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Great Things Are Still to Come In This Market

By Matt McCallOct 26, 2019

It was a fairly quiet week for stocks, and all three major indices closed the five-day period in the green. Even though it was the first full week of third-quarter earnings, stocks traded in a narrow range as headlines out of Washington, D.C. were muted – for once.

If you read MoneyWire regularly, you know how important it is to ignore the financial media noise and instead focus on what’s really going on beneath the surface. That’s how we can better ourselves as investors.

So while this week’s news flow was minimal, I still wanted to get in touch to share my thoughts on some of the more important things I saw and what they mean.

Volatility Down, Stocks Up

The CBOE Volatility Index (VIX) is currently trading near its lowest level in months as traders finally get back to concentrating on the big picture. Thanks to the lower volatility, the S&P 500 was able to climb nearly 1% this week. Believe it or not, the index is now just a few ticks away from a new all-time high.

I am still as bullish as it gets on this market. In fact, I have been bullish throughout this entire 10+ year bull run… to the day. On Friday, March 6, 2009 – the day the S&P 500 was down 57% from its previous high and made its intraday bottom – I appeared on television on Fox Business. I called the market bottom that day, even though I wasn’t exactly trying to.

I also created my now-famous “Andrew Jackson Portfolio” – a group of nine stocks whose share prices totaled about $20 – that multiplied five times in five years… even with two of the companies going bankrupt. (For more on that, check out this recent article.)

Fast forward more than 10 years and I still encourage you to be heavily invested in stocks. I anticipate a market rally into the end of the year that will result in historic highs for U.S. stocks – and you don’t want to be left holding your cash in the dust.

Retail Stocks Poised for Holiday Rally

Speaking of a year-end rally, all signs currently point to retail sales coming in very strong this holiday season as U.S. consumers are expected to spend 4% more than last year.

The housing market is adding to that bullish tone. According to CNBC, mortgage holders saw the value of their home’s equity increase by 4.8% – or $428 billion – at the end of the second quarter. As a result, the number of borrowers who are underwater with their mortgages fell to 3.8%.

At the same time, the U.S. personal savings rate has reached its high level since 2012. And a combination of a strengthening housing market, increased savings, and unemployment near historical lows is exactly what retailers were hoping for.

That’s why – against what most investors and talking heads in the media want to believe – I feel that now is the time to be invested in select retail stocks. “Select” is the key word here. I must emphasize that not all retail stocks are a “buy” today. Only innovative retailers that meet my stringent criteria make the cut.

Q3 Earnings Surprise

Already, about one-third of all S&P 500 companies have reported their third-quarter earnings – and an impressive 81% have beaten expectations. Analysts now look for earnings to be down only 4.1% from last year, which is better than where estimates stood just a week ago.

Remember, long-term investors must always look ahead at what’s to come – not back at what happened earlier this year. You wouldn’t drive a car while only looking in the rearview mirror, would you? And yet, that’s essentially what a lot of investors do every day.

I look for earnings to start picking up in the fourth quarter, and then really ramp up in 2020. If the U.S. gets a trade deal done with China, I am confident that corporate earnings will take off. However, even if we remain status quo, expectations are for record earnings next year. And when company profits are at historic highs… stock prices are typically at historic highs, too.

NOW is the time to prepare your portfolio for new highs. NOW is the time to be heavily invested in stocks. And NOW is the time to finally turn off the bearish pundits who have been wrong for 10+ years!

Great things are still to come.

Matt McCall’s MoneyLine Podcast

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