Stock Market Bears Should Prepare for Disappointment

In 1918, World War I was raging across Europe…

Amid the war, the deadliest pandemic in modern history broke out.

The Spanish Flu infected an estimated 500 million people and killed as many as 50 million: a 28% infection rate and a nearly 3% fatality rate.

Fast forward a century… and we’re living through the worst pandemic of our lifetimes: the COVID-19 outbreak.

While serious, COVID-19 currently has an infection rate of 0.2%. The current fatality rate is 0.6%.

Now, a lot has changed since the Spanish Flu pandemic. The world’s population was under 2 billion in 1918. Today, it’s over 7 billion.

And there have been major advances in technology, medicine, hygiene, and healthcare since then. So people are more likely to survive diseases today than they were 100 years ago.

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But here’s why I’m telling you this…

After the Spanish Flu, America experienced a Golden Age of technological innovation: the automobile, radio, movies, aviation, and TV.

Of course, that was followed by the Great Depression. But the 1920s set the stage for a long-term secular rise in the stock market.

You see that barely visible drop that the red arrow is pointing to in the upper right corner? It’s the market collapse after the coronavirus outbreak. Yes… that little thing.

And since the March bottom, the market has rallied 44%.

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In fact, stocks have outperformed U.S. Treasuries, gold, and nearly every other asset class over the last 100 years.

Today, I’ll tell you why I believe the stock market will continue to power higher – and more importantly, why buying high-quality stocks is still your best bet to build wealth…

Follow the Data

Regular readers know I’m a numbers guy. I follow the big money because it tells me what’s going on in the markets… and points me to the best-of-the-best stocks.

In fact, a 2017 study by an Arizona State University professor found that 4% of stocks make up 100% of the gains in the market over the past 100 years.

I call them “outliers.” And if you’re not buying these stocks, you’re wasting your time.

My system is dedicated to finding these outliers by following big-money buying. And so far, it’s led us to five triple-digit winners in my Palm Beach Trader portfolio… including gains of 376% and 196%.

But my system can also predict broad moves in the market. For example, in March, it was only off by one trading day in predicting the market bottom.

So I did a deep dive into the numbers to see where the market is likely headed the rest of the year.

Here’s what I found…

Over 15 years, my system has recorded a daily average of 63 big-money buy signals and 48 sell signals.

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So far in 2020, we’ve seen the expected daily average of 63 buy signals.

However, the average daily number of sell signals has spiked to 85 – thanks to huge selling in late February. For instance, in one 21-day period, we saw an astounding 10,141 sell signals – an average of 482 per day!

Over the past 30 years, huge selling historically precedes the market ripping higher.

Why the Bears Will Be Disappointed

Look, COVID-19 is killing hundreds of thousands of people and making many more ill. So I don’t want to understate the danger here.

But that doesn’t mean the media won’t capitalize off a scary event. It makes money through fear.

I’m more optimistic. I believe a vaccine for COVID-19 will arrive sooner than markets anticipate. Hundreds of firms worldwide are working on possibly the biggest blockbuster drug of all time.

And when we get a vaccine, the market will explode higher.

But if things do get worse, I’m banking the Fed will continue its shadowy support for the markets.

It’s already buying troubled bonds and ETFs. And it’s printing trillions of dollars to keep the economy afloat during the pandemic. Much of that money is going into stocks.

And if things go seriously south, I believe the Fed might step in and directly purchase stocks.

So, not only does the data line up for another big rally in stocks… so does the macro picture. Stock market bears will find disappointment yet again.

That said, we should see at least one more healthy and moderately scary market pullback before year-end.

Remember, we saw a huge crash in February that bottomed in March. But it was an epic buying opportunity. If you bought the market bottom, you’d be up 44% now.

So another pullback will be a buying opportunity for savvy investors big and small.

If you’re looking for sectors to buy on a market dip, consider technology and healthcare.

Big money has been flowing to those two sectors the entire year. That should continue.

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I understand… there’s plenty to worry about right now: an unstable political landscape, social unrest, massive unemployment, and a deadly virus threatening our health.

But we’ve seen it before, and we’ve been through worse. Each time, we triumphed. And the market has continued to rise.

I’m betting it’ll continue to rise again.

Patience and process!

Jason Bodner

Editor, Palm Beach Insider

Read more from Jason Bodner at PalmBeachGroup.com

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