Reason #14 Why Stocks Will “Climb” Higher
I couldn’t believe my eyes!
As I began my research this morning I stumbled across this statistic buried deep in the Wall Street Journal:
More than three-quarters of the 358 companies in the S&P 500 index that reported through Friday have beaten estimates, according to FactSet’s data.
66% of companies that reported have risen in subsequent trading sessions, a five-year high which has boosted the stock market to its highest levels ever.
But nobody seems to be batting an eyelash… And investors still seem as timid as ever…
That’s why today, I want to talk about what these results mean for your retirement account, and more importantly, why today’s timid investors could be setting you up for BIG gains in the future…
Climbing the “Wall of Worry”
Have you ever heard the term “Wall of Worry?”
The term refers to the well-known but little-talked about market phenomenon of stock prices actually rising during times of uncertainty.
I understand this may seem counterintuitive… But let me explain.
As we’ve talked about in the past, it’s important to pay attention to investor confidence — that is, the overall measure of investors’ fear and greed.
This is because investor confidence usually signals the amount of money being held on the sidelines. Or in other words, the amount of money that today’s “timid” investors could use to buy stocks and push the market higher.
If investors are fearful, it is assumed that the amount of money standing idly on the sidelines is higher than average.
And if investors are greedy, odds are too many buyers have already pushed stock prices uncomfortably high. (We saw this in the late 90s and early 2000s.)
That’s why it’s best to invest when there is a “wall of worry” in the market that is keeping prices under control… Just like we have today.
Think about it…
The fundamentals of this market are incredibly strong. As I said earlier, more than three-quarters of S&P 500 companies that have reported earnings so far have beaten estimates.
However, it’s the uncertainties in today’s market like the unsettled trade war between the U.S. and China, new political drama stemming from the upcoming presidential election, and the fears that this bull market has gone on for too long that are weighing on today’s stock prices…
Which according to the “wall of worry” theory makes today a great opportunity to take advantage of these lower stock prices. Because as we’ve seen in the past, those “timid” investors are just one headline, Trump tweet or trade war truce away from hopping back into this bull market.
And when they do, you’ll already be locked into your positions and ready to reap the rewards of the market’s next jump higher!
Now let’s get to the “must know” stories to start your week…
“Must Knows” for Monday, November 4th
Earnings on Deck — On Monday, Under Armour, Uber, Shake Shack, Sysco, Occidental Petroleum, Ferrari, Chegg, Sprint, Hertz and Marriott report earnings.
On Tuesday, Chesapeake Energy, GW Pharma, Amarin, Regeneron, Match, Allergan, Newmont Mining, Diamondback Energy and Tapestry report earnings.
On Wednesday, CVS Health, Barrick, Square, Baidu, Qualcomm, Fitbit, Humana and Wynn report earnings.
On Thursday, The Walt Disney Company, Teva Pharmaceutical, Take Two Interactive, Planet Fitness, Activision Blizzard, Bookings Holdings, AMC Entertainment and Dropbox report earnings.
And wrapping up the week on Friday, Duke Energy, U.S. Concrete and Enbridge report earnings.
Trade War Optimism — Yesterday, U.S. Commerce Secretary Wilbur Ross expressed optimism that the U.S. and China will reach a “Phase One” trade deal within the month in an interview with Bloomberg. In addition, Ross detailed how talks with car companies in Europe and Japan have been positive, and may mean tariffs can be avoided on autos being imported into America.
World’s Largest Company to Go Public — After years of speculation and countless delays, Saudi Aramco announced the company will now go public on the Riyadh stock exchange. The Saudi-based oil company is looking to value itself between $1.6 and $1.8 trillion.
McDonald’s CEO Fired — Fast food giant McDonald’s announced over the weekend that it’s parting ways with CEO Steve Easterbrook after a consensual relationship with an employee came to light. According to the press release, the relationship was in violation of company policy. Easterbrook had been influential leading the revamp of the McDonald’s menu, introducing online ordering and delivery, and switching to all-day breakfast options.
Fraud at Under Armour? — On Sunday, the Wall Street Journal reported that Under Armour Inc. is being investigated by the Securities and Exchange Commission and Department of Justice over accounting practices that could potentially mislead investors. The company insists that it has done nothing wrong, and is fully cooperating with investigators. The stock is down sharply this morning on the news.
That’s all for me this morning. Enjoy your week and I’ll talk to you tomorrow!
Here’s to growing and protecting your wealth!