Well, the secret’s officially out.
At 1pm I released the special report that I’ve been alluding to all week.
If you haven’t got to it yet…
And don’t worry…
If you’re a Small Cap Alpha subscriber, you’re already privy to this information.
And what a time to learn about it!
2019 is shaping up to be an absolute doozy for stock markets, if you ask me. And I’m talking to the upside.
You may think that idea sounds insane. But events have come together to give the world economy a nice big lift.
On Tuesday, we put down what we expected from the central bankers at the Fed this week.
They delivered after their meeting overnight (our time).
These two things were as follows…
One: The Fed to raise interest rates again?
Two: Will the Fed moderate the outlook for more raises in 2019?
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This takes the pressure off (for now) one of the big worries of this year…the huge amount of outstanding US dollar debt in emerging markets.
Less interest rate hikes mean less burdensome repayments. It also puts less pressure on the US dollar to rise.
Then we have the falling oil price as well. But not for the reason everyone thinks…
I saw a note come into my inbox yesterday. It attributed the falling oil price to excess supply and no growth.
This assessment is almost certainly false.
Granted, it may make an intuitive kind of sense. US shale output is up. Global trade worries preoccupy everyone.
However, the volatility in oil right now is almost certainly due to trading and positioning in the futures market.
These are the ‘paper’ barrels traded every day in amounts that far exceed the daily consumption of oil.
These are almost certainly algorithmic traders.
They tell us nothing about ‘growth’.
I’m not alone…
Stanley Druckenmiller is a hedge fund veteran who turned himself into a billionaire after a 30-year career.
In a recent Bloomberg interview, he argued the quants have become so dominant in markets that they are changing directions to extremes he’s never seen before.
I would not dismiss the importance of this observation.
Regardless, oil has come way down and given every consumer an effective tax cut…you and I included. Make the most of it.
And the market likes it, as far as the major importing economies go in emerging markets.
The currencies of India, Turkey and Indonesia all rallied into the Fed meeting.
And we also have evidence that the US economy is a lot stronger than people give it credit for…
A clue that the US economy is stronger than you think
The Dow Jones Equity REIT Total Return Index hit an all-time high earlier this month.
A real estate investment trust buys land and buildings to lease them out. In America, they carry special tax treatment for paying out their profits to investors.
For our purposes, it’s notable for a different reason. It suggests rents are strong in the US and the market likes the outlook further out.
That signifies the economy is ticking over well.
I know US stocks have been volatile and down of late. But the best measure of any economy is the real estate market.
It’s the biggest asset class, and involves a wider range of the populace.
The rich own most of the equity wealth in America.
Note, too, that the Fed pausing its rate hikes helps affordability for homebuyers.
As does rising wages. They are growing at a hot pace — over 4% on an annual basis.
Employment in the US is at a 49-year low and job openings are at record highs.
Some argue this is as good as it gets. That’s a possibility. We can’t discount it…but good risk management can cater for that outcome.
My money is on stocks in 2019 to make another leg up…
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The Fed’s new mood and the drop in oil just turbocharges the fundamental factors that are already there.
And if the trade war is called off? Strap yourself in. The stage is set for money to pour off the sidelines and into the market.
We got a glimpse of that in the immediate trading day (on the ASX) after the G20 meeting. The Aussie market had its best day in two years.
We’ve cooled since.
Yes, the market will be volatile around the Fed meetings. That’s always in play because the outcome is never completely certain.
And we’ll move on to other worries next year. Markets climb those usually.
In the meantime, the recent selloff has brought values way down.
I see it across the small-cap sector. It’s astonishing how little interest there is for stocks releasing good news.
All you need is the courage to step in. That’s one of three qualities our friend Stan Druckenmiller says one needs in the market.
To quote him directly…
‘I’ve never made a buy at a low that I didn’t just feel terrible and scared to death making it.’
Of course, it’s only worth this kind of feeling if the upside is truly compelling.
And it sure is right now.
Three German men, for example, turned themselves into multimillionaires using a unique strategy I just discovered.
It’s one of the most compelling investment ideas I’ve ever seen.
Even better…you can put it to work for you right now.