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This Extreme Fear Signal Is Actually a Blessing for Stocks

This Extreme Fear Signal Is Actually a Blessing for Stocks

FromHypergrowth Investing


This Extreme Fear Signal Is Actually a Blessing for Stocks

FromHypergrowth Investing

ratings:
Length:
62 minutes
Released:
Oct 26, 2022
Format:
Podcast episode

Description

Last week, we saw stocks rally in a major way. And we’re confident this isn’t another head fake. This rally has legs, and it seems possible that stocks are clawing their way out of this bear market.Earnings have been very strong. Yields are coming off their highs. Stocks have been performing well. There’s talk of a Fed pivot again (which feels much more substantiated than it has previously). We’re cautiously optimistic that this rally could become the start of a new bull market.Though it may not be happening as fast as some hope, inflation is coming down. The Fed is considering slowing its pace of rate hikes. And the bond market has started to react on a global scale. Central banks around the world have capitulated, causing yields to retreat. And now earnings are surprising to the upside. Altogether, this is creating a recipe for stocks to move higher – at least in the short term and hopefully into the medium and long term as well.So, if this is the start of a potential long-term rally, does that mean we’ve hit the market bottom? Well, timing an exact bottom is nearly impossible – but we’re seeing indicators flashing all across the market, signaling that the bottoming process has begun. And that’s all that matters when preparing for an incoming bull market.The first signal is valuations. Without a deep recession, bear markets tend to bottom around 14 to 16X forward earnings. And recently, stocks have reached about 15X – very close to that bottoming level. The second thing we’re watching is financial conditions. Bloomberg’s financial conditions index – which takes yields, stock prices, commodity prices, etc., into account – dropped below -1 a few weeks ago. Over the past 25 years, when that index falls beneath -1, stocks are close to a bottom.The third? The S&P’s price is well below analysts’ price targets, about 23% below consensus. Historically, the market bottom when the S&P was 20% to 30% below analyst targets. That’s bullish.Another indicator? Fund managers have record-high levels of cash. That indicates capitulation and money waiting on the sidelines for a more bullish setup. And that’s bullish, too.Not to mention, investor sentiment is at peak-bearish levels. This tends to mark “peak fear,” and it usually correlates with market bottoms.What about a strong technical indicator? The McClellan Oscillator, which is a market breadth indicator, just broke below -15 – a super negative reading it rarely breaks beneath. And every time it does – 100% of the time – stocks are higher 12 months later. Indeed, that is a huge bottoming signal for the market. These aren’t the only signals. The list goes on. It’s clear that we’re due for a big rally here. And it’s possible that this rally could bounce us all the way out of bear market territory.?Timestamps? 00:00:00 - Intro 00:03:16 - Market Rally 00:09:40 - Have Stocks Bottomed? 00:20:28 - Earnings Season 00:29:21 - The Yield Curve 00:33:19 - Recession Talk 00:36:28 - Real Estate 00:39:09 - Politics as Usual 00:41:52 - Our "Big 3" 00:44:45 - Fan Questions! ?Join Luke's Free Newsletter: https://signup.investorplace.com/?cid=MKT502688&eid=MKT612161 ?Visit Our Website: https://investorplace.com/hypergrowthinvesting/ ? Subscribe: https://www.youtube.com/c/HypergrowthInvesting?sub_confirmation=1 #Stockstobuy #earnings #stocks
Released:
Oct 26, 2022
Format:
Podcast episode

Titles in the series (65)

Hypergrowth Investing is a weekly podcast that picks the brain of investment analyst Luke Lango. Each week Luke will take an in depth look at the trending tech and investment innovations. Electric vehicles, cryptocurrency, the metaverse, nothing is off limits in this innovative new podcast!