Small-cap stocks have been soaring lately.
The Russell 2000 index just hit a 52-week high on Monday and has risen 22.9% year-to-date, overtaking the Dow Jones Industrial Average’s and NASDAQ Composite’s gains over the same timeframe and coming in just behind the S&P 500’s 24.2% gain.
My Breakthrough Stocks, on average, have continued to benefit from an early “January effect” that begins as yearend pension funding, annual gift-giving and other positive seasonal events create buying pressure on higher trading volume.
An early January effect tends to significantly boost small-cap stocks, which is great news for my Breakthrough Stocks. As a result, they tend to flourish between November and May. I must say that after more than 40 years of publishing, I’m still amazed at how small-cap stocks often surge this time of year.
This played out late last year and into this year. You can see in the chart below how the Russell 2000 grew over 35% from November 2020 through mid-January 2021.
Given the Russell 2000’s strength this year, I expect history to repeat itself. I should note that, generally speaking, November, December and January are historically the three best months for the stock market. In fact, the Dow Jones Market Group reports that the S&P 500 and Dow both gain about 3.4% during this three-month span, while the NASDAQ tends to rally 6.3%. So, we have three months of seasonal strength in front of us!
Now, there are a couple of risks investors need to keep their eye on. But the one folks are most concerned about right now is inflation.
Consumer prices, as tracked through the Consumer Price Index, climbed 6.2% in October from a year prior, which represents the largest rise in over 30 years, and the fifth consecutive reading above 5%. Higher prices for natural gas, gasoline and used cars were a significant cause of the price gains in the index.
The Labor Department also reported October’s Producer Price Index jumped 8.6% from a year ago, the fastest increase in 11 years.
In fact, inflation has become a global problem. China’s latest Producer Price Index soared 13.5% from a year earlier, its fastest growth rate in 26 years.
Interestingly, central banks around the world want to do nothing about it so far and I think it’s sad they think and move in unison like that.
Higher inflation tends to leave investors with limited options to look for yield. Real estate is one possibility, though there are signs the housing market is cooling a bit. The median price for a single-family home in the third quarter increased 16% to $363,700, according to the National Association of Realtors. That was down from the 23% rise in the second quarter.
That leaves fundamentally superior stocks as an excellent inflation hedge. Fact is, many high-growth tech companies can raise prices as inflation rises.
Case in point: my Breakthrough Stocks.
Overall, they’re characterized by 52.5% average annual sales growth and 401% average annual earnings growth. So, I remain very optimistic that my Breakthrough Stocks will continue to post substantial earnings surprises and garner more and more investor attention in the upcoming months.
The bottom line: The current confusing, inflationary environment is causing a major stock market rotation into quality stocks that are characterized by strong sales and earnings momentum. The stock market is now shifting its attention back to fundamentally superior stocks, and money is increasingly flowing into my Breakthrough Stocks.
Now, if you join me at Platinum Growth Club, you will have access to this Breakthrough Stocks’ November Monthly Issue and my three newest recommendations and more than 100 stocks across all my services and nearly 30 LEAPS call options, and each and every one boasts strong sales and earnings growth.
I handpick all of my Model Portfolio recommendations from my different stock services – Growth Investor, Breakthrough Stocks and Accelerated Profits – so you can rest assured that you’re investing in the best of the best.
Of course, you don’t have to invest in all 100+ stocks to grow and prosper this year. If you’d rather start small, I have you covered there, too. My Platinum Growth Club also comes with my exclusive Model Portfolio. I handpick all of my Model Portfolio recommendations from my different services, so you can rest assured that you’re always invested in the crème de la crème.
Sign up here now so you don’t miss out!
Sincerely,
Louis Navellier
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
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