Heavy selling pressure … how Louis Navellier’s and Matt McCall’s Power Portfolio is shaping up for 2020 … where the market goes from here
As I write Wednesday mid-day, the Dow is down 700 points on fears of rising coronavirus cases.
The selloff carries an interesting twist …
Historically, today is the best-performing day of the entire year for stocks.
As we’ve noted before in the Digest, from 1980 through 2018, the best quarter for stock performance has been the fourth quarter.
Meanwhile, the best single month for stock performance has been April.
And data compiled by LPL Financial finds that, historically, the S&P 500 averages its highest return of the entire year on October 28th.
… the S&P 500 Index has averaged a 0.54% return on October 28, better than any other day of the year — with the day after Christmas the second best.
On the downside, October 19 has been the worst day of the year, and we can thank the crash of 1987 for that one.
Today’s volatility combines fears related to soaring coronavirus case numbers, with President Trump’s apparent acknowledgement that a stimulus package won’t be passed prior to the election.
The downward market pressure brings up a question — has something changed?
Is it time to get more bearish on the market as we close out 2020?
We’ll answer that with the help of Louis Navellier and Matt McCall shortly. But first, as we enter the home stretch of the year, let’s return to Louis’ and Matt’s Power Portfolio.
***Two analysts come together to create one, elite portfolio
At the beginning of the year, Louis and Matt found themselves sharing very bullish market views — which wasn’t a popular opinion at the time.
You may recall that many investment talking heads were bearish based on an inverted yield curve a few months prior, expensive valuations, and one of the oldest bull markets in history.
But Louis and Matt saw things differently — in short, they saw big gains coming in 2020.
Realizing this, they came together to create the Power Portfolio.
It was a collection of 12 stocks, each one hand-selected due to its potential to crush the market in 2020.
***What made these picks different is that they had to meet the criteria of two different strategies
Louis is a classic quantitative investor. That means he has objective criteria programmed into highly-advanced computer models that signal what to buy, when to buy it, and when to sell to collect the profits.
Matt is more of a thematic and technology investor. He analyzes entire sectors that are poised for huge growth like electronic vehicles, 5G or Artificial Intelligence, then finds the most explosive way to play those trends.
The Power Portfolio combined these two different market orientations, requiring its holdings to meet both sets of standards.
As you can imagine, very few stocks did — only about one out of 500.
Given this, at its core, the Power Portfolio was a “best of breed” portfolio, blending Louis’ and Matt’s styles to identify a small selection of elite stocks they believed would grow significantly in 2020.
***The status of the Power Portfolio guarantee
Louis and Matt were so confident in their 12 picks that a subscription to the Power Portfolio came with a guarantee …
If, by the end of 2020, the average gain of these 12 picks wasn’t at least triple the return of the Dow Industrials, subscribers would get another year of the research service for free.
Given that we’re about two months away from 2021, let’s check in on how the guarantee is holding up.
On the year, the Dow is now down 6.3%.
Meanwhile, the Power Portfolio is sitting on an average gain of 22%, including today’s selloff. In other words, it’s easily making good on the guarantee.
Even if we compare it to the S&P 500, which serves as the official yardstick for most investors, the Power Portfolio guarantee is holding up.
Louis and Matt’s 22% gain is 11X the S&P’s 2% gain on the year. We’ll be wrapping up 2020’s Power Portfolio and bringing you information about 2021’s Power Portfolio as we get closer to the new year. Stay tuned …
For now, let’s return to how Louis and Matt are viewing the remainder of 2020, Power Portfolio or not.
***Our experts are eyeing a strong finish to the year despite current volatility
A few weeks ago, Louis and Matt updated their Power Portfolio subscribers on their 4th quarter views:
There’s a lot to watch in the last quarter of the year, but we both still see strength beneath the surface of the market that should ultimately lead to a strong year-end rally.
To start with, the economic news is great.
The data continues to show a sharp V-shaped recovery — like in durable goods, retail sales, ISM manufacturing and service sector reports, productivity, import/export data, and steadily declining unemployment claims.
At the same time, Federal Reserve Chairman Jerome Powell recently signaled that the Fed will keep key interest rates near zero through 2023, which is a year longer than previous guidance.
The Fed also wants to push inflation above 2% to stimulate economic growth, which is fine with us. Consumers will spend, most fixed-income investments return very little with rates so low, and investors will turn to stocks.
Though Matt and Louis acknowledge the potential for volatility surrounding the election next week — which is part of what we’re seeing with today’s down market — neither believes the outcome will curb the growth potential of certain, elite stocks.
They then point toward a huge tailwind that should be driving the market higher … cash:
Americans have been holding on to cash during the pandemic, which is understandable.
When COVID-19 hit, the economy basically shut down. The government started sending out stimulus checks, and cash in checking accounts quickly surged to $3.6 trillion — a 56% jump in less than a year.
In fact, the $1.3 trillion increase in checking deposits over the last few months nearly matched the $1.5 trillion increase over the prior 10 years.
This leads to the trickle-down effect.
Hundreds of billions (if not trillions) of dollars will be invested and spent on goods and services. Companies must supply those goods and services to their customers, increasing demand for raw materials and human labor.
This cycle plays out as spending continues, unemployment falls, and wages increase.
Now, this analysis is encouraging. But it’s also from a few weeks ago.
Given this week’s significant selling pressure, we should ask — has something changed?
***Louis’ latest thinking on the market
This morning, Louis sent his Platinum Growth Club subscribers a flash alert, commenting on the market volatility.
Let’s jump straight into his analysis:
The trigger for the selloff was the rising COVID cases in Europe …
I do expect a big bounce because the earnings season has been stunning for us.
So, ride through this, let the earnings do their thing. When all the dust settles, we’ll be the winners. I’m not worried about it …
Louis then points toward strong economic growth as a reason why he’s still bullish.
He notes how the Atlanta Federal Reserve just upwardly revised its 3rd quarter GDP estimates to 36.2%, which Louis calls “stunning.” He suggests this revision might be because we had a great durable goods report earlier in the week. There were also strong export numbers.
Back to Louis on the takeaway:
People can poo-poo the U.S. economy, but the truth of the matter is it’s growing …
I feel very, very good right now that we’re in the midst of a very strong V-shaped economic recovery.
For more from Louis as a Platinum Growth Club subscriber, click here.
***The final takeaway
Perhaps the best way to wrap up today is by returning to Louis’ and Matt’s Power Portfolio update from a few weeks ago.
They sum things up simply — they’re not on the sidelines.
Given the gains they anticipate, they’re 100% in the market, regardless of the uncertainties of the election, coronavirus, and economy.
Here they are with the final word:
Our portfolio remains fully invested, and our stocks stand to benefit from that money coming into stocks in what should be a strong finish to the year.
Have a good evening,