The dog days of summer have officially arrived.
Typically, August volatility intensifies as the month progresses.
But this year, August has been characterized by wild market swings from the onset. All of the major indices have oscillated over the past three weeks, with the S&P 500, Dow and NASDAQ down 3.8%, 3.9% and 4.9%, respectively, so far in August.
The fact is that it is every stock for itself right now – and the ones that have outperformed recently are well-positioned to profit from a few trends that have emerged in recent months.
We want to remain invested in the current “hotspots.”
In today’s Market 360, I’m going to share three market hotspots right now – and tell you how you can access my recent Growth Investor Buy List recommendations.
Let’s jump right in…
1. Consumer Staples
The U.S. economy may not be hitting on all cylinders right now, but it is hitting on a lot of cylinders – and that’s a very positive sign.
Manufacturing remains a concern, with eight-straight months of contraction and more manufacturing job losses over the past two months. But, as you probably know, consumer spending accounts for nearly three-quarters of total GDP growth; and right now, Americans continue to open their wallets.
The U.S. economy remains consumer-driven, and the latest retail sales report ignited big revisions to forecasted GDP growth. The Atlanta Fed now expects the U.S. economy to grow at a 5.8% annual pace in the third quarter, which is up from previous estimates for a 4.1% annual pace last week.
Considering this, I anticipate that consumer plays, some of which I hold in my Growth Investor Buy List, will continue to exhibit relative strength and climb higher in the upcoming weeks and months.
2. Oil Refiners
The second-quarter earnings announcement season also shined the spotlight on the fact that refiners are making a lot of money right now.
You see, refiners benefit from the “crack spread” between crude oil prices and refined product prices. For the better part of the year, crude oil prices have been suppressed, while demand for refined products has been high. So, refiners have been making money hand over fist.
I should also add that inventories are low. In fact, Phillips 66 (PSX) recently noted that gasoline inventories are 7% below five-year averages, and distillate (diesel, heating oil, etc.) inventories are 19% below averages.
So, as long as global demand remains elevated, which is anticipated at least through yearend, prices will remain high, and refiners will continue to profit.
I own several refiners in my Growth Investor Buy Lists.
3. Artificial Intelligence
The artificial intelligence (AI) craze has driven much of the NASDAQ’s impressive 30% rise year-to-date.
And while there’s been some pullback of late, AI isn’t going away any time soon.
The reality is that analysts have expected extraordinary profits from AI companies like Super Micro Computer (SMCI) and NVIDIA Corporation (NVDA). Super Micro Computer’s results were impressive, with 116.4% annual earnings growth and 37% annual sales growth in its fiscal year 2023.
And as we discussed yesterday, NVIDIA knocked earnings out of the park.
I expect AI to continue to propel growth in stocks like these in the weeks and months ahead.
Prepare Your Portfolio for Anything
I know the August volatility has been a bit hard to stomach recently, especially when it drags down our fundamentally superior stocks – even if they post strong quarterly results.
This consolidation is merely profit-taking.
So, if we can stay invested in the hotspots, we’ll continue to weather the dog days of summer better than most.
In the Growth Investor Monthly Issue for September which was just released, I talk about why it’s important to keep your personal portfolios fully diversified and how I’ve structured the Growth Investor Buy Lists to weather volatile months like August by investing in stocks that “zig” when others “zag.”
I also added three new stocks to the Growth Investor Buy List this month to further diversify my portfolio – including one consumer-related stock.
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:
Phillips 66 (PSX), Super Micro Computer (SMCI), NVIDIA Corporation (NVDA)