Regular readers know that we are still bullish on many aspects of the stock market.
And that remains the case today.
But many people have turned bearish and we understand why.
Clearly, there are a lot of confusing signs about what direction the market is headed in 2019.
It’s a nervous time…
There are conflicting signs are all over the media.
The fourth quarter of 2018 was extremely volatile, and stocks took a beating.
But many stocks were oversold. Since Jan. 2, stocks have done very well. The S&P is up a little more than 5% since the first trading day of the year.
Earnings season has started on Wall Street and the news is pretty good so far.
So far, the companies in the S&P 500 that have reported have posted 7.8% annual sales growth and 21.5% annual earnings growth and many have stated that the bull market is back.
But it’s important that we don’t just see what we want to. We have to take a realistic view and consider all the information.
And right now, concerns about global growth are looming over everything.
Yesterday, China released data showing that it’s economy grew at 6.6% in 2018, the slowest pace since 1990, according to The Wall Street Journal.
Concerns about China stocks has lead to an increase in search volume on this topic at InvestorPlace.com. InvestorPlace Contributor Luke Lango wrote a piece on seven retail stocks with worrisome exposure to China.
In the wake of the news from Apple about slower than expected iPhone sales in China, Lango penned another article on the tech companies that don’t depend on China for profits.
But China’s slowing economic growth has not been the only concern.
Yesterday, the International Monetary Fund released its report on global growth and said that weakness in China and Europe led them to downgrade global growth estimates.
The IMF predicted the global economy to grow at 3.5 percent in 2019 and 3.6 percent in 2020, down 0.2 and 0.1 percentage point respectively from last October’s forecasts.
According to Reuters, the IMF cited a bigger-than-expected slowdown in China’s economy and a possible “No Deal” Brexit as risks to its outlook, saying these factors could downgrade conditions for growth and increase volatility in financial markets.
Below is a chart reflecting IMF estimates for the percentage of economic growth in advanced economies from 2018 to 2020.
You can’t blame the average investor for worrying if growth has plateaued and now we are headed down.
Many have taken to the sidelines.
Assets in money market funds increased by more than $2 billion this month according to Lipper data.
Some see the cash as a sign of a bottom. Investors are holding cash just waiting to get the high sign that stocks are headed higher. Others simply note that it means investors are gun shy about opportunities and it’s going to take a significant rally to get that money back I the market.
After taking all this in over the last few days I was reminded of the advice of Louis Navellier.
Louis continues to call these trends earlier than anyone else.
Previously, Louis urged everyone to put money into China stocks because of their growth potential.
This summer, he made a major call about the future of the markets. He urged everyone to get out of Chinese stocks, and put their money into a certain type of stocks that were due for big gains as global market volatility accelerated.
And that was the right call.
I’ve highlighted before how he has predicted more gains in 2019. Not gains for the broader market generally, but for a certain type of stock.
He noted that the number of stocks with high growth potential has dwindled, but there is still room for rallies if you know where to look.
For subscribers of his Growth Investor service, Louis has identified those stocks that can still thrive in this market.
His record over more than 25 years makes him uniquely qualified to help investors profit in any market condition.
But you don’t have to take my word for it.
Forbes has dubbed Louis the “King of Quants” and the New York Times called him “an icon among growth investors.” That’s not a reputation lightly earned.
Louis believes that last year’s tax reform law is about to cause an avalanche of money to rush into a very specific kind of stock.
As you know, the new tax law slashed the corporate tax rate from 35% to 21%.
According to Forbes, the corporate tax cut will save US corporations $600 billion in taxes over the next decade.
That’s $600 billion not going to Uncle Sam that companies will now put to use elsewhere.
That’s a lot of money, but it’s not even the biggest piece of the big tax reform cash avalanche that’s coming.
According to the Citizens for Tax Justice, the total amount currently being stashed overseas by Fortune 500 companies in order to avoid paying U.S. corporate taxes tops $2.6 TRILLION!
Just look at some of the names on this chart… Apple, Coca-Cola, Amazon, GE, Microsoft, Gilead, Intel… we’re talking about big, blue chip companies hiding billions overseas.
But the new tax law holiday lets companies bring back that cash at a 15.5% tax rate.
With $2.6 trillion sitting overseas, that’s potentially a $400 billion windfall for Uncle Sam…
And a more than $2 TRILLION bonanza for investors as companies put all that repatriated cash to work.
So where will it go?
Not where you’d expect.
Louis has prepared a presentation detailing where money is flooding the market right now and how subscribers to his Growth Investor service can take advantage.
Louis has managed to make money in every market condition you can imagine – bull, bear and everything in between.
Once you see why he is making this call, I think you’ll agree with his assessment.
To see the complete presentation, just click here.
As always, I want to encourage Digest readers to reach out to us with their opinions and questions. Is the 10-year bull market over, or is there something left?
To a richer life..
Luis Hernandez, Managing Editor
and the research team at InvestorPlace.com
