Two Telltale Signs Why You've Got to Own Stocks Now
Editor's note: Understanding the market's "DNA" can give you a leg up on other investors. But it isn't the only way to gain an edge over the competition...
You can learn to recognize other key market signals as well – and use them to your advantage.
In today's Masters Series – adapted from the September 17 and October 20 editions of the DailyWealth e-letter – True Wealth Systems editor Dr. Steve Sjuggerud and analyst Brett Eversole detail two other reasons why stocks are the best investment to make right now...
Two Telltale Signs Why You've Got to Own Stocks Now
"I've seen this specific situation only a few times in my career," my buddy, Jim, told me over lunch a few weeks ago. "When I see it, I know it's time to buy."
I (Steve) have learned to follow Jim when he gets excited...
It's worked out well for me in the past. And it turns out, the opportunity he saw recently is far from over.
Let me explain...
Back in 2011, Jim's advice helped me make about four times my money on the stock of a small local bank.
The bank had traded for $23 a share in 2007. Then, the real estate bubble burst here in Florida. The local bank's stock crashed to around $2 a share. It was priced like it was doomed, but I believed it would survive. Still, I wanted an expert opinion...
So I took Jim out to lunch one day in 2011. He actually had a hand in starting this local bank, but he was no longer an insider. He gave me the key I needed... He said, "Steve, look at the bank's non-interest income," and he left it at that.
I dug deeper there. What I saw was that the bank would be completely fine. It was priced as if it was going out of business... However, thanks to its non-interest income, it would weather the real estate storm. So I started buying all I could.
That one sentence from Jim helped me make about four times my money on the stock by the time I sold in 2015.
The 2011 lunch with Jim was the first time I asked for his opinion on a bank stock. (Thank you, Jim!) But it wasn't the last...
I have known Jim for decades. Our kids grew up together. In his career, he has built a number of small banks from scratch in fast-growing markets, brought in a ton of customers, and then sold those banks to the bigger banks.
The second time I relied on Jim to help me make money in bank stocks, I bought into one of his bank startups. It was later sold to a publicly traded bank, and I made a solid profit. (I don't remember how much exactly, but I think it was nearly a double.)
In our recent conversation, Jim told me at lunch that he started buying bank stocks in March – after the yield on U.S. Treasury bonds crashed.
He nailed it... And it's not just bank stocks. As you know, stocks in general have soared since then – up 50% from their March bottom. Take a look...
Now, most folks look at this chart and think they missed the rally. I see exactly the opposite...
Sure, I hope that you bought in March, like Jim did. But don't worry if you didn't...
The trend is in our favor. The Federal Reserve is pumping trillions of dollars into the system. And investors are excited.
That's a recipe for a boom in stock prices. It's already happening... And if you don't get on board now, the opportunity will pass you by.
It's not easy to take advantage of a situation like this. And it took even more guts for Jim to buy back in March. But when you look at the body of evidence, it's clear that stocks are the best investment you can make right now. Take advantage of it.
Still, I get it. Sometimes, it's hard to do that – especially if you're still shell-shocked from what happened earlier this year. But here's another reason why the time to invest is now...
An Important Market Laggard Breaks Out
It's hard to trust a new bull market.
The worry from the last bust tends to stick around. And it's hard to shake those feelings, even if prices reverse.
That has certainly been true this year... The COVID-19 crisis shocked the world, changed our daily lives more dramatically than anyone could have imagined, and pushed investors to extreme fear.
But now, stocks are back... The major indexes have been at new highs for months. And the economy is starting to show signs of recovery.
Still, if you're having a hard time trusting this new bull market, don't beat yourself up. It's normal. Scars from a market crash don't go away quickly... But you can't let them control you forever.
You need to start believing in this new bull market today. That's because just this month, an important market laggard broke out...
This underperformance was a warning sign hanging over the market since 2018. Today, it's gone. And that's one more reason you want to be along for this rally.
Let me explain...
Certain areas of the market are worth examining regularly.
These groups of companies can give crucial insights into the health of the market and economy. They can flash warning signs when times seem great, or "all clear" signs when times seem tough.
Those contrarian indicators are invaluable. And just this month, we got one...
The Dow Jones Transportation Average broke out to new all-time highs on October 7. That's the first new all-time high we've seen in the index since September 14, 2018. You can see it in the chart below...
It took more than two years, but transportation stocks have finally hit new highs. I hope you realize how important that is for this new bull market...
The transportation index includes shipping companies like FedEx (FDX) and United Parcel Service (UPS), railroads like Norfolk Southern (NSC) and Union Pacific (UNP), and airlines like United Airlines (UAL) and American Airlines (AAL).
Simply put, if goods and people are moving around the country, these companies thrive. And that's exactly what you'd expect to see when the economy is doing well and the future of the stock market is bright.
That's why, historically, the transportation index has been a good indicator of things to come in the market. If stocks seem dreary but transports are at new highs, it's a positive buy signal. And conversely, if stocks seem great but transportation stocks are lagging, it's a warning sign for the overall market.
That's the state we had been in for the last two years. Stocks were hitting new highs up until the COVID-19 crash began – but not transports. They were lagging, flashing a warning sign for stocks.
Now, the opposite is true.
That might seem hard to believe given what's happening today... Air travel is down dramatically. And plenty of folks are still working from home and going out a lot less.
Normal life is far from back. But transportation stocks have broken out to new highs. That tells us no matter how we might feel about it, this new bull market isn't one to fear... It's one to own.
Good investing,
Steve Sjuggerud and Brett Eversole
Editor's note: The COVID-19 pandemic fundamentally changed Steve's "Melt Up" playbook... And more than 27,000 people tuned in last Wednesday for a special broadcast as he revealed a critical new prediction about exactly what we can expect to happen from here.
Steve explained the steps you must take to prepare... And he shared the name and ticker symbol of a stock that could help you reap tremendous gains as the Melt Up plays out.
If you missed the event, you're in luck... We're offering a FREE video replay for a limited time... But you have to act fast. Click here to see Steve's prediction while it's still available.