I’ve spent a lot of time in and with the financial media. I have friends in the financial media. So I don’t like what I’m about to say, but I feel I need to say it:
Forget 90% of what you hear in the financial media.
That’s right … almost everything you hear and read stems from unwarranted fear.
Last week, I was honored to attend and speak at the 2019 Stansberry Conference in Las Vegas, but I was blown away by the amount of bearishness. These are smart people, too. One woman was so convincing that I almost considered lowering my exposure in the market — almost … but not really.
I didn’t because I’m more bullish on the current market environment than ever.
A recession is not on the horizon. Stocks are not expensive. A bull market does not automatically die of old age. And while we did see an inverted yield curve recently … that’s actually a signal to buy now.
We talk about this in MoneyWire, so I hope you haven’t been drinking the financial media Kool-Aid. But if you’re tempted to and think I’m crazy, I’ve got a few charts to back up my view.
1. Stocks are NOT expensive.
Wall Street currently estimates that S&P 500 earnings will range between $176 and $183 next year. You don’t need to be a math whiz to figure out that the S&P trades at about 16 times 2020 earnings. That is not high. It’s slightly above average, absolutely. But it is nowhere near bubble levels.
2. An inverted yield curve is actually bullish!
Fear sells. There’s no denying that. And the financial media is pushing fear more than ever right now. When the yield curve inverted on August 13 — when the shorter-term two-year Treasury bond yielded more than the long-term 10-year Treasury bond — you would have thought the world was ending. But that couldn’t have been further from the truth.
Since 1978, a recession historically will not occur after an inversion for another 21.3 months — nearly two years. But the more important stat that the media overlooks, either due to lack of knowledge or intentionally, is that one year after the reversion occurs, the market is almost always higher. And by a big margin!
Over the last four decades, the stock market has been up 22.3% on average one year after the 2/10 yield curve inverts. On August 13, the S&P 500 closed at 2,926. So if this trend continues, the index would be up around 3,579. In fact, I do believe the S&P will hit 3,600 in the next 12-18 months.
Most important of all, the big gains happen in the first year after the yield curve inverts. And that’s right now. That’s why you need to be in stocks today.
3. The economy is still rocking.
We have low interest rates … low inflation … low unemployment … the Fed is cutting rates … the GDP is still decent … and we’re not overvalued! It is a “Goldilocks” economy … and a perfect market for stocks.
And where do you want to be invested in this kind of environment? A number of places, but make sure you look at small caps. As you can see below, when the Fed cuts rates, small caps tend to perform better than mid- and large caps.
But stocks in general trade better following rate cuts, too. In fact, the last few times the Fed started cutting rates by 25 basis points, stocks were higher, on average, one year later.
4. Bull markets don’t die of old age.
This last chart amazed even me. When I first looked at it, I thought it was upside down.
This chart shows the S&P 500’s 20-year annualized return. The average 20-year annualized gain is 7.4%. And look where we are today. Because of those bad years the market endured before really taking off, we’re actually below average over the last 20 years. And that’s an extremely bullish reading.
So even if bull markets could die of old age — which they can’t — we’re not even close to performance levels that indicate a slowdown. This bull market isn’t going anywhere.
The Data Doesn’t Lie
So there you have it — a handful of hard data showing that we are not on the verge of a recession … and that odds are high the S&P 500 will rally another 20%-25% in the coming 12-18 months.
Fear also creates massive opportunities for those bold enough to act. Don’t listen to what the financial media is spouting off these days or the scary headlines they come up with. Don’t listen to what your next-door neighbor said at the weekend barbecue. Don’t follow everyone else running for the hills. Remember, fear sells, and that’s what drives the financial media.
You now have the facts right in front of you. You need to be in stocks today. If you’re not, you stand to miss out on some of the biggest wealth-creating opportunities of your life.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
