Market Insights & Analysis from Kramer Capital Research

When Larry Summers, Paul Gundlach and All Tthe Other Bears Get It Wrong

Nobody wants to follow a broken game plan. That’s why it’s worth reviewing the accuracy of your own market forecasts as well as everyone else’s predictions from time to time.

And the start of a new year presents the perfect opportunity to calibrate our sense of where Wall Street is headed. I’m pleased to say that we got 2019 right, despite a lot of noise pushing investors in the wrong direction.

As early as February, when the S&P 500 was still struggling to crawl out from the 20 percent hole it dug in 2018, I was telling everyone within range that stocks were headed back to record territory soon. The prospect of a relapse never entered my mind.

But at the time I was pretty lonely in my bull market view. The trade war had started to gnaw on corporate confidence, the Treasury curve looked fragile and the Fed seemed set on raising interest rates. Major market players were ready to give up.

We’re talking about big names like Larry Summers and “bond king” Paul Gundlach, who maintained all the way into March that the decade-long bull market was over.

Even over the summer, Gundlach was urging people to retreat to the sidelines and the cold security of gold. Gold had a decent season. Stocks still did better, leaving investors who bought into the fear factor feeling a little cheated.

They didn’t lose any money. But because they bet on a crash that never happened, they missed what became an 18 percent surge. 

Summers has done even worse. He thought the bull market would run out of steam two years ago. While the S&P 500 has been a rollercoaster in the intervening time, the ride definitely has still left investors feeling more elevated than nervous.

If your only objective is to avoid a loss, you’re always bearish. Otherwise, the only way to make money is to be in the market and embrace its inherent volatility.

My Targets Kept Climbing

In February, the S&P 500 was still a harrowing 16 percent from record territory. I didn’t see a compelling reason why it couldn’t recover every lost point and push past what was then a historical limit around 2,900.

That made February a beautiful opportunity to put capital to work. Those who listened to me could have made over 30 percent in less than a year. 

And once the market recovered its 2018 peak, we were back in bull market territory. It’s impossible to even talk about a bear market when stocks are breaking record after record.

As a result, Gundlach changed his tone. Summers faded back into the background. Other negative voices like Stanley Druckenmiller sheepishly admitted they were wrong and came back to stocks.

My thought was a little simpler. A market in motion remains in motion. While earnings were stalled, every rate cut raised the ceiling about 2 percentage points.

As a result, there was no reason to assume the S&P 500 was anywhere near peaking. I reset my sights from 2,900 to 3,300 by the end of the year.

I was about 1 percentage point too ambitious. We’ll make it up in the new year. But I’d much rather miss the mark by 1 percent than miss out on one of the biggest years in my career.

Admittedly, 2020 is an election year, and there’s going to be some stress around geopolitical tension as well. We’re going to need to keep revising our expectations to make sure they conform with reality.

But right now I’m comfortable calling 3,600 on the S&P 500 by mid-year. That makes me one of the most bullish people on Wall Street. 

After that, we’ll regroup depending on what the summer political landscape provides. The index will probably end the year at 3,000 or 4,000. Anything in between is unlikely.

Whatever happens, my subscribers will stay in the loop. There’s no wasted time here. GameChangers will capture the upside of a growing economy and Value Authority will cushion the downside with defensive stocks and dividends.

When the market goes sideways, 2-Day Trader keeps the cash flowing And for the long haul, I’ve launched a new IPO service that focuses exclusively on the newest kids on Wall Street. 

Stocks rise and fall. Everybody’s got an opinion on the next move. The important thing is to stay in the game.

CANNABIS CORNER: ILLINOIS IS OPEN  

Recreational cannabis investing is all about the regulatory map that determines how many people can buy your favorite company’s products. That map turned a lot greener this week.

Illinois just added 12 million people to the recreational map, or potentially 1.3 million cannabis consumers. And counting Canada, that brings the total “addressable market” of likely retail buyers to about 13 million.

The market just swelled by 10 percent. That’s a big deal for those of us who were concerned that the supply of dried plant matter had ramped up to the point where it overwhelmed demand.

The governor of Illinois thinks cannabis will generate $170 million in taxes this year alone. That’s huge. No wonder he’s happy to sign the deregulation bill into state law.

All we need now is for Wall Street to follow the money.

Join me for the Orlando MoneyShow, February 6-8, 2020, at the Omni Orlando Resort at ChampionsGate. I will be speaking Friday, Feb. 7, 3:00 p.m. about The Stealth Value Investor: Ten Amazing Dividend Yield Plays Flying Under the Radar. On Saturday, Feb. 8, I will talk at 5:15 a.m. about Identifying the Real Future GameChanger Stocks: Ten Companies Positioned to Double – Even if the Bears Take Over Wall Street. Other investment experts who will be speaking include retirement and estate planning specialist Bob Carlson, income and options guru Bryan Perry and world-traveling, free-market economist Mark Skousen, who leads the Forecasts & Strategies newsletter. Register by clicking here or call 1-800-970-4355 and mention my priority code of 049252.

 

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