The Stock Market is Optimistic — Should You Be?

The market has been highly optimistic lately.

Despite wave after wave of bad news, stocks are refusing to crash.

So just imagine how high the market will climb once the good news starts rolling in.

The Stock Market is Optimistic — Should You Be?

Fifteen years ago, Bernie Madoff was charged with masterminding the largest fraud case in American history.

As a result of his schemes, tens of billions of dollars were wiped out of the stock market. And analysts feared the market would quickly collapse.

Only, it didn’t. In fact, three weeks after Madoff was taken into custody, the market began trending up. Within a year, it had climbed almost 50%.

What happened? Essentially, Madoff’s antics didn’t matter — the market had already priced in this scandal. And it was ready, if not eager, to jump.

The thing is, we’re experiencing a similar circumstance right now. Let me explain what’s going on, and how we can position ourselves to profit from it.

The Glass is Half Full

Sky-high interest rates… surging oil prices… turmoil in the Middle East — the market is being fed a steady dose of grim news.

Yet surprisingly, and just like in 2008, the market isn’t budging. It’s not crashing in the wake of these events.

I’ll admit, I initially found this confounding. But now I believe the bad news is being baked into the market ahead of its announcement, thereby cushioning the blow and limiting the drops.

The thing is, if the market isn’t falling because of all this bad news, imagine what it’s going to do when the good news starts to come in…

A Coiled Spring, Ready to Expand

Last month, I began prepping you for a market rally. Even earlier, I described the market as a coiled spring, ready to expand. And I’m doubling down on this situation right now.

If you recall, three indicators made me confident that the market’s spring was ready to pop.

First, I noticed an oversold market.

Sure, the S&P 500 is up nearly 14% this year. But the bulk of these returns have come from seven tech giants — Meta (formerly Facebook), Apple (AAPL), Amazon (AMZN), and the like. Meanwhile, the rest of the market has sold off.

A surge in broad-based selling has created buying opportunities. And those opportunities will get the broader market jumping.

Second, I pointed out that economic activity was more robust than expected.

Despite inflation and slower wage growth, consumers continue to spend. There’s been no pullback. Companies have been spending, too.

Simply put, the wheels of this economic train didn’t fall off, as many expected they would.

As for the third reason, I forecasted a big upcoming earnings season.

Generally, September is a boring month. Not a lot of economic news gets reported. October, meanwhile, is when companies start reporting earnings. And all it takes is a few companies to beat expectations to send investors flocking to the market, creating the rally I predicted.

These indicators were why I was bullish about the market heading into the fall. And now I’ve got two more reasons to be bullish…

A Look at the Data

For starters, hiring is up.

Granted, companies aren’t out there hiring at will. But according to my proprietary data, they’re starting to take their feet off the brakes. And this is happening across all sectors — a good sign of things to come.

Why is hiring up? That leads me to my fifth reason: successful cutbacks.

You see, companies have spent much of this year getting lean and mean. They’ve trimmed inventories and staff to stay afloat. But have they gone too far?

Here’s a look at monthly business inventory numbers:

Remember, during COVID, we saw a massive surge in inventory. But as we returned to normal, those numbers fell significantly. Companies weren’t adding to their inventories.

Now notice the sudden uptick on the right-hand side. In August, there was a major surge in inventory growth.

This tells us that companies are ready to hit the gas. And that mirrors what I’m seeing with my hiring data.

We’re going to see more economic activity, more hiring, more spending, and presumably more positive market activity.

So, is it good times from here on out?

Where We Go from Here

Not so fast.

Keep in mind that a lot of these bullish signs aren’t long-term indicators. They could be short-term sparks.

The market may rally a bit over the next few months, but we’ve still got some uncertainty ahead.

Considering that, focus on smaller companies — small-cap and mid-cap players that are poised to benefit significantly from a jump in sales.

If you’re a Pro subscriber, I’ve got a specific company that could deliver as much as 60% gains over the next year.

We’re in it to win it. Zatlin out.

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