sleepy state.
Don’t be infected with Wall Street’s apathy.
It’s time to be active – to take action.
Now is the time to own stocks.
If you’re already invested, look to buy more if you can.
And if you’re waiting for the Fed to declare victory in its war on inflation – and to say that it’s done raising rates – you’ll miss out as stocks really start roaring while you’re still snoozing.
We’re supposed to be deep in the summer doldrums right now…at least, that’s the narrative (recent gains notwithstanding). And I guess with $5.7 trillion parked in money-market funds (according to the Federal Reserve Bank of St. Louis), you can make the case that most investors remain in summer-hammock-lounging mode.
But that somnambulant narrative – coupled with those trillions of dollars in dry powder – say “opportunity” to me. I view the current “doldrums” as a chance to get locked and loaded before the next Big Lift gets triggered, and we wrap up 2023 on an explosive note.
I could give you tons of reasons why I’m predicting this.
But I’ll focus on the three most important… and then I’ll tell you where to find the best opportunities right now.
Big Lift Trigger No. 1: Inflation Is, Well, Deflated
We’ve been lulled to accept rate hikes over the last year-and-a-half. Like a well-crafted Broadway production, they’ve become part of the backdrop – the scenery you know is there but don’t pay close attention to.
But if you watch the numbers like I do, you’re able to take a step back and see that somebody changed the backdrop.
And most of the “audience” hasn’t a clue.
Consider this: The Fed’s long-term goal for inflation is 2%. And the newest data (from just two weeks ago) tells us it’s now at 3%.
In other words, while the inflation rate isn’t yet in the Fed’s preferred neighborhood, it’s at least in the preferred zip code. More important, inflation is falling and there’s no sign that trend will change.
When it comes to interest rates, that means the Fed’s navigation system is about to say, “You’ve reached your destination.”
Here’s another “we’re-almost-there” data point you’re not hearing about. The Fed Funds rate – which the central bank uses to guide market rates – now sits at 5.25%-5.5%. As we said, that’s the highest in more than 20 years.
This is important because it’s now way above market interest rates. The 10-year Treasury bond yields a much-lower 3.9%. That’s a massive spread, and the Fed will be playing with fire if that gap widens much more than it is now. The Fed historically doesn’t fight market rates.
Look, even though Fed Chair Jerome Powell dangled the potential for additional rate increases, I believe the central bank’s inflation fight is over – meaning the credit-tightening campaign is finished. Honestly, though Powell had been saying another rate increase or two was possible ahead of this week’s meeting, I thought Fed policymakers would leave rates alone.
But the Fed did act this week, and I understand why. Inflation is a virulent pest – a parasite not to be taken for granted. Powell knows this and wants to be sure inflation stays down. But unless the data changes significantly, it’s hard to imagine another increase. I look for rates to level off for a bit, and – before we know it – we’ll be talking about rate cuts in the New Year.
Yes, I really said cut. Powell even acknowledged this possibility in his press conference yesterday.
My Takeaway: The hope for the end of the rate-increase campaign has been a big ignitor for stocks, with the S&P 500 up 27.5% from its lows back in October. If you wait any longer to buy stocks, you’ll miss out on even more gains.
I can tell you that Big Money isn’t waiting.
Big Lift Trigger No. 2: Big Money Is Already Investing
Big Money accounts for 70% to 90% of daily trading volume.
That’s right: Big Money is what really movesstocks.
You want to invest with Big Money and not against it.
And Big Money is loving stocks right now.
My Quantum Edge system grabs and analyzes targeted data that reveals the fingerprints of Big Money (despite its best efforts to wear gloves). I call the broadest gauge in my system the Big Money Index (BMI).
It gives me an instant snapshot of what the real Wall Street “smart money” is doing. And at the moment, my index shows that nearly 80% of all Big Money activity is BUYS.
If you notice the dotted red line on the chart, you’ll see a reading that high actually means stocks are close to being overbought. But that’s ultimately a good thing, as my data also shows that, historically, stocks continue higher in the months to come.
It does mean we can expect a pullback sometime in the coming weeks… and that would be a buying opportunity in the market’s best stocks – with all of the ingredients to continue running to higher prices.
A pullback could come all at once with most stocks dipping together, or it could come by sector or even by individual stock. No matter how it happens, you should pounce ahead of the Big Lift that’s coming.
My Takeaway: As you decide which stocks to own, remember the Quantum Edge trifecta of excellent fundamentals, strong technicals, and Big Money inflows. (More on this in a moment.)
Big Lift Trigger No. 3: Record Fuel for the Next Launch
So, let’s set the scene.
Inflation is falling. Interest rates are about to level off. The economy is holding up nicely. Consumers continue spending. Corporations continue profiting.
Pretty bullish, wouldn’t you say?
But stocks have already surged 30% in a mere nine months, meaning you’d be buying near the top, right?
Going back 90 years, bull markets (yes, we’re in one) lasted nearly five years on average. The shortest was actually the post-pandemic bull that started in March 2020 and lasted 21 months.
At nine months, the current bull market has yet to celebrate its first birthday.
And there’s plenty of fuel to keep the market’s rocket engine burning – maybe for a long time, even.
Stocks are fueled by cash, and right now we have the mother lode available. We currently have $5.7 trillion sitting in money market accounts.
That’s the highest amount ever, and it’s not really helping folks at all. I mean, the average money-market account has an annual yield of just 0.23%, according to the FDIC. So much for higher interest rates, right?
Stocks have waged an immense rally since October without all that cash. So just imagine what’s going to happen once inflation is “officially” controlled, the Fed stops raising rates, and a growing numbers of folks wake up to the fact that they’re missing out.
The rubber band will snap back in the other direction, and we might well see record levels of cash coming back into stocks.
My Takeaway: I’ve been predicting a big finish to 2023 since the year started. I am more confident than ever in that scenario. In fact, I now think that “finish” will be even bigger than I originally anticipated… and that’s saying something. Don’t get caught napping.
It’s easy to see why you need to invest in stocks, so the next question is… which stocks?
The best stocks to own in a bad market are also the best ones to own in a bullish market.
They have the highest probability of making you money… and you’re likely to make more of it.
They have superior fundamentals, powerful technicals, and Big Money coming in.
You can find these elite companies in most corners of the market, though it may take some digging in some of the darker, out-of-favor sectors.. To focus your list of possibilities, start with the strongest sectors right now.
My Quantum Edge system helps us here as well, as it also ranks sectors. Here’s the very latest data…
With an excellent Quantum Score of 67.1, tech is clearly the big winner, as it has been for most of 2023. Notice, too, that the second- and third-strongest sectors are Discretionary and Industrials. Those are growth sectors, which tells you what Big Money is anticipating.
Here’s a peek at actual tech sector data from my system. The green bars are Big Money buys; the red bars are sells. That picture is worth a thousand words, but I can say it in 11: Big Money is buying a lot more than it is selling.
I’m not suggesting you throw common-sense diversification rules out the window. But I am saying that Big Money is clearly flowing into tech. That makes sense in the big picture, since tech will drive a lot of the global economy’s growth going forward.
We’re temporarily overweighted in tech in my Quantum Edge Trader service, with five of our nine stocks in that top sector. It’s paying off. Our average gain in those stocks is 13%, led by a 24% surge in Synopsys (SNPS) and a 19% pop in Advanced Micro Devices (AMD).
Both are way over our buy limits, but both have all the ingredients to move higher. If I didn’t already recommend them to my readers, I would look to grab them on pullbacks.
Only one of our tech stocks is down right now. Our newest buy is 1.8% below where we got in. I can’t give away the name here, but I can tell you that it is one of the highest-rated stocks in my system, which makes it an exceptionally strong buy right now. (Click here if you’d like to learn more and receive access to the stock’s name and the full portfolio.)
A lot of money has been made already, but there is even more yet to be made. With all that cash on the sidelines, inflation on the decline and growth sectors still powering the market higher, I expect even bigger gains in the months ahead.
It’s not too late to get ready, but time is running short.
Jason Bodner’s Power Trends
P.S. I already have a Watch List of powerhouse stocks to add on pullbacks.
One is a well-known software company that just hit new 52-week highs. Its Quantum Score is an outstanding 84.5, and it is positioned to ride the artificial intelligence wave higher.
I suggest you develop a Watch List of your own. And if you want to be alerted when I do recommend my next stock, click here to learn how.