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Monday, June 3, 2024
The Most Likely Event to Follow a Market High
With the S&P 500 Index recently hitting all-time highs, you're likely one of two investors... You see a run-up in stocks and get nervous. You think to yourself that nothing goes up forever... and you see the risks in the economy and market.
Editor's note: If you've been following along with us this year, you know we've previously said not to fear new highs. Of course, volatility can happen. But new highs don't mean a big crash is imminent.
That brings us to today's essay from our friend Jeff Havenstein at our corporate affiliate Stansberry Research...
Jeff is a senior analyst and a member of our good friend Dr. David "Doc" Eifrig's team. And he's a regular guest editor for Doc's free daily e-letter, Health & Wealth Bulletin. In fact, we also shared one of Doc's essays from this e-letter earlier this year.
Today's essay first appeared in the May 22 Health & Wealth Bulletin. And in it, Jeff shares what investors can expect after the market hits a new high...
The Most Likely Event to Follow a Market High
By Jeff Havenstein, senior analyst, Stansberry Research
With the S&P 500 Index recently hitting all-time highs, you're likely one of two investors...
You see a run-up in stocks and get nervous. You think to yourself that nothing goes up forever... and you see the risks in the economy and market. So you decide to flee to safer assets like government bonds and cash.
Or you're the investor who sees new highs and decides to buy stocks...
You want to add fuel to the fire. All your friends are talking about stocks, so you don't want to be left behind if there is another major move higher.
In my early days in the market, I struggled with which investor to be.
I'll never fault anyone for taking some profits at a market high (though, to be clear, you should never sell all your stocks, as my colleague Doc Eifrig has often written about).
But today, I'm here to tell you that you should be the second type of investor. The numbers back it up...
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The chart below looks at returns for the S&P 500 from January 1988 to August 2020. Since 1988, if you bought the S&P 500 on any given day, you would have seen an average one-year return of 11.7%.
That's fantastic. There's no doubt that stocks are the best game in town.
But if you bought when the market hit an all-time high, you would have done even better... Specifically, your average one-year return would be 14.6%. On average, buying at all-time highs also outperforms over a three- and five-year holding period.
One of the most valuable things I have learned watching markets is: The most likely thing to follow a new high is another new high.
Folks see stocks hitting records on the news. If they're not already fully invested, their emotions start to take over... and that motivates them to follow the herd. They buy stocks to catch up and this pushes markets even higher.
Of course, it's true that nothing goes up in a straight line forever. The key to being a savvy investor is to spot when things get a bit too frothy in the market.
I don't believe we're there yet.
Consumer sentiment has bounced higher from its 2022 lows. But it's still below historical averages.
I'm just not seeing people getting too excited about stocks. No one seems to be "all in" just yet. And that's why I think stocks can still run higher from here.
It's easy to be the first type of investor I mentioned earlier, the doom-and-gloom guy. But it's lucrative to be the second investor, buying stocks after a fresh all-time high.
My advice today is to have your money in the stock market... Then just wait for the next, new all-time high. It should be coming shortly.
Good investing,
Jeff Havenstein Editor's note: In Health & Wealth Bulletin, Jeff regularly shares these kinds of insights. As Doc says, he and his team aim to share ideas with readers on how to live a "millionaire lifestyle" – on far, far less than you can imagine.
In this e-letter, Doc does what he likes to do best: advising others on improving their health, managing their money, and enjoying a prosperous retirement.
Health & Wealth Bulletin publishes in the afternoon every weekday the markets are open. And just like the ChaikinPowerFeed, it's completely free of charge. You can sign up for it right here.
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+1.56%
5
19
6
S&P 500
+0.91%
125
293
79
Nasdaq
-0.19%
23
54
23
Small Caps
+0.79%
506
1015
375
Bonds
+0.68%
Energy
+2.5%
4
15
3
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+2.01%
Real Estate
+1.85%
Utilities
+1.71%
Communication
+0.37%
Staples
+0.31%
Discretionary
+0.24%
Materials
+0.2%
Financial
+0.12%
Health Care
-0.5%
Industrials
-0.76%
Information Technology
-2.34%
* * * *
Industry Focus
Bank Services
48
38
6
Over the past 6 months, the Bank subsector (KBE) has underperformed the S&P 500 by -0.98%. However, its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #2 of 21 subsectors and has moved up 3 slots over the past week.
Top Stocks
UMBF
UMB Financial Corpor
BK
The Bank of New York
FFBC
First Financial Banc
* * * *
Top Movers
Gainers
CZR
+11.65%
CRM
+7.54%
DG
+7.03%
CVS
+6.35%
ELV
+6.14%
Losers
PAYC
-8.58%
VST
-5.97%
MRNA
-5.9%
SMCI
-5.25%
HPQ
-4.85%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
SAIC
GTLB
No earnings reporting today.
Earnings Surprises
No significant Earnings Surprises in the Russell 3000.
* * * *
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