Bold Prediction: 42% Gains by Year’s End
What goes up will probably keep going up.
It’s a bit of a twist on the old Isaac Newton quote, I know.
But the fact of the matter is that, gravity excluded, what goes up often doesn’t come back down. At least when it comes to the financial markets, that is.
Let’s do some market myth-busting…
Back in 2016, the National Bureau of Economic Research published a paper by Yale professor William Goetzmann. In it, he showed that booms are rarely followed by busts.
His study of 42 different stock markets from 1900–2014 actually found that booms are much more likely to be followed by more booms.
In fact, a stock market that’s doubled in the past year is almost twice as likely to double again as it is to get cut in half in the year that follows.
Just think about that for a second. It completely flies in the face of the common investing wisdom.
More importantly, it flies in the face of market psychology. If you picked 10 investors off the street and asked them whether they’d be willing to buy a stock after it had just doubled, most would think you were nuts for even asking the question.
But as the data shows, markets are far more likely to hand you another 100% gain than they are to hurt you.
What goes up will probably keep on going up.
Here in 2019, we’ve been enjoying a market that’s been in rally mode all year long.
Year to date, the big S&P 500 index is up more than 17.5% on a total returns basis. If Mr. Market were able to keep that pace for the rest of the year, we’d end 2019 a whopping 41.5% higher than we started the year.
We’re currently on pace for the best year for the S&P 500 since 1933!
Of course, that’s no guarantee that we’ll see the market pull off the same performance in the second half of the year. Nothing’s guaranteed when it comes to the stock market.
Still, odds are lots of investors are looking at this market right now, wondering how stocks could possibly continue to track higher for the rest of the year after the start they’ve had.
But the data show that market strength isn’t a caution flag — it’s a buy signal.
That’s something worth keeping in mind as you weigh which stocks to buy for the second half of the year.
When it comes to stocks, what goes up very often keeps right on going up.
And more specifically, given the explosive growth of tech stocks in particular…
We’re looking at a great opportunity to bank a ton of profits in the second half of this year.
For Technology Profits Daily,
Jonas Elmerraji, CMT
Chief Quantitative Expert