This hasn’t exactly been a smooth year for stocks, but the end result is impressive.
The S&P 500 more than doubled historical averages with a 25% pop. All three major indexes hit 52-week highs here in December, with the Dow and Nasdaq even hitting new all-time highs.
But the ride to those all-time highs was filled with five sharp moves – up, down, up, down, and up. Fortunately, those last two up moves were monsters.
As we sit on the cusp of a new year, now is the time to own stocks. The darkest clouds that blew the strongest winds last year are parting, and the data indicates 2024 could be another unusually strong year – especially if you own the right stocks.
Those are the stocks with the best fundamentals, strongest technicals, and largest Big Money inflows in the market. More often than not, they also operate in massive trends that are changing the way we live and thrive.
Here are five key data points showing why these stocks are set to continue their outperformance in 2024… and why owning the best stocks in the market is a worthwhile New Year’s resolution.
Catalyst #1: Stocks Start Off Well in the New Year
I’ve shared this chart before because it tells the story of a strong fourth quarter. But now look at the beginning of the year. The first four to five months are generally good.
I think the early part of 2024 could be better than usual because…
Catalyst #2: Rate Cuts Are Coming
The Federal Reserve began raising interest rates nearly two years ago to fight inflation. Eleven increases later, rates were as high as they’d been in 16 years.
But the Fed has hit the pause button. And more importantly, the idea of rate cuts has crept into the central bank’s forecasts. Investors got as much of a “green light” as possible from the Federal Reserve in December with the projections clearly showing the expectation for cuts in 2024 and 2025.
In fact, Fed members telegraphed six cuts, which include rates falling by 0.75 percentage points in 2024.
I expect rate cuts sooner rather than later – I’m targeting the first quarter – because the current situation is imbalanced. The rate set by the Fed (the Fed Funds Rate) stands at 5.25%–5.5%, which is way higher than both inflation (3.1%) and 10-year Treasury bond yields (3.9%).
These gaps are unsustainable and won’t stay that way, especially with inflation market interest rates already falling. The Fed does not like to go that far against the grain.
This is the information the investing world has been waiting for, and we see it in the data. Big Money is buying in all sectors except energy. And just as important, the growth sectors – Technology, Discretionary, and Industrials – rank the strongest.
Big Money has already been investing for the end of rate hikes, and when we get more definitive signals that cuts are coming, the fuse will be lit.
We are close because…
Catalyst #3: The War On Inflation Worked
You and I didn’t like paying higher prices for groceries, gasoline, eating out, vacations, or anything else. And while we still don’t, things have improved dramatically.
Inflation is much closer to the Fed’s target rate of 2%:
And, by the way, that 2% target rate is a unicorn – it only exists as a bit of stock-market mythology. I ran a personal study on the consumer price index – going all the way back to its 1960 creation. The average reading over the last 63 years is 3.77%. That’s nearly double the 2% goal – and the current rate of 3.1% is lower than the six-decade average.
That level of inflation certainly wasn’t harmful to stocks: The S&P 500 has gained more than 46,000% during that studied 63-year span.
Higher rates cooled the economy, which was a necessary side effect. But the economy has proved amazingly resilient and surprised an awful lot of folks with its strength.
We see this strength as…
Catalyst #4: Earnings Are Growing Again
We’ll start the next earnings reporting season in just a few weeks, but the tide has turned.
The second quarter of 2023 marked the end of earnings declines for now. S&P 500 earnings grew 4.9% in the third quarter, and expectations are for continued growth of 2.4% in the upcoming fourth-quarter reports.
Looking ahead to 2024, analysts expect S&P 500 earnings to grow 12%, well above the 10-year average of 8.4%.
Expect money to flow into stocks as rate hikes end, rate cuts begin, and earnings grow. And there is a lot of cash ready to flood in, providing…
Catalyst #5: Tons of Fuel for Stocks to Launch
The $6.1 trillion in money market accounts, according to the Fed’s latest report, is far and away the most ever. It’s about one-fifth of the entire U.S. economy.
I call it a “cash bubble,” and its more than enough fuel for a test launch. It’s enough for a long journey into the future.
Investors stung by 2022 resisted the bull market of 2023, but they can’t much longer. Money managers aren’t paid to park funds in cash. They’re paid to grow funds, so there’s an inherent pressure to have that money working.
And as interest rates fall, the return on that cash will also fall. This bubble is likely to end with money pouring into stocks rather than out of them.
As these catalysts kick in, FOMO (“fear of missing out”) will also kick in. In fact, I think we’ve seen some of it already as stocks shot higher when November started.
But there’s still a tidal wave of cash to come back into stocks.
The Stocks to Buy Now
Stocks enjoyed a great rally in November and December, and while pullbacks are normal and healthy after strong runs, they do not mean the bear will come out of hibernation.
And don’t let higher prices scare you out of future profits. My quantitative analysis through the years shows without a doubt that higher prices almost always lead to higher prices.
Stocks with high Quantum Scores (my system’s overall rating of a stock) have the best fundamentals in the market, some of the strongest technicals you can find, and Big Money flowing in. These are the stocks most likely to run a lot higher in the new year.
My system’s win rate is roughly 70% historically, and that’s through all market conditions. These muscular stocks have an even higher win rate and bigger moves when the overall market is also rocking and rolling.
They are the kinds of stocks you want to own to grab your share of what could well be some pretty special gains in 2024.
If you want the benefit of investing in stocks with high Quantum Scores that are leading the way in the world’s biggest megatrends, you can click here to learn more about how we do it.
I wish you much health, happiness, and prosperity in 2024!
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends
