Here’s how I expect things to play out over the next few months. First-quarter earnings season is winding down, but it won’t be long before the market starts to focus on second-quarter earnings season.
The time in between first- and second-quarter earnings, which I like to call “earnings pre-announcement season,” will start in June. Since investors are anticipating the upcoming earnings season, large-cap stocks usually do well in early summer. Then, we’ll get the bulk of second-quarter announcements in July.
As for August, this is usually when the market catches its breath. This is when a lot of Wall Street professionals go on long holidays. So, trading volumes are light.
However, I’d like to point out that August 2014 was the exception to the rule. Between plummeting German bond yields and increased stock buyback activity, the market kept afloat last summer. Therefore, we can’t always assume that stocks will pull back in August.
Furthermore, this year, we’re in a unique situation because trading volumes are unusually low, and as long as there’s low volume on the downside, that’s a good thing.
Regardless of whether we get a repeat of last year, or if this August is a bumpy ride, we should be in good shape as I expect the flight to quality dividend stocks to continue. The strong U.S. dollar is still suppressing sales for multi-national companies. So, most of S&P 500 has no sales growth and meager earnings growth. For this reason, more and more investors are resorting to stock-picking rather than sector bets.
In addition to having excellent forecasted sales and earnings growth for the next few quarters, we are well positioned in dividend stocks. High-yield dividend stocks — especially conservative stocks like Altria Group Inc (NYSE:MO), Home Depot Inc (NYSE:HD) and Reynolds American, Inc. (NYSE:RAI) — act as a ballast when the market gets choppy.
Dividend stocks are more likely to rally on down days, and they also provide a steady stream of income even when growth stocks are hit with profit taking. So, while there may be some near-term dips, they should be viewed as buying opportunities.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.