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Whether you're currently bullish on the market (stocks are up sharply since last October's key upside reversal)... ...or bearish (the major indexes still closed lower last year)... ...or just plain wary given all of the volatility (inflation, interest rate hikes, and the current banking 'crisis,' are just a few of the things roiling the market)... ...it's now more important than ever to make sure you're doing everything you can to get the most out of your trades. Regardless of which camp you put yourself in, there will be distinct winners and losers as we move forward. Personally, I put myself in the bullish camp. In spite of inflation still being too high, it has come down quite a bit from its peak last year. The latest CPI report showed core inflation at 5.5%, which is down from last year's high of 6.5%. The latest PPI showed core inflation at 4.4% vs. last year's high of 8.2%. And the latest PCE report showed the core rate at 4.7% vs. last year's high of 5.3%. As for the recent banking 'crisis,' it definitely spooked the market last week. But unlike past banking crises (the S&L crisis of the late 80's, or the sub-prime mortgage crisis in 2008), Silicon Valley Bank didn't overly invest in risky assets. To the contrary, they invested in arguably the safest investments on the planet - U.S. Treasuries. Their issue was one of liquidity. They didn't adequately plan for what they would do when interest rates went up and business slowed. And they found themselves in a cash crunch when depositors needed funds, which forced them to sell their long-dated Treasuries at a sizeable loss. Had they been able to hold them until maturity, they would have had zero losses and only gains. Big banks are in excellent shape. And there appears to be little risk of widespread contagion. When it comes to interest rates, we may still have another one or two more hikes to go. Although, given recent developments, some are expecting the Fed to pause at the next FOMC meeting. Either way, we are closer to the end of this rate hike cycle than not. And that's bullish for stocks. Additionally, the market's seasonals look great this year. For one, the 4-year Presidential Cycle shows that year 3 (that's 2023), is the best year of all 4 years. Since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%. So we are literally still at the beginning of one of the most bullish periods for the market. Moreover, history shows a high probability of outsized gains following a down year for the market. The S&P was down by -19.4% last year. It was the first down year since 2018, and the worst down year since 2008, when it closed lower by -38.5%. As for 2009, it was up 23.5%. And there's plenty of reason to believe we could see something like that again this year. But again, regardless of which camp you put yourself in (bullish, bearish, or somewhere in-between), there will be distinct winners and losers as we move forward. So before you make your next trade, please read this first to learn how to put the probabilities of success in your favor. Knowledge Is Power We've all heard the old adage; knowledge is power. It's a great saying because it's true. And that saying couldn't be truer than when it comes to investing. Take a look at your last big loser for example. After analyzing what went wrong, you soon discover some piece of information that, 'had you known beforehand, you never would have gotten into it in the first place.' I'm not talking about things that are unknowable, like inside information or surprise announcements that can catch even the most professional of professionals off guard. I'm talking about things that you could have known about or should have known about before you got in. Did You Know?...
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| Was your last loser in one of the top industries or in one of the bottom industries? If it was in one of the bottom industries, you should have known to not take a chance on something with a reduced probability of success. That's what is meant by knowledge is power. Knowable things that you need to know. That's not to say that stocks in crummy industries won't go up -- they do. And that's not to say that stocks in good industries won't go down -- because they do too. But more stocks go up in the top industries, and more stocks go down in the bottom industries. And since there are over 10,000 stocks out there to pick and choose from, why settle for one with a reduced chance of making any money? Did You Know?...
Did your last loser have a spectacular growth rate? If so, and it got crushed, would you have picked it if you knew that stocks with the highest growth rates have spotty track records? It seems logical to think that the companies with the highest growth rates would do the best. But it doesn't always turn out to be the case. One explanation for this is that sky high growth rates are unsustainable. And the moment a more normal (albeit still good) growth rate emerges, the stock gets a dose of reality as well. For example, a company earning 1 cent a share that is now expected to earn 6 cents, has a 500% growth rate. But, if it receives a downward estimate revision to 5 cents, that's a significant drop. Even though it still has a 400% growth rate, the estimates were just reduced by -16.7% and the price is likely to follow. If you've ever wondered how a stock with a triple-digit growth rate could possibly go down -- that's how. Instead, I have found that comparing a stock to the median growth rate for its industry is the best way to find solid outperformers with a lesser chance to disappoint. And focusing on companies with growth rates above the median, but less than 50%, has produced some of the best results. Did You Know?...
Do you know how well your stock picking strategies have performed? Whether good or bad - do you know why? Do you know if your favorite item to look for is helping you or hurting you? If not, you should. Beat The Market On Your Next Trade There's a simple way to add a big performance advantage for your stock-picking success. It's called the Zacks Method for Trading: Home Study Course. With this fun, interactive online program, you can master the Zacks Rank in your own home and at your own pace. You don't have to attend a single class or seminar. Zacks Method for Trading covers the investment ideas I just shared and guides you to better trading step by step, plus so much more. You'll quickly see how to get the most out of the proven system that has more than doubled the market for over three decades. Discover what kind of trader you are, how to find stocks with the highest probability of success, and how to trade them so you can consistently beat the market no matter where stock prices are headed. You'll get the formulas behind our top-performing strategies suited for a variety of different trading styles. The best of these strategies produced gains up to +15.6%, +38.9%, and even +39.7% in 2022 while the S&P 500 lost -18.2%.¹ The course will also help you create and test your own stock-picking strategies. Today is the perfect time to get in. I'm giving participants free hardbound copies of my book, Finding #1 Stocks, a $49.95 value. Its 300 pages unfold virtually every trading secret I've learned over the last 25 years to beat the market. Please note: Copies of the book are limited and your opportunity to get one free ends midnight Saturday, March 18, unless we run out of books first. If you're interested, I encourage you to check this out now. Find out more about the Zacks Home Study Course » Thanks and good trading,
Zacks EVP Kevin Matras is our chart patterns and stock screening expert. He developed many of Zacks' most powerful market-beating strategies and directs the Zacks Method for Trading: Home Study Course. | ||||||||||||||
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| ¹The individual strategies mentioned herein represent only a portion of the ones covered in the course. This free resource is being sent by Zacks.com. We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms of Service". https://www.zacks.com/terms_of_service Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The Zacks #1 Rank Performance covers the period beginning on January 1, 1988 through February 6, 2023. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank #1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance_disclosure for information about the performance numbers displayed above. Zacks Emails Zacks Investment Research |
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