3 Reasons the Summer Melt-Up Isn't Over Yet VIEW IN BROWSER For most of us, Labor Day marks the unofficial end of summer. The pools close, the grills cool off and the kids go back to school. Historically, this is when Wall Street starts to cool off, too. You see, September has a reputation as the market’s weakest month. Maybe it’s because much of Wall Street and Europe are on extended summer vacations and the “B” team is still in charge. Or it could be because a lot of folks sell before the September 15 quarterly tax deadline. Consider this: Morningstar reports that September is the only month since 1926 that the stock market averages a loss. Since 1926, large-cap stocks have declined an average of 0.9% in September. In more recent history, FactSet notes that the S&P 500 has dropped an average of 1.7% in September since 2000. Either way, we usually brace for the worst in September. But here’s the thing... you can’t always trust seasonal sayings or market clichés. Consider the old saying, “sell in May and go away.” That didn’t work out too well this year, as stocks “melted up” in June, July and even August (another seasonally weak month). During this three-month period, the Dow rose 7.7%, the S&P 500 climbed 9.3% and the NASDAQ soared 12.3%. So, everyone who sold prior to the Memorial Day holiday is kicking themselves right about now.  Now, given the market’s phenomenal run, I know many people are wondering if the market surge can continue. Well, if this summer has taught us anything, it’s that historical precedent does not guarantee future results. Personally, I’m feeling a little more bullish than normal heading into September. That’s because several forces are driving the stock market’s summer melt-up – and three of them remain in play. Combined, they should continue to support higher stock prices in the upcoming weeks and months. So, in today’s Market 360, let’s look at each of them and what they mean for your portfolio. I’ll also share how a brand-new system from my friend and InvestorPlace colleague, Eric Fry, could help you find the market’s biggest winners during this rally. | Recommended Link | | | | Tesla is failing. But Elon Musk would prefer you didn’t know that. So he’s done talking cars. It’s now all about the robots! Musk just claimed that 80% of Tesla’s value will “eventually” come from its humanoid, Optimus. However, the real story we’ve uncovered reveals the lies behind Elon’s delusion. Get the details here, including a much better pure-play robotics stock to buy now. |  | | Reason #1: Strong Corporate Earnings One of the primary factors fueling the summer melt-up is the spectacular earnings environment. It should remain one of the main driving forces under stocks in the upcoming months, too. According to my favorite economist, Ed Yardeni, the second quarter represents the strongest earnings surprise percentage ever recorded in the 39 years that he has observed quarterly earnings results. The average earnings surprise was a whopping 8.8%. Yardeni also points out that with 92% of S&P 500 companies reporting, second-quarter earnings rose an average of 10.6%. The latest Earnings Insight from FactSet also reiterates this point. Their latest numbers show that with more than 98% of S&P 500 companies reporting, 81% have posted a positive earnings surprise. They also report that the S&P 500 has posted a 7.7% average earnings surprise and 11.9% average earnings growth. Reason #2: Monetary Easing During the Federal Reserve’s annual meeting in Jackson Hole last week, Fed Chair Jerome Powell signaled that the central bank is set to cut key interest rates at its September meeting. As we discussed in a previous Market 360, Powell noted that the “downside risks to employment are rising.” So, it appears the Fed’s unemployment mandate is now overshadowing inflation fears. Powell also recognized that there’s been a drop in economic growth due partly to a slowdown in consumer spending. But the comment that really caught Wall Street’s attention was when Powell admitted, “Our policy rate is now 100 basis points closer to neutral than it was a year ago.” In other words, not only is the Fed going to cut key interest rates by 25 basis points in September, but more are on the way. So, the stage is set for a key interest rate cut, and in turn, a continuation of the summer rally. Now, the key interest rate cut is expected when the Fed’s next meeting wraps up on September 17. That should spark more buying pressure and drive stocks higher, especially in the second half of the month. Reason #3: AI-Led Productivity Gains We’re living in a brave new world that’s increasingly dependent on AI to enhance productivity and, in turn, boost GDP (gross domestic product) growth. Over the next several years, AI will continue to invade our lives, as robots boost productivity on factory and warehouse floors, and advances like self-driving become more common. Home assistant robots are still more than a decade away. But, overall, the AI-led productivity gains will help reduce inflationary pressures, strengthen the U.S. dollar and boost GDP growth. For example, my leading artificial intelligence play, NVIDIA Corporation (NVDA), dominated the headlines last week. The company released its quarterly results on Wednesday, August 29, after the market closed. The reality is that NVIDIA is overpowering the world with its market dominance of AI chips. And that was apparent in its latest results. (We covered NVDA’s earnings in this Market 360 issue.) Given NVIDIA’s AI dominance, it now has a market capitalization that accounts for 3.6% of global GDP, according to Deutsche Bank. To put this into perspective, NVIDIA’s market cap is now bigger than the entire stock market capitalizations of the U.K., France and Germany. Only China, India and Japan have stock market capitalizations larger than NVIDIA. Another company that’s dominating in the AI space is Palantir Technologies, Inc. (PLTR). In fact, it may be putting AI to work more effectively than many of its peers. Through its government contracts, Palantir helps upgrade and modernize key agencies, including the U.S. Department of Defense, the CIA and the NSA. Those contracts have paid off. In the second quarter, Palantir reported 48% year-over-year revenue growth and 47% earnings growth. The company beat Wall Street’s expectations on both the top and bottom line – and even raised its guidance for 2025. What All This Means Bottom line: We’re in an incredible environment for stock market appreciation. The analyst community expects earnings momentum to remain robust for the foreseeable future, with the S&P 500 expected to achieve 7.2% average earnings growth in the third quarter and 7% average earnings growth in the fourth quarter. Full-year earnings are forecast to grow by an average of 10.3%. The fact that the Fed is set to cut key interest rates in September is a very welcome development. The “dot plot” of future key interest rate cuts will be carefully scrutinized, but I think at least four key interest rate cuts are on the table. And the AI race continues to heat up, with the U.S. leading the way. The fact is, AI and the subsequent productivity growth can help counteract the poor demographics that plague much of the world, so AI should help boost overall global GDP. So, I expect a robust year-end rally fueled by strong corporate earnings, lower interest rates and AI-led productivity gains. A Breakthrough Worth Waiting For I’ll, of course, continue using my Stock Grader system (subscription required) to uncover the strongest stocks during this market melt-up. It’s my go-to tool for separating the winners from the losers – and it’s never been more important to have a proven system in place. But I’m not the only one turning to data-driven investing right now. For the first time ever, my friend and longtime colleague Eric Fry is rolling out a computerized system of his own. Eric is no ordinary analyst. He’s delivered an incredible 41 different recommendations that each went on to soar 1,000% or more – including massive wins like 7,992% on Bitcoin and 2,045% on BHP Group Ltd. (BHP). And now he’s distilled decades of experience into a machine he calls Apogee. During the five years of testing this system across 14,000 stocks and 31 years of history, Apogee delivered a whopping 308% average gain on winners and had a 72% win rate. If this system were live in years past, it could have pinpointed Apple Inc. (AAPL), Amazon.com, Inc. (AMZN) and NVIDIA before their massive runs. In short, Apogee is designed to spot when a beaten-down stock is about to enter the rare “10X Pattern.” And here’s the best part: Eric’s giving you the names and tickers of five fresh 10X opportunities Apogee has uncovered right now – for free. I can’t stress enough that opportunities like this don’t come around often. One 10X winner alone can turn a $1,000 stake into $10,000. And Eric’s Apogee system is built to find them again and again. So if you’re serious about capitalizing on the next wave of market winners, you’ll want to hear what Eric has to say. Click here now to secure your spot for Eric Fry’s 10X Breakthrough event and get all five tickers. Sincerely, | .png)
.png)
No comments:
Post a Comment