Wow, has the market changed since the release off the FOMC minutes two weeks ago!
On that day, we discovered that our FED had suddenly gone from Dovish to Hawkish.
On that day the U.S. dollar halted its downward trend and began going up once again.
On that day Gold halted its upward trend and began going down once again. Things have really changed. Have they changed for the better or the worse?
The bottom line in the changing of stance by the FED, is that on that day they endorsed our current economy. They do not even see a hint of a recession looming on the horizon.
It will be a recession that will lead us into the next bear market. If the FED feels confident enough to start tightening monetary policy, they must also be fairly confident of the current state of our economy.
Is this not good news for the stock market? The stock market feeds off of a growing economy. If the FED sees a growing economy ahead, don’t they also see a growing stock market?
Judging by the reaction of the market since the FOMC minutes were released, the market sure is thinking that way.
On the surface, you may not think that there has been much significance to the moves that the market has made since those FOMC minutes. But, as someone that dives down deep, for 8-10 hours into the market on a daily basis, I have witnessed a lot of action that was downright eye-popping!
Did you see the extreme breakout in a “risk-on” stock like Dollar Tree (DLTR)? I sure did!
Those are new, all-time highs that you are seeing above! Dollar Tree was one of those “I didn’t know that” discoveries that I made when I was inventing my Best Stocks Now App back in 2008.
I mean really, a company that sells mostly off-brand, sometimes damaged, and even cheap trinket like merchandise is one of the best performers in the market over the last decade?
See for yourself…
Data from Best Stocks Now App
The returns of Dollar Tree’s stock have blown away the returns of the market over the last one, three, five, and ten years! In cheap trinkets I do believe!
I guess this is one area of retail that Amazon cannot destroy the competition in. How much does it cost to pack and ship a one-dollar trinket? Besides that, I want to hold and feel a trinket in my hand before I plunk down my hard-earned dollar. I wrote about why Amazon is one of my biggest positions last week.
Dollar Tree is currently my fourth largest position.
Did you see the breakout in Adobe (ADBE) last week? I sure did.
I wrote about why Adobe is also one of my largest positions last August. I also did a three-minute evaluation of its current valuation this past week on my daily, national radio show. How many large-cap tech stocks are expected to grow their earnings by 37% this year and 33% next year? Not many.
I can list here a lot of large-cap tech stocks that are not! In fact stocks like Cisco, Microsoft and Apple have dwindled down to just single digit growth. No thanks! I recently wrote about another large-cap tech stock that I believe is the new king of growth in this space.
Did you notice the breakout in Intuit (INTU) this past week? This is another large holding at Gunderson Capital Management.
These are obviously all “risk-on” stocks that we are looking at so far. They have been going sideways since last summer. Now they are all of a sudden lifting off once again. I did a three-minute evaluation of Intuit on another of my radio shows this past week.
This sudden action is not limited to just U.S. stocks, however. Another one of my large holdings is Tencent Holdings Ltd. It is one of China’s largest internet stocks. Tencent, like Dollar Tree, Adobe, and Intuit also broke out this past week.
It looks like I will be doing a feature of this stocks on one of my upcoming radio shows.
A technology related REIT named Equinix is also busting loose one again. This is also one of my largest holdings. I wrote all about it back in February.
The financial sector is also liking the new hawkish clothes that Ms. Yellen is wearing once again. One of my favorites continues to be Visa. It is also a holding here at my money management firm. It is articles and picks like these that have placed me in the top 15% of all financial experts according to tipranks.com.
One would really not expect the stock market to react in such a positive way after the FOMC minutes showed that they had turned hawkish once again. There are several reasons for this.
By going hawkish, the FED endorsed the economy and the growth thereof. They are now more confident that the economy, both domestic and global, is now on solid enough ground to be able to absorb future rate hikes.
By endorsing the growth of the economy, the FED also endorsed the stock market in an indirect way. If you do not believe this, go back and review the charts above. It will be a recession that will finally end this seven year old plus bull market. The FED obviously does not see one out there on the horizon for now, either do I.
Lastly, earnings for the S&P 500 are expected to return to growth in the second half of this year. That second half begins in about four weeks. The big leveling off in earnings over the last two years has been caused, for the most part, by earnings in the oil patch going negative during that time.
Now oil has rebounded to almost $50 per barrel and earnings expectations are finally rising once again as opposed to falling.
My weekly newsletter gave a BUY SIGNAL back I late March of 2009. I am a market timer, not buy and holder, or an asset allocator. My newsletter will eventually give a SELL SIGNAL, but for now we need to continue to make hay while the sun is shining.