Tech Set to Surge Higher
2019 is shaping up to be a spectacular year for the stock market.
Even if it doesn’t quite feel like it…
While CNBC and The Wall Street Journal are running headlines this morning lamenting the trade war — and the 240-point drop in the Dow that it’s causing this morning — they’re ignoring the fact that we’re still off to one of the strongest starts for stocks on record.
As of this writing, the big S&P 500 is up 14.1% in its first 97 trading sessions of the year.
Looking all the way back to 1928, there are only 14 years that have started that well or better.
But so what?
While that statistic is interesting, it doesn’t necessarily tell us anything about what’s going to happen next.
After all, like the bear market numbers we looked at last week, a strong start for stocks could mean that all the gains are done.
(Hint: They’re not).
So let’s take a look at what the data actually says about what happens next.
Even though starts this strong are quite rare, we’ve got a big enough sample of data to get at least a rough picture of what usually happens to the market when stocks rally through the first five months of the year.
And it bodes well for your tech portfolio in the year ahead…
Looking at the S&P 500 in years when the big market average is up 14% or more by this point in the calendar year, the big index rallies a whopping 11.8% in the 12 months that follow.
Here’s a glimpse of similar situations stretching back to 1980:
Each gray line in the chart above is a year when the S&P started 14% higher or better. The graph shows how the S&P fared over the trading days from this point of the year onward.
Clearly, some years are more volatile than others — but the long-term trendline in blue has consistently pointed up and to the right.
The highest point on the blue line represents the end of October — if 2019 is in line with the other instances of strong starts for the market, the market should be up another 10% or so by then.
Bottom line: We probably haven’t seen the last of the bull market for 2019.
That probably comes as a surprise to a lot of folks.
After surging over 14% higher in the first five months of the year, it’d be natural to assume that the rally’s running out of gas. But the data say otherwise.
And it gets even better for technology-oriented investors.
In the last two instances when the S&P surged to start the year, the tech sector charged much higher, climbing 14.8% and 65.7%! That makes tech stocks look like a particularly good bet for 2019.
Of course, that’s no guarantee of what’s to come.
But while history never repeats, it usually rhymes.
The weight of the evidence supports more upside in stocks for the year ahead.
For Technology Profits Daily,
Jonas Elmerraji, CMT
Chief Quantitative Expert