This Secret Reveals the Next Market Rally

by Andrew Zatlin November 15, 2023 9:00 am ET

What if you knew exactly when the stock market was going to rally?

It turns out, a piece of data has a history of signaling the next bull run…

A piece you probably didn’t realize even existed.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

This Secret Reveals the Next Market Rally

Earlier this week, the credit rating on U.S. government debt was downgraded, a rare occurrence on Wall Street.

The reasons behind the downgrade weren’t surprising — massive debt… rising interest rates… turmoil in Congress.

The thing is, there’s a tightly-kept secret about these downgrades that can help you capture enormous profits in the stock market.

Curious? Let’s dive into the details…

The Importance of Third Parties

To start, let’s look at the market for debt and the role its credit rating plays.

Perhaps surprisingly, corporate debt is a $10 trillion market. It’s massive. And within this market is a need for a third party to independently assess the value of this debt.

It’s similar to the way any market has third-party evaluators. Appraisers, for instance, determine the value of collectibles like comic books and baseball cards. And a company like Kelly Blue Book determines the value of used cars.

But in the world of corporate debt, valuing this debt falls onto the shoulders of credit-rating agencies, including a company called Moody’s.

Why Moody’s Matters

Moody’s role is fairly simple. It assesses a company’s debt and assigns it a certain value based mostly on how risky this debt is to carry.

To companies holding this debt, this valuation matters. It can have a direct impact on its earnings.

It also matters for institutional investors, particularly those who invest in corporate debt. After all, to have the best chance at making money, these investors will only look at high-quality debt.

The thing is, Moody’s valuations also matter to everyday investors like you. Let me explain…

A Proven History

Take a look at this chart:

This is a 25-year snapshot — 1995 to 2020 — comparing the S&P 500’s performance (in black) with the timing of corporate-debt downgrades (in blue).

Notice how each time corporate downgrades peak, the stock market rallies almost immediately afterwards. In other words, downgrades peaking is a signal to buy, buy, buy.

That’s the secret that’s been essentially hiding in plain sight. But back to Moody’s for a moment…

Walking a Tightrope

Companies want to pay as little as they can on their debt. So they’re going to shop around for the best ratings.

Keep in mind that Moody’s may be independent, but it’s also a business. It makes money by attaching itself to these debt valuations. And the last thing it wants to do is bite the hand that feeds it.

At the same time, Moody’s might have to downgrade a company’s debt in order to remain an honest broker.

In essence, Moody’s must walk a tightrope of keeping its clients happy, while remaining a reputable business…

And that’s exactly why this credit-rating agency will always be the last to issue changes in corporate-debt ratings.

Leading the Charge

You see, Moody’s isn’t out to make headlines. It’s not out to drop an information bomb on the investment world.

It waits until the last possible moment to make changes — again, it’s walking a tightrope.

But while these changes are lagging in a market for investments like bonds, they’re typically leading the charge in the stock market.

That’s evident with the chart I showed you above. And now Moody’s has downgraded corporate debt once again…

Meaning a stock-market rally is about to kick off.

When?

The question is: When will it happen?

I’ve been adamant that 2024 will be the “Year of the Bull.” And I’m sticking with that forecast.

Moody’s debt downgrade is another example that aligns with my prediction. And if you’re a Moneyball Pro subscriber, I’ll show you exactly how to get ready for it.

We’re in it to win it. Zatlin out.