Last week’s better than expected Consumer Price Index (CPI), and Producer Price Index (PPI) confirmed that inflation is on the decline.
It’s still too high. But it’s definitely moderating with core (ex-food & energy) CPI (retail inflation) at 5.3% y/y vs. last year’s peak of 6.6%, while core PPI (wholesale inflation) came in at 2.8% y/y vs. last year’s peak of 8.2%.
And while last month’s Personal Consumption Expenditures (PCE) index (the Fed’s preferred inflation indicator), ticked up from the previous month, the core y/y rate was down from last year’s peak (4.7% vs. last year’s 5.3%), just like the CPI and PPI. And the Fed’s latest forecast is for core PCE to fall to 3.9% by year’s end, and 2.6% in 2024.
With inflation on the decline, the Fed hitting pause at their latest FOMC meeting, and it looking like we could be just 1 or 2 more rate hikes away from being done, the market has been rallying in anticipation of this rate hike cycle coming to an end.
Moreover, while the Fed has said they are not expecting to cut rates this year, they are forecasting a -1% cut in rates in 2024, and another -1% cut in 2025.
And all of that is bullish for the market.
Continued . . .
Saturday Deadline: Claim Your Free Copy of Finding #1 Stocks
One single idea changed Kevin Matras’ life as an investor, allowing him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin explains his top stock-picking secrets and strategies based on this powerful concept..
In 2022...while the market lost -18.2%...these strategies actually produced gains up to +15.6%, +38.9%, and even +39.7%.¹
You can take full advantage of them without attending a single class or seminar, in a lot less time than you think. Opportunity ends midnight Saturday, June 17.
Get your free book now >>
The recession of 2022 has come and gone.
And while some continue to speculate that maybe we could see one in late 2023, the market, at the moment, does not seem to think so.
Q1 GDP, which was previously forecast at 1.1%, was just upgraded to 1.3% in the latest report.
And the Federal Reserve Bank of Atlanta, via their GDP Now forecast, is estimating Q2 GDP to come in even higher at 1.8%.
It’s hard to make a case for a recession (defined as 2 quarters in a row of negative GDP), when the economy is expanding.
But even if we do see growth slow later in the year, it’s important to note that slower growth is still growth.
Additionally, the World Bank released a report the other week, and they increased their global growth rate from 1.7% to 2.1%.
Moreover, the OECD (Organization for Economic Cooperation and Development), also released a report where they projected a global growth rate of 2.7% this year, and commenting that the global economy is showing signs of improvement.
So that 2.1% or 2.7% growth rate could very well be upwardly revised yet again.
Turning our attention back to the U.S., it’s also worth noting that personal incomes are hovering near all-time highs. An important point when you consider that 70% of our GDP is driven by consumer spending.
And with the jobs market still so tight, that continues to underpin the economy.
None of that is consistent with a recession, and why the outlook is for growth.
Let’s also not forget that valuations are down.
While the P/E ratio for the S&P has risen from last year’s lows, they are still down sharply from 2021’s peak, and are below their five-year average.
And that makes stocks a bargain.
At the same time, the earnings outlook is one of stability.
Not only did this past earnings season come in better than expected, companies provided reassuring enough guidance for the coming quarters, with many upping their outlook.
While few are predicting rip-roaring sales and earnings (although, you might have a different take if you were looking at Nvidia and other companies keyed into the transformational generative AI industry), there are plenty of stocks and industries forecasting outsized growth.
You just have to know where to look.
Also in the market’s favor are the statistical trends. And they 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. And historically, it’s amazing to see how favorable this cycle is for investors.
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 in the first half of one of the most bullish periods for the market.
Second; over the last 60 years, if a bear market in the S&P goes down by -25% or more (the S&P was down by -25.4% last year between their bull market high close and their bear market low close), stocks go up on average of 38% a year later (those stats encompass 9 bear markets, with 8 of those seeing stocks up the next year).
And there’s plenty of reason to believe we could see something like that again this year.
So how do you fully take advantage of the market right now?
By implementing tried and true methods that work to find the best stocks.
For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 29 of the last 35 years (an 82% win ratio) with an average annual return of more than 24% per year? That's more than 2 x the S&P, including 4 bear markets and 4 recessions. And consistently beating the market year after year can add up to a lot more than just two times the returns.
Did you also know that stocks in the top 50% of Zacks Ranked Industries outperform those in the bottom 50% by a factor of 2 to 1? There's a reason why they say that half of a stock's price movement can be attributed to the group that it's in. Because it's true!
Those two things will give any investor a huge probability of success and put you well on your way to beating the market.
But you’re not there yet, as those two items alone will only narrow down a field of 10,000 stocks to the top 100 or so. Way too many to trade at once.
So, the next step is to get that list down to the best 5-10 stocks that you can buy.
Picking the best stocks is a lot easier when there’s a proven, profitable method to do it.
And by concentrating on what has proven to work in the past, you’ll have a better idea as to what your probability of success will be now and in the future.
Of course, this won't preclude you from ever having another losing trade. But if your stock picking strategy picks winners more often than losers, you can feel confident that your next trade will have a high probability of success.
Here are a few of my favorite strategies that have regularly crushed the market year after year.
New Highs: Studies have shown that stocks making new highs have a tendency of making even higher highs. And this strategy proves it. The alignment of positive price action and strong fundamentals creates all the necessary conditions to see these stocks soar to even greater heights. Over the last 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 38.7% vs. the S&P’s 6.2%, which is 6.2 x the market.
Small-Cap Growth: Small-caps have historically outperformed the market time and time again. Often these are newer companies in the early part of their growth cycle, which is when they grow the fastest. This strategy combines the aggressive growth of small-caps with our special blend of growth and valuation metrics for explosive returns. Over the last 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 46.4%, beating the market by 7.4 x the returns.
Filtered Zacks Rank 5: This strategy leverages the Zacks Rank #1 Strong Buys, and adds two time-tested filters to narrow the list of stocks down to five high probability picks each week. Over the last 23 years (2000 through 2022), using a 1-week rebalance, the average annual return has been 49.5%, which is 7.9 x the market.
The best part about these strategies (aside from the returns) is that all of the testing and hard work has already been done. There’s no guesswork involved. Just point and click and start getting into better stocks on your very 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 Saturday, June 17, unless we run out of books first. If you're interested, I encourage you to check this out now.
Find out more about Zacks Method for Trading: Home Study Course >>
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
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 does not engage in investment banking, market making or asset management activities of any securities. 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 for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research
