And the Beat Goes On
Inspired by promises... Another bullish day… What history suggests for semiconductor stocks… This could be just the start of gold's move higher… Porter has spotted a 'market anomaly'...
There was no hangover today...
Yesterday, we wrote about the latest commentary from the Federal Reserve (and European Central Bank). In short, they're using "magic words" to suggest easier monetary policy ahead... which appears to have "juiced up" investors.
After the Fed's latest policy announcement (keeping rates steady) and outlook (three rate cuts later this year and a promise of slowing down its balance-sheet-trimming pace), the major U.S. indexes pushed higher during the last few trading hours yesterday.
Not only did the Fed maintain the "status quo" of rate cuts to come – despite some recent higher-than-expected inflation numbers – but Fed Chair Jerome Powell added a bullish shot to the discourse with balance-sheet talk.
Since then, I (Corey McLaughlin) have seen various takes on it all, like one suggesting that while Powell may have started off the "inflation fight" a few years ago sounding and acting like Paul Volcker, he's now turning into Arthur Burns (and lifting off the pressure too soon).
That may end up being true.
In the meantime, though, Mr. Market is happy...
The U.S. indexes opened higher this morning from their already all-time highs. The benchmark S&P 500 and tech-heavy Nasdaq Composite Index added 0.4% today. Meanwhile, bond yields remained steady. The U.S. Dollar Index ("DXY") was higher, but just a touch.
This is similar to the bullish market "tell" I discussed in the March 12 edition... when the markets moved higher despite slightly higher inflation data. It was like nobody cared. Investors only seemed to care about Powell's promises of rate cuts.
This doesn't mean the story can't change, but it's what we see today.
This leading sector could keep going...
Semiconductor stocks have been rallying with the overall market. Unless you've been living without an Internet-connected computer or phone, you're likely aware of how this technology has become essential around the world.
Nvidia (NVDA) is a large part of the story. Its shares are up 250% year over year, and it has made headlines with its in-demand AI-related tech. But the entire semiconductor sector has been on a tear as well.
As Stansberry Research senior analyst Brett Eversole wrote in DailyWealth on Tuesday...
We can see this by looking at the Philadelphia Stock Exchange Semiconductor Index ("SOX"). This is the benchmark index for semiconductor stocks. And it recently jumped a staggering 26% in nine weeks. Take a look...
As you can see, these stocks were already soaring last year. But the recent rally is one of the biggest we've seen.
The double-digit jump was the equivalent of a few years of gains for this index... And it happened in barely more than two months.
The contrarian bent in us makes us think that this sector must be due for a pullback or reversal. (These stocks did pull back slightly from the start of the month, but not enough to make a significant dent in longer-term returns.)
But as Brett showed in DailyWealth (and first to paid True Wealth Systems subscribers earlier this month), history suggests that with an "extreme" surge like we've seen over the past few months, semiconductors are likely to outperform the S&P 500 in the months ahead...
Similar rallies have happened only 13 other times in the past three decades. So today's setup is rare.
To see what this means going forward, I looked at each new nine-week rally of 26% or more since the index began in 1994. You might expect a slowdown after a rally this big. But history shows the gains should continue...
Semiconductor stocks are notorious for their booms and busts. Still, they've led to an impressive 13% annual return over the past three decades. But you can do better if you buy after setups like today's...
On average, similar setups led to roughly 9% gains in three months, more than 11% in six months, and about 18% over the following year, better than the S&P 500 average return in each of the same time periods.
As Brett mentioned, the semiconductor sector is known for its cyclical nature, meaning when bullish momentum gets behind it, the momentum can last longer than you might think (the opposite is also true). And right now, the trend is higher.
A transportation index for the tech-heavy age...
Now, here's what this trend might mean for the markets overall...
I like to think of the Philadelphia Stock Exchange Semiconductor Index – which tracks 30 companies involved in the design, manufacturing, and sale of semiconductors – and other indexes like it as a modern-day Dow Jones Transportation Index.
If you think about chips in phones, computers, etc., as a key component of the tech-heavy parts of the economy, it makes a lot of sense. So a bullish trend for semiconductors could be a positive signal for the markets overall, in the same way business being good for trains, planes, or freight is.
At the same time, gold is making new highs...
The idea of an easier monetary environment – and the associated inflation that is likely to come with it – has been showing up in gold's price action lately too. We've noted this over the past few weeks.
Gold has broken above what had been a technical "resistance" level of around $2,000. Today, it trades at around $2,180 an ounce. And here's the thing: Sentiment still isn't bullish when you look at bets in the gold-futures market.
As Brett shared in True Wealth Systems recently, the weekly Commitment of Traders ("COT") report, which shows real-money bets of futures traders, shows sentiment in a "no man's land" – not overly bullish despite gold hitting all-time highs.
This suggests gold has room to run higher before sentiment turns more bullish (at which point you'd want to evaluate buying more closely).
DailyWealth Trader editor Chris Igou recently reached the same conclusion using a different indicator: the gold-to-stocks ratio.
Chris explained to his subscribers that if gold's recent turn higher and its outperformance relative to stocks over the past month (occurring for the first time in about a year) continues, there could be much more upside for gold ahead. As Chris says...
If a new gold rally is kicking off like we expect, we're far from multiyear highs in this ratio. And that tells us the outperformance is just starting.
In order for the gold-to-stocks ratio to revert to its five-year average, it would have to climb another 9% from here. And to reach its 10-year average, it would have to climb 16%.
In short – we haven't hit the ceiling for this gold rally yet.
Finally, an opportunity you won't want to miss...
This one is from our founder, Porter Stansberry. In short, he's stepping forward to share an urgent message about a "financial anomaly" that has emerged in the market that could impact a select group of stocks.
Forget AI, bitcoin, inflation, and even November's presidential election... Porter says this incredibly rare market anomaly could be the single most important story of 2024, and those who know how to take advantage of it could see unparalleled returns.
But this opportunity is unlikely to last much longer... So, next week, on March 26, Porter is sharing the details during a free presentation... and you won't want to miss it. He'll explain what this story is, why it's occurring right now, and why it will likely never happen again.
Click here to register for this free event now and make sure you don't miss anything.
New 52-week highs (as of 3/20/24): American Financial (AFG), A.O. Smith (AOS), Atkore (ATKR), American Express (AXP), Aya Gold & Silver (AYASF), AutoZone (AZO), Builders FirstSource (BLDR), Brown & Brown (BRO), CBRE Group (CBRE), Sprott Physical Gold and Silver Trust (CEF), Canadian National Railway (CNI), Pacer U.S. Cash Cows 100 Fund (COWZ), Copart (CPRT), Cintas (CTAS), Donaldson (DCI), D.R. Horton (DHI), Disney (DIS), Dimensional International Small Cap Value Fund (DISV), Dorchester Minerals (DMLP), Dow (DOW), Enterprise Products Partners (EPD), Enerplus (ERF), iShares MSCI Spain Fund (EWP), Diamondback Energy (FANG), Freeport-McMoRan (FCX), Franklin FTSE Japan Fund (FLJP), GEO Group (GEO), SPDR Gold Shares (GLD), W.W. Grainger (GWW), iShares Convertible Bond Fund (ICVT), JPMorgan Chase (JPM), London Stock Exchange Group (LNSTY), LyondellBasell (LYB), VanEck Morningstar Wide Moat Fund (MOAT), Microsoft (MSFT), Motorola Solutions (MSI), Nucor (NUE), NVR (NVR), Oracle (ORCL), O'Reilly Automotive (ORLY), Parker-Hannifin (PH), Sprott Physical Gold Trust (PHYS), Ferrari (RACE), Rithm Capital (RITM), Construction Partners (ROAD), SPDR Portfolio S&P 500 Value Fund (SPYV), ProShares Ultra S&P 500 (SSO), Stellantis (STLA), Cambria Shareholder Yield Fund (SYLD), TFI International (TFII), Travelers (TRV), Tenaris (TS), Trane Technologies (TT), Textron (TXT), ProShares Ultra Financials (UYG), Visa (V), Vanguard S&P 500 Fund (VOO), Advanced Drainage Systems (WMS), and W.R. Berkley (WRB).
In today's mailbag, more feedback about the GLP-1 drugs our colleague Ken Millstone and Stansberry Venture Technology editor Dave Lashmet have been sharing information about lately... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"I've also been following the information about these weight loss drugs. There is such a pent-up demand for them that I have been waiting for over six months to get my prescription filled... Hopefully I'll get the medicine soon and will report how it works for me in the future. Thanks so much for your expert research on these topics..." – Stansberry Alliance member Karen T.
All the best,
Corey McLaughlin
Baltimore, Maryland
March 21, 2024