The U.S. economy has everything it needs to come back from the pandemic with a boom.
Vaccines are coming as the virus recedes. Pent-up demand is building on robust retail sales.
And corporate earnings throughout much of the market are on the way back up. We haven’t seen growth forecasts like this since the 2017 tax cuts super-charged profit margins across the board.
This is a stock picker’s paradise. Big Wall Street firms like JPMorgan and Wells Fargo agree with me.
Of course, you need to be in the right stocks to really feel that wind beneath your wings.
That’s a problem for investors who thought parking in a handful of Big Tech companies was all it takes to build long-term wealth. Pick the wrong stocks, and the index funds are in for a world of pain.
The time to buy Apple Inc. (NASDAQ:AAPL), Amazon.com Inc. (NASDAQ:AMZN) and their Silicon Valley peers was years or even decades ago. Their growth rates have plateaued.
Shareholders have made trillions of dollars. But the last few weeks show that even trillion-dollar titans can stall while more “boring” areas of the economy leap into the lead.
FANG Falters, Tesla Spins Out
I’ve refined my technical orientation in the last few months to get ahead of the next phase of the post-pandemic recovery. Charts are great things because they reveal which stocks have what it takes to outperform and which can barely keep up with the market.
When all stocks were plunging a year ago, correlations were almost universal. And then when the Fed stepped in, the flood of free money gave nearly everything on Wall Street a lift.
Fundamentals receded into the background. Only momentum mattered.
Now we’re in an environment where strong stocks and weak ones move in separate directions. The charts will signal the new statistical limits, outlining new trading channels.
The results of this new technical framework generated their first 30% win this morning. It took barely a week and I’m looking forward to more aggressive results as our other positions mature.
You can get a taste of the system by reviewing my recent conference call. (Click here.) But here, I want to talk about what happens when strong charts hit a wall.
You know the “FANG” as Facebook Inc. (NASDAQ:FB), Amazon, Netflix Inc. (NFLX) and Alphabet Inc. (GOOG).Every member of that famous quartet has hit a technical wall.
They aren’t crashing. They simply aren’t showing me any of the positive momentum that I’d usually associate with a continued bull run into record territory.
It is almost like investors have gotten bored with these once-thrilling stocks or simply lack the motivation to keep them reaching for the sky.
After all, it takes a lot of conviction to move a trillion-dollar enterprise. Even pushing FB back to its 52-week high requires about $65 billion in new allocations to the stock.
Until that cash emerges alongside the accompanying conviction, all these giant companies can do is drift roughly in line with the market as a whole. That’s not a great place to be.
NFLX is stuck 18% lower than it was 60 days ago. AMZN has fallen 15% and GOOG is down 6% from its recent high.
None of them show any urgency in recapturing their past glory. There’s no support holding these charts up. The only thing I see is resistance holding them back.
And they aren’t alone. AAPL is stuck. Even mighty Microsoft Corp. (NASDAQ:MSFT) is stuck. Tesla Inc. (NASDAQ:TSLA) has crumpled a full 32% in the last 60 days.
If you were content to pick those five stocks, you’ve probably had a great long-term experience, but immediate upside now looks unlikely.
They’ll need to rest. Until they do, forget them. Even though they account for 30% of all cash in the market, they’re just five stocks.
There are 5,000 other companies on Wall Street, and more are going public all the time. They’re the future. That’s where my IPO Edge shines.
You won’t find AAPL or AMZN there, but you might catch the trillion-dollar titan of tomorrow.
And the market as a whole actually looks eager to shake off the Big Tech shadow and get back to work. Take a close look at the S&P 500 chart or the Dow chart, and the momentum indicators point back to record territory.
The bull market is alive and well. Just not on Silicon Valley. I’m talking about all of this on my Millionaire Makers radio show (Spotify)(Apple) and video channel (YouTube). Subscribe now so you never miss an episode… or an opportunity!
Cannabis Corner: New York Tests the ‘Green Map’ Theory
A lot of cannabis investors like to think every state that opens up to recreational sales will dramatically expand the market, as well as turning another spot on the map bright green.
I’ve never been a fan of that theory. As far as I’m concerned, people will travel to get the regulatory framework they want, effectively shopping for the cannabis laws that fit their interests.
Cannabis tourism in the early years pushed a lot of vacationers to Colorado and Washington before other states like Nevada responded in an effort to keep those leisure dollars from drifting elsewhere.
All in all, the market didn’t really expand as much as expected after every new state opened up. The existing pool of consumption simply broadened out geographically, without bringing a lot of fresh money to the overall table.
And if you still need convincing, just look at the cannabis stocks this week. New York finally agreed on a plan to legalize recreational sales and big names like Canopy Growth Corp. (NYSE:CGC) and Tilray Corp. (NASDAQ:TLRY) took a huge step backward.
Good news if you believe that the map is key to the industry’s future. Bad response.
The narrative only adds up when you accept that the map and the business model aren’t highly correlated after all. The map can expand and the stocks retreat.
Besides, we’ve seen the stocks soar without the map expanding at all. My proprietary cannabis index is still up 70% year to date after the last few weeks of selling.
Several companies like TLRY have doubled or even tripled in a matter of months. That’s not the map. That’s just the way money flows on Wall Street.
I’ve got triple-digit-percentage cannabis fun in my IPO Edge portfolio and more on the way. This is an entry point, not the end of the world.
Which business will transform the aging world and bring investors life-changing profits? Hilary Kramer knows. She reveals the name of this company – “The Final Human Frontier: An Aging World” – and much more in her blockbuster new book, GameChanger Investing: How to Profit from Tomorrow’s Billion-Dollar Trends.
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