Louis Navellier expects upcoming market strength … what we can learn by watching institutional investors and traders … Luke Lango is expecting to 5X his portfolio
Next week brings the big Fed meeting that is all-but-certain to introduce the first rate hike since December of 2018.
If legendary quant investor Louis Navellier is right, look for stocks to surge afterward, with gains continuing in the second half of March.
Here’s Louis from his Accelerated Profits Market Update podcast earlier this week:
I think you’ll see a better bounce after next week’s Federal Open Markets Committee meeting. On Wednesday, the Fed is probably going to increase rates a quarter-percent to get more in-line with market rates.
But then they’re going to be very cautious on their guidance. And as long as they’re dovish on their guidance, the market is going to explode.
And the second half of March is all going to be about quarterly window dressing. The institutional managers going in there and making their portfolios pretty.
For newer Digest readers less familiar with the idea of “window dressing,” here’s how Louis has explained it in the past:
There’s another trick Wall Street money managers have up their sleeves. It’s called “window dressing.”
When we approach the end of a quarter, big money will often buy top-performing stocks to spruce up their returns when they report the performance of their current portfolio.
This institutional buying pressure can act as a powerful tailwind for the prices of fundamentally superior stocks as a quarter comes to a close. This is the type of stock that Louis’ computer algorithms are engineered to find.
So, Louis is looking for a strong bounce in the market next week, followed by continued strength as we move later into March.
How are our technical experts, John Jagerson and Wade Hansen, seeing things?
***What Wall Street traders are telling us about the potential for steeper market declines
John and Wade are the analysts behind Strategic Trader. This premier trading service combines options, insightful technical and fundamental analysis, and market history to trade the markets, whether they’re up, down, or sideways.
So, what direction do John and Wade expect we’ll be heading in the near future?
In their Strategic Trader update from Wednesday, they answered this by looking at two clues we can take away from watching the buying behavior of big-dollar institutional investors and Wall Street traders.
From their update:
We can track demand from institutional investors for protective options on the S&P 500 through the CBOE’s SKEW index.
When traders are in a panic about a potential market crash, the SKEW rises as demand for portfolio “insurance” or protective options spikes. Right now, the SKEW is still near the low end of its long-term range.
Similarly, if traders were expecting an economic downturn, we would see traders dumping riskier stocks like small caps. As you can see in the following chart, the Russell 2000 small cap index is still holding at the same support level it hit in January.
John and Wade note that, despite these reassurances from institutional investors and traders, we’re not on the cusp of a big market drop, so they’re not adding risk to their portfolio just yet.
The green light for that will come when they see meaningful, sustained progress toward the end of the Russian/Ukraine crisis.
***Meanwhile, Luke Lango is expecting more market volatility, yet is urging investors to take advantage of slashed prices in the tech sector
Luke is our hypergrowth specialist. In Early Stage Investor, he focuses on small, innovative technology companies that are transforming our world – and potentially creating enormous investment wealth in the process.
As you’re likely aware, this type of stock has been punished by Wall Street in recent months as risk-off sentiment has grown more pervasive. But this has resulted in what Luke believes is an opportunity to buy tomorrow’s tech market leaders at bargain prices.
The challenge is preparing yourself for what could be more volatility in the near term so that you don’t miss the chance to position yourself for huge returns in the long term.
Here’s more from Luke’s Early Stage Investor Daily Notes:
We continue to foresee near-term turbulence in the equity markets and caution against getting too bullish…
Instead of paying close attention to the daily price action, we continue to emphasize an unrelenting focus on our “5X5” Plan, in which we project that our entire portfolio will rise by 5X or more over the next five years.
A reminder that Luke is referencing innovative, disruptive technology leaders when referencing “our portfolio.”
To prepare readers for more short-term volatility, Luke points toward commodities as a driver of upcoming market moves. Though oil prices saw a 10% drop earlier this week, Luke believes prices could be marching higher again soon, which could impact stocks.
Back to his Daily Notes:
The catalyst for the commodity sell-off (earlier this week) isn’t very strong.
The U.S. administration is reportedly considering easing sanctions on Venezuelan oil to help stabilize global supply. While that should help, Venezuelan oil production (~530,000 bbl/day) is a drop in the ocean compared to Russia’s (~10 million bbl/day). Therefore, the net impact here is still a supply-constrained global oil market.
In other words, the fundamental backdrop remains one where commodity prices should go higher, not lower. To that end, [Wednesday’s] drop in prices may be short-lived – and so may be the equity market bounce.
***But after acknowledging the likelihood of more near-term pressure on the markets, Luke makes a critical redirect
Back to the update:
We also believe all of this geopolitical chaos is creating a fantastic multi-year buying opportunity.
Today many hypergrowth tech stocks are trading at completely washed-out valuations – almost entirely disregarding the fact that these companies will grow their businesses by leaps and bounds over the next few years.
Simply consider this. While the equity markets appear to be singularly focused on rising oil prices, global solar installations continue to rapidly expand; global EV sales continue to rise; global e-commerce and digital advertising spend continues to move higher, and enterprise spending on automation software, cybersecurity, and DevOps is quickly multiplying…
Once today’s macroeconomic fears pass and renewed bullish sentiments couple with sustained large operational growth, we expect many hypergrowth tech stocks will soar over the next few years.
As noted earlier, the challenge is being able to step in and buy when market conditions appear bleak.
In Wednesday’s Digest, we wrote that the big money isn’t made by buying in blue-sky, sunny conditions when everyone is bullish. It’s made by buying when things appear dark and scared investors have left prices in the gutter.
Of course, this can be incredibly difficult. It’s why courage and a long-term vision such as the one Luke urges is critical.
We’ll end with one of my favorite quotes on this topic. It comes from Rob Arnott, founder of Research Affiliates, which manages more than $160 billion:
In investing, what is comfortable is rarely profitable.
Have a good evening,