Market Rally Stage II: Here’s How Top Investors Are Targeting The Top Stocks Of Tomorrow
If You Are Expecting Another Market Crash, Don’t Read This
Worried a crash is coming?
Most investors sure are.
They see an untenable disconnect between stocks and the economy.
And to be honest, they’re not wrong in what they see.
Major stock indices are almost back to their pre-pandemic highs.
And this week we got official economic data that shows the economy is well below 2008 levels of awful.
So worries of a stock market crash do make sense.
However, that’s not the case at all.
In fact, most investors watching the headlines are missing out what’s really driving this market (hint: it’s not what they’re telling you) and will miss out on the big opportunities in the next stage.
If you’ve watched what’s going on with Apple, Amazon, and other high-flying stocks, the next chance to see gains like that is coming soon.
Read on below to see for yourself how it’s all coming together.
Stocks Vs. The Economy: And The Winner Is…
Most market observers see a complete disconnect between stocks and the economy.
On the surface, that’s true.
But we drilled down on the data and found that’s not really the case at all.
It all makes sense when you separate the markets from the economy and look at each individually.
Here’s what I mean.
First, let’s take the economy.
The financial news this week was dominated by the U.S. govt reported that GDP fell at a 32.9% annualized rate the March-June quarter.
That’s just bad.
Basically, 8.2% of economic activity was eliminated.
To understand how big it is, just look back to the last major recession in 2008.
That was nothing compared to 2020.
If you look back to 2008, the peak GDP was set in 2008 at $14.8 trillion rate.
It fell to bottom at $14.35 trillion rate in 2009.
That’s only a 3% decline in GDP which was enough to cause economic mayhem, 10% unemployment, and a 50% drop in stocks (Note: This is 100% true, it felt far worse so we went back and quadruple-checked the datat).
This is way worse than that.
In fact, the current economic slide is almost three times worse than the 2008 credit crisis.
Worst of all though, once we estimate a roaring recovery of a 5% GDP growth, we see it will take a couple years to get all the way back to pre-pandemic and beyond.
That’s the economy part by itself.
The market side – despite the surging overall markets — is actually not much different.
How “Crazy” Is This Market Now?
There’s no better time to be an investor than earnings season.
We’re in the heart of it right now and this week we saw the financial results of three bellwether companies – Apple, Amazon, and Microsoft.
The companies provided a lot of good news too.
But more importantly, they showed what’s really happening in the markets right now.
All three of these companies posted big earnings beats.
Now, that’s nothing new.
These companies beat earnings expectations all the time.
Apple once went more than nine years beating estimates every single quarter during the Steve Jobs era.
They’re not alone either.
According to FactSet Research, so far this quarter 81% of S&P 500 companies beat earnings expectations and 71% have beat revenue expectations too.
Beatings earnings expectations is a joke.
But these companies weren’t just able to leap artificially low hurdles, they were able to continue to grow market share in this time is the outstanding part of it all.
And they’ve gone from big to even bigger.
For example, Amazon, Apple, and Microsoft are now worth a total of $4.77 trillion.
Together they account for about 1/6th of the total value of all the S&P 500 companies.
And this is exactly why the overall market indices have recovered so well.
You see, since these behemoths are so big, when their stocks climb 90% or more (as some of them have since March), they drag the overall market indices with them.
Because while it is party time at these companies, the fervor is not equally distributed.
Take Wynn Resorts (WYNN) for example.
Wynn is going to take the most direct hit from the pandemic-driven drops in travel and tourism.
The company’s main revenue sources are casino resorts in Macau and Las Vegas and their currently operating at a fraction of total compacity.
Wynn is expected to see an 81% drop in revenue this quarter.
And frankly its stock reflects the troubled times it faces.
Wynn’s stock has rebounded more than 30% from March bottom, but it is still down 50% from its 2020 highs.
That, to be honest, seems about right.
Which brings us back to our bigger point.
The Best Move To Make Right Now
The markets aren’t nearly as crazy as the headlines would lead a passive observer right now.
The pandemic has sparked a sharp drop in GDP, but it has also changed a lot of consumer patterns.
The winners have been the companies on the right side of these changes.
The losers have been on the wrong side of those changes.
Now, here’s the key for investors in all this.
We already know the companies on the right side of this. Their stocks have soared.
Now its time to move to the many companies who are on the wrong side of this all temporarily.
They’re not the companies headed for bankruptcy like Brooks Brothers or GNC. And they’re not the companies that will be reduced for years to come like the airlines.
I’m talking about companies that are truly temporarily on the sidelines.
And I’ve got the perfect example.
Dear Retail has targeted a group of gold stocks which haven’t gone for a ride on the current gold bull market.
There is nothing wrong with them.
There’s actually quite a lot right with them.
These gold companies scooped up some of the largest and most valuable gold mining assets in the world.
However, due to the current lack of travel, the big money gold investors which drive gold stocks haven’t been able to really check them out in person and see the true scale of these success stories which were just starting to unfold before the world economy was halted.
That all will change in time and these stocks will catch up fast to the rest of the gold bull market.
Dear Retail is currently working on a new report and it should be available soon.
Stay tuned for this report and, until then, don’t worry about a market crash. It’s not as sure a thing as it would seem. Just target the companies temporarily held back in all this and get ready to ride the next wave.
Dear Retail Staff/Gary Baldwin
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