Our conviction stems from a trifecta of bullish developments that indicate stocks are about to rocket higher.
First, we received strong earnings results. Indeed, pretty much every major company from Alphabet (GOOGL) to Microsoft (MSFT) to Apple (AAPL) has reported outstanding quarterly earnings over the past few weeks.
Then, the Federal Reserve reaffirmed its dovish stance. At the FOMC press conference just two days ago, Fed Board Chair Jerome Powell confirmed that the central bank still plans to cut rates later this year. Furthermore, it isn’t considering hiking rates again, especially if the labor market weakens and/or inflation continues to cool.
And just this morning, we received some €˜Goldilocks’ jobs data. The newly released April jobs report suggests that the U.S. labor market is weakening and that inflation is cooling. Overall private-sector job growth slowed to one of its most sluggish paces since the pandemic emerged. Meanwhile, wage growth did, in fact, drop to its slowest pace of the post-pandemic era. And we think these results should compel the Fed to cut rates sooner than most people think.
A Bullish Trifecta Is Building
Strong earnings, a dovish Fed and soft economic data – the trifecta that brings about a huge stock market rally.
And we’re getting all three right now.
It should be no surprise, then, that stocks have been soaring recently. The market rallied triple-digits on Thursday. It is up another triple-digits on Friday as I write.
It seems the stock market is bouncing back to life.
And we believe that throughout the rest of May, we’ll continue to see strong earnings results. That will push forward earnings estimates higher, creating a huge tailwind for stocks.
Moreover, we’ll also likely receive softer inflation reports in May and June as the economy gradually weakens, businesses stop hiking prices (as they’ve mentioned in this quarter’s conference calls), and commodity price pressures ease (oil prices have been crashing lately). The labor market should also continue to cool.
That should lead the Fed to consider rate cuts more seriously, meaning the market’s rate-cut hopes will soar throughout the summer.
And ultimately, we think this saga ends with the Fed actually cutting rates in July – which could unleash a massive stock market rally.
The Final Word on April’s Jobs Data
Net-net, we see “green shoots” for stocks over the next few months as we approach the Fed’s first rate cut, which should accelerate the rally even further.
So, needless to say… we’re feeling very bullish.
That’s why we’ve gone on a buying spree as of late. We’ve been hard at work finding the stocks to best prepare our portfolios for this incoming market rally.
Now that it has arrived, we think our new picks are going to soar.
Interested in learning exactly which stocks we’ve been buying for this incoming surge?
Get all the details before the gains begin.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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