Why the stock rebound is creating large-scale gains

Editor’s Note: No one has a clearer picture than our friend and colleague Matt McCall. As longtime readers know, Matt tracks the innovative megatrends that are pushing our economy and society into the future…and the stocks that are set to soar as a result. Find out why he says the recent market rally isn’t just a “headache”…

As long-term investors, we must always look to the future.

Getting bogged down in the past does not help your investment strategy. What’s more important is being able to see where we are title.

We had a rocky start to equities in 2022. It scared a lot of people – and led to a lot of scary headlines. But that doesn’t mean the whole year is touring.

So today I want to see what the rest of this year could look like…and what it means for investors along the way.

As you’ll see, you don’t want to lose sight of the big picture – because the big rally we saw in July could lead to a major rebound in stocks in the second half

The benchmark S&P 500 index fell 21% in the first half of the year. The tech-heavy Nasdaq composite index fell 30%. And if you owned a lot of growth stocks, you know that many individual stocks fell again.

It was the S&P 500’s worst first half since 1970. It was just lousy.

But that’s in the past now. And equities had a strong rebound in July that could point to bigger gains by the end of the year.

Last month, the S&P 500 and Nasdaq climbed 9.1% and 12.3% respectively. Huge one-month gains like these are rare.

And according to Certified Market Technician (“CMT”) Ryan Detrick – of the Carson Group – there’s a good chance the July rally will be the start of a bigger move higher.

Since 1945, the S&P 500 has climbed more than 9% in just one month 17 other times. This is only about 2% of all months during this period.

Over the next three months, six months and 12 months, the index increased by 3.5%, 10% and 15.4%, respectively. These are solid gains.

Six-month gains are about average annual stock market gain (about 10.7%). And the one-year returns are about 40% higher than the long-term average stock return.

You can see a summary of Detrick’s recent study in the table below…

It’s also important to note that after a signal, the S&P 500 was higher a year later 82% of the time.

Here are my thoughts on this…

After a difficult start, the market recovered strongly in July. And with all the downtrend surrounding stocks after the first half of the year, the chances of a second half upside are high. But I wouldn’t get into it right away…

Historically, August and September are two of the worst months for stocks. Over the past 30 years, the average return of the S&P 500 for those months has been negative 0.2% and negative 0.4%, respectively. Now, those aren’t terrible returns… But there’s a good chance stocks will struggle a bit in the near term.

I want to be clear though: I would use any weakness over the next two months to add new positions for the last quarter of the year.

You see, the best time to hold stocks is often October through December. Over that same 30-year period, stocks rose about 4.5% on average in the last three months of the year. That’s almost half of their average annual earnings – in just three months.

Don’t be swayed by everything you hear in the mainstream media. The overall picture for equities is improving. And the odds of stocks being higher in a year’s time are around 82%.

I like the upside potential for stocks with this tailwind. Get ready to take advantage of this setup in the months to come.

Here is the future,

Matt McCall

Editor’s Note: Matt identified a part of the market with the potential to skyrocket 30X or more in the coming years – regardless of market volatility. Our economy, our national security, and the technological advances we use every day…it’s all about these companies. That’s why hundreds of billions of dollars are already flowing into this critical sector.

It’s also why Matt just released a report detailing the six stocks he thinks will see the biggest rise. He thinks each could skyrocket to 1000% as it unfolds… For more on this story, Click here.

Further reading

“Where Wall Street saw endless misery…Steve saw a tremendous buying opportunity,” writes Sean Michael Cummings. This was after the Great Financial Crisis, when stocks were bottoming out. And it shows why it pays to stay focused on the big picture… Read the full story here.

“Making the long-term bet on prosperity remains the right decision,” said Brett Eversole. In June, Brett took a trip to help ring the Nasdaq opening bell. He came back with another example of why nothing will stop innovation – not even a bear market… Read more here.

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