One of the Stock Market's Best Years Ever... So Far

It might not feel like it, but... The market is behaving like it's 1997... The 13th best year for U.S. stocks since 1928... A disjointed market... This Melt Up could keep on going... But be careful about what you buy...

The market hasn't been this 'good' since 1997...

Things don't seem that great in the world today... Real-world inflation is still high. Major wars in Eastern Europe and the Middle East continue without an end in sight. The U.S. just suffered through two major hurricanes. And the U.S. political scene continues to leave much to be desired with a presidential election less than a month away.

But you wouldn't know it by looking at the stock market.

Based on its price action, times have rarely been better. The benchmark S&P 500 Index entered October up more than 20% since New Year's Day. That's its best performance to this point in the year since 1997.

And today, it had one of its best days in a few weeks, up nearly 1%. The S&P 500 is now about 2% higher this month. It has made 46 new all-time highs in 2024. And it's trading solidly above its longer-term 200-day and short-term 50-day moving averages...

As of Friday's close – when the index was up 21.9% for the year – the S&P 500 has had its 13th best first 197 trading days of a year since 1928. Here's a chart from market analyst Charlie Bilello with the history...

We're also seeing similar trends for the equal-weight S&P 500 Index. It is up 14% year to date.

That's not as strong as the market-cap-weighed S&P 500 Index, but if you think this bull run has longer to go, this trend suggests "other" stocks can still catch up to the mega caps. Or you could see this performance and argue mega-cap leaders have more room to fall. However, companies like Nvidia (NVDA) and Meta Platforms (META) are trading at or near all-time highs again.

I (Corey McLaughlin) am not saying this is 'right'...

The stock market's performance feels disjointed from the economy that many Americans are experiencing. And there's a good case to be made that it's a smart time to sell mega-cap tech stocks.

But stock investors certainly don't seem to mind the Federal Reserve "juicing" the economy – even with the unemployment rate falling over the past two months, a potential return of high(er) inflation down the road, and fiscal policy that's fueling a mind-boggling government debt.

You could even argue we're already seeing a reignition of inflation via the stock market, absent energy stocks. As we pointed out last Tuesday, that sector is one place to find "cheap," high-quality stocks today.

That said, this Melt Up could go on a bit longer...

Jeff Havenstein, a senior analyst on Dr. David "Doc" Eifrig's research team, recently warned of some volatility ahead in the stock market – perhaps tied to the U.S. election, but also typical October trading behavior. However, this "isn't necessarily a bad thing," he said.

You see, more volatility means a better environment for selling options, which is one of Doc's favorite trading strategies. In fact, Retirement Trader subscribers just received a brand-new recommendation in the Friday issue.

But as Jeff also pointed out, history shows that after a banner year like this one, the next year is generally good, too. As he wrote last week in an edition of Doc's free Health & Wealth Bulletin...

The chart below looks at S&P 500 returns since 1950. The index has only posted a better return than what we're seeing this year seven times in that 74-year span. And returns were positive the next year in six out of those seven instances. Take a look...

So Jeff told readers to expect the markets to get rockier the rest of the month. But with this above chart in mind, he reminded folks that "bull markets don't die on a whimper" and...

We have yet to see any real signs of euphoria – folks are still too cautious today. Stocks have plenty of room to run from here.

But be careful about what you buy...

Yes, "expensive" stocks can keep getting more "expensive." And, yes, it might feel like "everything can go up" when stocks are trading at all-time highs and the Fed is willing to help juice the economy.

Today looked like one of those days. Nearly every major S&P 500 sector was higher. Energy stocks were the only exception, with oil prices turning lower as the OPEC oil cartel cut its demand forecast.

That's not exactly a good signal for the global economy. But after the recent run-up in oil prices on the heels of more warring in the Middle East and China's stimulus plans, the haircut in expectations was welcomed for now.

In short, it's possible this bull market could run longer than many might think... but we know the "good" times won't last forever.

After all, while 1997 was followed by two more euphoric years (a nearly 27% return for the S&P 500 in 1998 and about 20% in 1999), the dot-com bubble burst in March 2000.

As my Stansberry Investor Hour co-host and The Ferris Report and Extreme Value editor Dan Ferris says at the start of a brand-new free presentation he recently recorded...

You already know we're smack dab in the middle of the biggest tech craze in history. You likely realize you're too late to cash in on the easy money that's been made on popular AI stocks like Nvidia. And if you're anything like me, you know it's just a matter of time before these tech darlings become a retirement nightmare for millions of investors.

No one can say exactly when it's going to happen, of course... Or what will cause the crash. It could be a bad earnings report... Chaos after the election...

Or, as is often the case, it could be set off by something even bigger none of us see coming. But I'm not here to predict the exact day or reason AI stocks will crash. The reality is, no investment trend – no matter how exciting or big – lasts forever.

Dan goes on to detail other major market busts throughout history and why the current "unprecedented concentration you see in tech stocks right now is sending an important signal" to be careful.

But this signal is also creating an opportunity for a group of other businesses – ones that thrived when tech companies crashed back in 2000. Dan says they're incredibly positioned for another great run-up in the years ahead when tech stocks inevitably lose their luster.

Dan explains why the best of these stocks could return 500% to 1,000% in the presentation. Click here to watch or read a transcript now, before it goes offline tonight.

Extreme Value and Stansberry Alliance members have access to the full details on this group of stocks from Dan already, but feel free to check out the presentation for a refresher or more context.

New 52-week highs (as of 10/11/24): Automatic Data Processing (ADP), Atmus Filtration Technologies (ATMU), American Express (AXP), Alpha Architect 1-3 Month Box Fund (BOXX), Cisco Systems (CSCO), Carlisle (CSL), Commvault Systems (CVLT), CyberArk Software (CYBR), Fair Isaac (FICO), Comfort Systems USA (FIX), W.W. Grainger (GWW), Houlihan Lokey (HLI), iShares Convertible Bond Fund (ICVT), iShares U.S. Aerospace & Defense Fund (ITA), Kinder Morgan (KMI), McDonald's (MCD), Motorola Solutions (MSI), Pembina Pipeline (PBA), Ryder System (R), Spouts Farmers Market (SFM), SPDR Portfolio S&P 500 Value Fund (SPYV), ProShares Ultra S&P 500 (SSO), Torex Gold Resources (TORXF), Texas Pacific Land (TPL), Trane Technologies (TT), The Trade Desk (TTD), ProShares Ultra Financial Financials (UYG), Veralto (VLTO), Viper Energy (VNOM), Vanguard S&P 500 Fund (VOO), Vertiv (VRT), and Zebra Technologies (ZBRA).

In today's mailbag, feedback on Dan Ferris' Friday essay... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I read Dan Ferris' newsletter about value investing. The problem for any of us is being able to accurately value a business and its stock, and then believe the work we put in, and then watch the business thrive through good and BAD times. Having said that, my sure-fire strategy for retiring with $2 million dollars was investing and saving when I was in my 20s and let compounding do the work for me. Instead of buying individual stocks my portfolio consisted of ETFs and mutual funds diversified in stocks, bonds, real estate, commodities and treasuries. Enough said." – Stansberry Alliance member Nicholas P.

"Your article on the history of margin investing and ETFs was great. A clear description of the thugs that affect the financial market. Keep up the good work!" – Subscriber Bob D.

"Dan, a short thanks for your insights and educated sharing. Please overlook the narcissists that pay for your inputs, then complain, wanting less. I'm still learning and your missives leave me wanting more. Thanks again and look forward to future works." – Subscriber William V.

All the best,

Corey McLaughlin
Baltimore, Maryland
October 14, 2024