'A worst of both worlds report'... Slower growth, higher inflation... The knee-jerk reaction and second-level thinking... Profit from the fear... Last call for Doc's Retirement Trader offer... Mailbag: The optionality of cash... Slower growth, higher inflation... If that sounds like a concerning combination, we agree... And it's what Uncle Sam's first-quarter GDP report showed this morning. Economic growth was a reported 1.6% annualized from January through March, while most of Wall Street and even the Federal Reserve had anticipated growth in the mid-2% range. The same report showed first-quarter inflation at 3.4% annualized, which investors could have already deduced from existing data. However, the obvious contrast in a single document about GDP made for a stark realization: a slowing economy paired with rising inflation? The market's knee-jerk reaction... The "landing" might be hard, after all... David Donabedian, chief investment officer of CIBC Private Wealth, described the initial Wall Street reaction well in a quote to CNBC.com this morning, "This was a worst of both worlds report." The major U.S. indexes went into the red quickly on today's open. And, while they clawed back losses throughout the day, they still finished down. The benchmark S&P 500 Index closed off roughly 0.5%, the tech-heavy Nasdaq Composite Index dropped 0.6%, the small-cap Russell 2000 Index shed 0.7%, and the Dow Jones Industrial Average – which has led the broader market movement by a few days lately – was down 1%. Yet bond yields rose across the curve to levels not seen since early November, suggesting higher inflation expectations. The 10-year Treasury yield is now above 4.7%, the 2-year yield is a hair above 5%... and the 30-year yield is at 4.8%. Yet there were signs of healthy 'correction' behavior, too... The biggest hit of any major S&P 500 sector was in "communications," which was down roughly 4% and was weighed down by Meta Platforms (META). The social media company's shares were off by as much as 12% today after an earnings call last night with a cautious outlook. Meanwhile, "defensive" sectors like utilities and materials were up slightly, and no other major S&P 500 sector was down by more than 0.6%. As our Ten Stock Trader editor Greg Diamond wrote to his subscribers this morning... If this recent decline was going to get ugly, we likely would not see this type of price action. In other words, everything would be down. This tells me the latest drop is a correction. But patience is likely key, in order to see how it unfolds over the next few weeks. I (Corey McLaughlin) said yesterday that the next week or so wouldn't be boring, given earnings from headline-making, monster-cap companies, the release of today's GDP report, more inflation data tomorrow, and next week's Federal Reserve meeting. Sure enough, we're off to a wild start. After markets started the week with a 2% rally, today's losses wiped out some gains and kept the indexes in mini "correction" territory as fear perked up again. Let's pause and think about what this report may or may not indicate... First, note that this GDP report was a backward-looking take on the previous three months. It showed one big thing that we've known: that inflation has been running "hotter than expected" the past several months... Second, GDP was still rising (albeit helped by government spending, including higher federal job costs), as was consumer spending. However, this data suggests that growth slowed more than expected, and in the same report, consumer spending was also lower than expected in the first quarter (up only 2.5% versus Wall Street's 3% consensus expectation). In all, these numbers make for more uncertainty than anything about what comes next, which is why I suspect enough investors reacted like they did today. Consumer spending is the area to watch closely, as it was when analysts were on "recession watch" in 2023. Consumer spending accounts for about 70% of economic activity. A continued material dent in it would have significant knock-on effects... Lower consumer spending could leave businesses with lower earnings and tighter margins, possible cost cutting, and job losses. In turn, that could put more pressure on consumers who are dealing with higher prices and debt... and more pressure on businesses facing higher costs... and debt. (Meanwhile, Uncle Sam just keeps on spending and passing on debt to everyone else.) It's reasonable to see how things could get ugly... If you haven't already, I suggest you read our colleague Mike DiBiase's essay from last Monday for the full picture. It's titled "There Will Be No Soft Landing." Among other things, he wrote... I'm seeing all the troubling signs you'd expect to see leading up to a recession. Credit-card debt is rising fast and at an all-time high. Delinquency rates on credit cards and car loans are rising. Mike also detailed why last year's "banking crisis" is far from over... why he believes inflation is not under control... why "we'll soon be in a recession and credit crisis [and] a new bear market within the next year" – and how he suggests preparing for it. Looking ahead now... if the Fed is really still concerned about inflation, one could argue that it should raise rates or at the very least keep them where they are until the pace of inflation gets to its supposed 2% goal. However, say growth and consumer spending continue to slow, at least compared with the second half of 2023... Elevated rates – meaning higher borrowing costs – would risk straining the economy further, potentially leading to job losses and a recession. Add it all up and the headlines are suggesting we're in a lesser-acknowledged version of 1970s-style volatile high(er) inflation territory. I don't necessarily disagree. But that doesn't mean it's right to sell all of your stocks tomorrow, either. Time for second-level thinking... On days like today, I'm reminded of something I first read about in the December 2021 edition of our True Wealth newsletter. "First-level thinking," editor Brett Eversole wrote, is the obvious – the "herd" mentality (which I wrote about yesterday). If you want to make outsized returns in the market, he said, you want to use "second-level thinking" instead. Brett quoted a passage from famed investor Howard Marks' great book, The Most Important Thing, which touches on exactly the scenario we're talking about today. Marks wrote... First-level thinking says, "The outlook calls for low growth and rising inflation. Let's dump our stocks." Second-level thinking says, "The outlook stinks, but everyone else is selling in panic. Buy!" Here's a second-level idea... If the economy weakens more than expected this year, the Fed could step in with lower rates sooner than the market now expects, which could trigger another "Fed's going to cut" rally in stocks like we saw start late last year. I'm willing to bet that if the unemployment rate picks up in the months ahead, Fed rates will go lower, even if inflation remains elevated. That's not great news for the value of dollars, of course, but this all-too-common "papering over" of problems can juice markets. That's also not to say, though, that the market might not endure some more pain or volatility first. For now, we may be facing a tougher new reality in which "bad news" is taken as "bad news" in the market (rather than a "good news" sign of likely rate cuts). As Mike wrote last week... All three of the stock market indicators we use in our flagship publication, Stansberry's Investment Advisory, are bearish today. That rarely happens. One of them − our proprietary Complacency Indicator − just flashed a new warning last month. It tells us that a market correction of 10% or more is coming in the next 12 months. You should take this warning seriously. This indicator predicted 10 out of the last 12 market corrections or bear markets, with only one "false signal." And even that one preceded a market drop of 9%, just shy of 10% to qualify as a correction. Also, keep in mind, as Mike added, that should the economy worsen from here to "recession" territory, recessions typically only begin after the Fed begins lowering rates. In this scenario, this correction could just be a preview of things to come... Yet, for now, even with today's performance, most major U.S. indexes are still trading above their longer-term trends and are not far removed from all-time highs. (The exception is the Russell 2000, which hasn't made a new high in 29 months, as we said yesterday.) All in all, though: Fear was the top word of the day, and it could remain popular in the weeks ahead. One way to profit from the fear... Here's another second-level idea, and it's one we've talked about throughout this week. Take the other side... and profit from other people's fear. This is at the heart of Dr. David "Doc" Eifrig's strategy in his Retirement Trader advisory. It works in any market environment, clearly. Doc is riding an active win streak of 211 consecutive trades and has returned roughly 20% annualized in each of the past three years using this trading strategy... And he has used it since 2010 with a 95% win rate. That period covers bear markets, bull markets, and anything else you can think of. But the way this strategy works, the more fear (or volatility) picks up in the market, the more potential profits are to be made. Retirement Trader subscribers and Stansberry Alliance members who use Doc's favorite strategy know what I'm talking about. We've heard from many of you who have said that it's, in fact, the only active investment strategy you use. And it makes sense. So long as you have the capital to get started, this strategy can produce a steady stream of income, no matter the environment, and be more lucrative when investors get scared and the market might be selling off. That's exactly how diversification should work and how you can protect and grow your wealth no matter what's happening in the world. 'Last call' for Doc's offer... If you haven't tried Doc's trading strategy yet, I can't stress enough that you should hear his new free presentation – and now. First off, Doc, a former Goldman Sachs trader, has used this strategy personally since he stumbled into it while working on Wall Street during Black Monday, one of the worst sell-offs in U.S. market history. As he shared in his free Health & Wealth Bulletin yesterday... This strategy has allowed me to collect hundreds and thousands of dollars each and every month. And it has helped me make my mark after I joined Stansberry Research more than a decade ago. Until recently, though, the masses didn't seem to pay it much attention. That's starting to change, but most investors still overlook this strategy... and even the biggest firms in the industry can't compete with what Doc does in Retirement Trader, where he has averaged double-digit annualized returns since its launch more than a decade ago. In Doc's presentation, you'll hear much more detail and learn how you can access all of his recommendations going forward in Retirement Trader for 60% off the usual price. You'll be ready to profit from the inevitable next round of volatility that will hit the markets, just like it did today. But don't hesitate. Tonight is "last call" on this offer. It will go offline at midnight Eastern time tonight. So, click here now to learn more. Recommended Links: | Gold Is Headed Above $3,000 per Ounce (Here's How to Play It) With so many strange events happening across the economy (the longest bear market for bonds since the Civil War... unprecedented bank closures... and soaring prices), it's no wonder the richest investors are loading up on gold. But what you might not realize is there's a much better way to profit from rising gold prices – WITHOUT ever touching an ETF, mining stock, or even bullion. Full details here. | |
---|
| New 52-week highs (as of 4/24/24): Grupo Aeroportuario del Sureste (ASR), American Express (AXP), Pioneer Natural Resources (PXD), Ryder System (R), Sprouts Farmers Market (SFM), and SilverCrest Metals (SILV). In today's mailbag, feedback on yesterday's edition – which included a discussion about going against the "herd"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Corey, In today's letter you [quoted Dr. David "Doc" Eifrig saying], 'After the housing bubble burst in 2008 and 2009, were you willing to buy stocks? They were trading for a mere 12 times earnings in 2009 when the economy started showing signs of life.' "It's really hard after a crash of that magnitude to overcome your fear. But even if you wanted to invest, if you weren't smart enough to keep some powder dry before the crash, you couldn't do anything, because all the liquidity in the system had dried up and no one had anything to invest with. "Buffett had plenty of dry powder, so he was able to take advantage of the opportunity when others wouldn't (or couldn't). That of course is his 'superpower,' being willing to sit on the sidelines and accumulate capital and wait for the next crash. "The flipside of that coin is that you miss opportunities near the end of a cycle in exchange for opportunities at the bottom of a cycle. I think a key skill is recognizing the signs of an impending top so you can stockpile some 'dry powder' before the crash. "I always enjoy your message, keep up the good work!" – Subscriber Tim M. Corey McLaughlin comment: Tim, thanks for the note. I agree. It's always wise to have cash on hand (even when you think you might not need it)... One, it gives you security, or an emergency fund that can cover expenses should you need it because of a loss of income. And two, it lets you pounce on "unexpected" investing opportunities when others can't. Doc (like Buffett) refers to this as the "optionality" of cash. I wrote an entire essay on this subject back in April 2022, as we talked about our Stansberry's Financial Survival Program series that we launched amid the start of what became a nearly year-long bear market. One of the first and most important points was the importance of cash. Dan Ferris hit on the topic in a June 2022 Digest, too, saying... Cash is the ultimate diversifier for an equity portfolio. Yes... your cash's buying power will decrease as inflation wears on. You'll definitely feel it when you pay bills, put gas in your car, or buy groceries. But there's more to it than that. The farther stock prices fall, the more valuable your cash is relative to your stocks, helping to reduce portfolio volatility. More importantly, as stock prices fall, the option value of your cash grows... Cash becomes like a call option that never expires on the extremely attractive future opportunities you'll be presented with as the bear market pushes equities into irresistible bargain territory. Today, there's another incentive to keep cash, or cash-like investments, in your portfolio – more than at any other time in the past 15 or so years... That's the ability to get 5%-plus interest on a government Treasury bill or a money-market account. The next question we usually get is about how much cash someone should have at any given time. We're not personal financial advisers, and the answer is different for everybody. As Doc once wrote in a 2021 essay in his free Health & Wealth Bulletin... For a young person with 30 years to retirement, there is little reason to have any cash holdings in your portfolio after you set aside your emergency fund. As you get closer to retirement, you should start moving some of your investments over to cash. You should start this phase five or 10 years before retirement. And you could gradually grow your cash allocation from, say, 5% to as high as 20%, depending on your goals. You can read more about Doc's view on cash here. All the best, Corey McLaughlin Baltimore, Maryland April 25, 2024 Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment | Buy Date | Return | Publication | Analyst |
---|
MSFT Microsoft | 11/11/10 | 1,351.0% | Retirement Millionaire | Doc | MSFT Microsoft | 02/10/12 | 1,298.9% | Stansberry's Investment Advisory | Porter | ADP Automatic Data Processing | 10/09/08 | 894.8% | Extreme Value | Ferris | WRB W.R. Berkley | 03/16/12 | 709.2% | Stansberry's Investment Advisory | Porter | BRK.B Berkshire Hathaway | 04/01/09 | 619.8% | Retirement Millionaire | Doc | HSY Hershey | 12/07/07 | 461.7% | Stansberry's Investment Advisory | Porter | AFG American Financial | 10/12/12 | 451.8% | Stansberry's Investment Advisory | Porter | TT Trane Technologies | 04/12/18 | 375.7% | Retirement Millionaire | Doc | NVO Novo Nordisk | 12/05/19 | 356.6% | Stansberry's Investment Advisory | Gula | TTD The Trade Desk | 10/17/19 | 340.1% | Stansberry Innovations Report | Engel |
Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. Top 10 Totals |
---|
5 | Stansberry's Investment Advisory | Porter/Gula | 3 | Retirement Millionaire | Doc | 1 | Extreme Value | Ferris | 1 | Stansberry Innovations Report | Engel | Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment | Buy Date | Return | Publication | Analyst |
---|
wstETH Wrapped Staked Ethereum | 12/07/18 | 2,291.8% | Crypto Capital | Wade | BTC/USD Bitcoin | 11/27/18 | 1,605.0% | Crypto Capital | Wade | ONE/USD Harmony | 12/16/19 | 1,238.0% | Crypto Capital | Wade | MATIC/USD Polygon | 02/25/21 | 810.1% | Crypto Capital | Wade | AGI/USD Delysium AI | 01/16/24 | 398.1% | Crypto Capital | Wade |
Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment | Symbol | Duration | Gain | Publication | Analyst |
---|
Nvidia^* | NVDA | 5.96 years | 1,466% | Venture Tech. | Lashmet | Microsoft^ | MSFT | 12.74 years | 1,185% | Retirement Millionaire | Doc | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | Nvidia^* | NVDA | 4.12 years | 777% | Venture Tech. | Lashmet | Intellia Therapeutics | NTLA | 1.95 years | 775% | Amer. Moonshots | Root | Rite Aid 8.5% bond | 4.97 years | 773% | True Income | Williams | PNC Warrants | PNC-WS | 6.16 years | 706% | True Wealth Systems | Sjuggerud | Maxar Technologies^ | MAXR | 1.90 years | 691% | Venture Tech. | Lashmet | Silvergate Capital | SI | 1.95 years | 681% | Amer. Moonshots | Root |
^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment | Symbol | Duration | Gain | Publication | Analyst |
---|
Band Protocol | BAND/USD | 0.31 years | 1,169% | Crypto Capital | Wade | Terra | LUNA/USD | 0.41 years | 1,166% | Crypto Capital | Wade | Polymesh | POLYX/USD | 3.84 years | 1,157% | Crypto Capital | Wade | Frontier | FRONT/USD | 0.09 years | 979% | Crypto Capital | Wade | Binance Coin | BNB/USD | 1.78 years | 963% | Crypto Capital | Wade | |