We Haven't Seen This Rare Extreme Since the Dot-Com Bust
Some good (and bad) news for the market... The best six months for stocks starts soon... We haven't seen this rare extreme since the dot-com bust...
Last week, our colleague Steve Sjuggerud shared the good news...
According to one of the most impressive market indicators out there, we're about to enter a super-bullish period for stocks. As Steve explained in the September 18 edition of our free DailyWealth e-letter...
Stocks are about to boom – potentially for as long as two years – thanks to our current spot in something called the "presidential election cycle."
It has nothing to do with President Trump's next tweet or a piece of legislation. Instead, it all comes down to the lessons of history we've learned from elections.
You see, on a broad level, politics does have a surprisingly large effect on financial markets... It's a bit hard to believe until you actually see the numbers. But once you do, it's hard NOT to give this wild idea some credit.
If you're not familiar, the presidential election cycle doesn't have anything to do with who's in
This indicator tells us that certain years of a president's term tend to be dramatically better than others for the stock market. You can see the full details in the table below...
As you can see, there's a BIG spread between yearly gains in the presidential election cycle. And the third and fourth years are the best, by far.
We've typically seen gains of 21.6% during the third year. Year four is the second-best performer, leading to 7.7% gains, on average.
(We use quarterly data in this analysis, which uses September 30 as "year end." Based on that, we're about to begin the third year of President Trump's first term.)
Again, this indicator doesn't have anything to do with who's in power. Republican or Democrat, history shows the year of their term has the greatest impact on stock market returns. And the most bullish year by far is about to begin.
But it gets even better...
You see, the next six months
Research from LPL Financial shows that since the Dow began trading in 1896, stocks have moved higher over each of the first
No other quarter in the entire four-year presidential cycle comes close to this impressive win rate, and only two others boast average returns of better than 4%.
In short, if Steve's "
In other news, U.S. consumers are feeling downright giddy...
This morning, the Conference Board reported that its widely followed consumer confidence index soared to a fresh recovery high last month. As the Wall Street Journal reported...
Consumers' outlook on the U.S. economy improved further in September, as a strong economy and robust job growth bolstered American consumers' sentiment. The Conference Board, a private research group, said Tuesday its index of consumer confidence rose to 138.4, up from 134.7 in August.
The consumer confidence index was last higher 18 years ago, in September 2000. Economists surveyed by The Wall Street Journal had expected a reading of 132.0 for September.
"Consumers are very upbeat right now. Not surprisingly, spending patterns reflect this optimism, as consumer spending has been quite strong consistently since winter broke in March," said Stephen Stanley, chief economist at Amherst Pierpont Securities, in a note to clients.
If you're like most folks, you'd probably assume this is great news for the U.S. economy and the markets...
Unfortunately, history suggests otherwise.
Since this survey was created in 1967, we've only seen similarly lofty levels two other times.
The first was over several months in the late 1960s. The second was during the dot-com boom and bust from 1998-2000, as the Journal noted.
Each of these periods
According to research from our friend Jason Goepfert – publisher of the excellent SentimenTrader service – stocks have fallen more than 80% of the time over the two and three years following these signals, with average losses of 15% and 21%, respectively.
This is concerning...
However, these signals come with one important caveat: Jason's research shows they have been far less reliable over shorter time frames.
In fact, over periods of less than nine months, stocks have gone up nearly as often as they've gone down... little better than a coin flip.
In other words, these two indicators don't necessarily contradict each other.
Remember, Steve has predicted we'll see a final explosive "inning" before this bull market ends. But he has also predicted a devastating bear market – a "Melt Down" – will begin when it does.
These two signals fit perfectly well with that forecast. Yes, the end of this long boom is approaching... But stocks could absolutely soar before it finally arrives.
New 52-week highs (as of 9/24/18): Becton Dickinson (BDX), Blackstone (BX), Fidelity Select Medical Technology and Devices Portfolio (FSMEX), Microsoft (MSFT), Roku (ROKU), ProShares Ultra Health Care Fund (RXL), and Viper Energy Partners (VNOM).
In today's mailbag: The Apple Watch "backlash" continues... and a subscriber has a question about next month's Melt Up event. As always, send your questions, comments, and concerns to feedback@stansberryresearch.com.
"I'm with paid-up subscriber PES! I noticed that you printed a comment from the above subscriber on Monday, 9/24/18, evening report of The Stansberry Digest. In his comment, PES stated that '. . . the Apple Watch scares the crap out of me'. I am in 100% agreement with PES. No one needs to know my whereabouts at all times, what my body is doing from second to second, or needs to do my thinking/acting for me! This smacks way too much of 'Big Brother', as far as I'm concerned. I'm not the most tech-savvy person around, but I am not afraid to use tech (I use it every day). Just like every other good thing that we have, man has the unmistakable perverse ability to misuse it. This is definitely a misuse. So is an insurance company making the arbitrary decision that they will not offer life insurance coverage to a person who does not use the Apple watch." – Paid-up subscriber Sue L.
"I agree 100% with PES! The Apple watch and Fitbit are great when used responsibly, but giving any stranger access to that type of personal information 24/7 is insane! – gives 'he knows when you are sleeping' a whole new meaning. It would be nice if there were enough of us who will just say 'NO' to the interactive policy! Fortunately... thanks to wise investing with Stansberry Research, I can.
"Unfortunately... People as a whole are no better than a flock of sheep. And tech advances quickly. So, how long will it be before the insurance companies, and God knows who else (the government) start targeting people for any habits that are deemed unhealthy? Eat that slice of pizza... .that will be an additional $10 on this month's premium, plus the 'Unhealthy Lifestyle' Tax... and we might as well link it to the healthcare system so we can automatically send you that prescription for Lipitor as well. Take a trip to that ATV park -$$$... travel to Central America -$$$$$. Great for profit margins... but a complete end to personal privacy. You will LITERALLY not be able to take a dump without the insurance company knowing it!
"By the way... who determines what is unhealthy? Anyone remember the Eugenics movement in the 1930's? (Of course not) Look where that went! Only to find out that we didn't really know that much about the human body- or anything else for that matter- in the first place. The only truly wise man knows that he knows nothing... or something like that." – Paid-up Stansberry Alliance member Jim H.
Regards,
Justin Brill
Baltimore, Maryland
September 25, 2018