Monthly reports give us a glimpse into the health of the U.S. economy. We look at these to see if the economic expansion is broad or if there are pockets of concern.
For the manufacturing sector, we use the Purchasing Managers’ Index (“PMI”) from the Institute for Supply Management. If it shows a reading above 50, that means manufacturing is expanding. A reading below 50 signals contraction.
Manufacturing has been contracting lately… But there’s more. The PMI fell below 48 in December.
That’s the first reading below 48 in more than a decade. Check it out…
Since 1960, this index has only been below 48 about 17% of the time. You might think those would be bad times for investors. A struggling economy couldn’t be good for stocks, right?
That logic seems solid. But it’s dead wrong. Surprisingly, this is actually a positive sign.
Going back nearly 60 years, similar cases have led to strong outperformance in the S&P 500. Take a look…
Over the long term, U.S. stocks return about 7% a year. But waiting to buy when the manufacturing sector is below 48 can lead to even better results.
Similar instances have led to 7% returns in six months, 13% returns in one year, and 22% returns over the next two years.
Yes, the manufacturing sector is contracting. But history says that isn’t enough to kill today’s bull market. Even more, it could lead to outperformance in the coming years.
Technology stocks as a whole are the poster child of the last great Melt Up during the dot-com boom. But surprisingly, they weren’t the biggest winners back then.
That title goes to a subsector of technology stocks… biotechnology.
While tech stocks jumped around 200% in the final 18 months of the 1990s boom, biotech stocks crushed that return. They soared more than 500% over the same period.
We’re once again seeing what’s possible in the biotech sector. After bottoming in early October, this sector is breaking out. It’s up 24% from its recent bottom.
Importantly, it hit a new 52-week high in the process. Take a look…
Biotech stocks have had a strong rally over the past two months. And as you can see in the chart, they hit a new 52-week high in the process.
Lots of folks would look at this kind of move and assume the worst. They’d think they missed all the upside. But after studying markets for years, I’ve learned that following trends really works.
Higher prices tend to lead to even higher prices. And that’s the case in biotech stocks too.
Similar breakouts have been great buying opportunities over the past few decades. Since 1993, buying after biotech stocks hit a new 52-week high has led to strong outperformance. Check it out…
In the long run, owning biotech stocks has paid off. The sector has returned nearly 12% a year for more than two decades. But you can improve your upside potential by buying after big breakouts like the one we just witnessed.
Similar cases have led to 6% returns in three months, 9% in six months, and 15% over the next year. Those are big returns. And we could do even better this time around…
Biotech stocks were a huge winner during the last Melt Up. They soared 500% in less than two years back then.
Today’s Melt Up is in full swing. Stocks are hitting new all-time highs. And biotech stocks are along for the ride… with big upside potential from here.
If you’re looking to take advantage of this, you can check out the iShares Nasdaq Biotechnology Fund (IBB). It’s a simple fund that tracks the biotech sector. And based on history, it should be a big winner in the coming months.
Trade talks are unlikely to breach the divide between the U.S. and China…
At least, that’s what the financial media told us in mid-September when officials from the two countries re-engaged in talks. Commentators said differences were so far apart, it would be near impossible for either side to meet the other in the middle.
Headlines said that the talks had hardened into a political and ideological battle. It might take decades before the two sides could fix anything.
After those dire predictions, the market began to drop… By the beginning of October, the S&P 500 Index had lost 3.2%. Investors were scared tariffs would keep rising and the growth outlook would worsen.
That’s because the U.S. had recently imposed additional tariffs on Chinese imports. And it was preparing to raise tariffs even further on October 1. When negotiators sat down together again, it was the first time the two sides had conducted face-to-face meetings since July.
And that’s when the dialogue began to change.
Now, all the signs say we should expect a deal soon – possibly within weeks. Today, I’ll share three reasons why… And I’ll show you why it could lead to powerful gains from here.
There’s an old saying about negotiations in American politics – when it seems like the two sides are farthest apart, they’ve never been closer together. That’s what appears to have happened here…
Both sides agreed they would rather work things out diplomatically. Soon, reports began to surface from both the U.S. and China that talks were moving forward.
This past Monday, high-ranking officials from China and the U.S. met to discuss a potential visit to the U.S. from China’s President Xi Jinping… And if all goes well, the visit will be the occasion for Xi and President Donald Trump to sign a “phase one” deal.
A signing was already planned for the Asia-Pacific Economic Cooperation (“APEC”) Summit in Chile on November 16-17. But it was canceled in the wake of violent protests there. Now, the two sides are searching for an alternate venue.
Trump has said he would like to hold a signing in the U.S. Many are saying that Iowa would be an ideal spot. Given that the U.S. has put pressure on China to boost agricultural purchases from U.S. farmers, a signing in Iowa could make for a great photo opportunity.
Chinese officials have also said they would like Xi’s trip to the U.S. to be an official state visit, in addition to the signing.
All this good news has had a profound effect on the market. Take a look at this chart of world stocks from index provider FTSE. You can see the rally since talks resumed…
Of course, trade-war talks have been a roller-coaster over the past year. And the market followed the headlines… with major drawdowns when negotiations took a turn for the worse. So how do we know things won’t suddenly change again?
We don’t. But there are several reasons why what seemed a total impossibility two months ago is now looking likely…
First, the Chinese economy is increasingly feeling the pain of the U.S.-imposed tariffs. More companies are moving their manufacturing operations out of the country – and they may not come back. The threat of lasting harm to the Chinese economy is real if the U.S. doesn’t lift its tariffs. So China has a strong incentive to make a deal.
Second, the effects of the global slowdown are clearly showing up in U.S. economic data. For instance, third-quarter gross domestic product (“GDP”) growth came in at 1.9% – better than expected, but much lower than last year’s growth of 2.4%. If Trump can make it through impeachment proceedings, the economic effects of the trade war will threaten his re-election chances – and he doesn’t want that.
Lastly, the U.S. reversed course and agreed to China’s proposal to make an agreement in phases. That means many of the more contentious issues can wait until later… which gives both parties no reason to hold off on a partial agreement in the short term.
So, after investors and the media nearly gave it up for dead, a trade deal now looks all but certain.
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China and the U.S. won’t resolve their differences all at once. That much is true. Still, even a phase-one deal should mean at least some of the tariffs will end.
This could do a lot to get global growth back on track. Plus, it would lift one of the biggest sources of uncertainty in the market… which means investors should get more confident about putting their money into stocks.
We’ve already seen the beginnings of this. Stocks have rallied to new highs. Now, a trade deal is incredibly close. So stay long… We could see a powerful run-up from here.
It was the only Christmas Eve people wish they could forget…
Between December 17 and December 24, the stock market crashed. The S&P 500 lost 7.7% in a week.
Even worse, by market close on Christmas Eve, the S&P 500 was in bear market territory, down almost 20% from its recent high.
But then, stocks stopped falling. The stock market rallied immediately after Christmas. It hasn’t looked back since.
Markets can be wildly irrational in the short term. They swing up and down, driven by recent events. But over the long term, the economy is far more important to stock prices.
That’s true in the U.S., at least. But in one major market, it hasn’t always been the case… And it could lead to the biggest catch-up story of the decade.
Let me explain…
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Crazy market swings like we saw last December probably shouldn’t happen, but they do.
Investors tend to get distracted by the news at hand… They get too excited about the good news, and too negative about the bad news. So in the short run, fear and greed rule over logic and reason.
The good news is, markets tend to be more rational over the long run.
They ultimately reflect the fundamentals of the economy. And if the economy is growing, then stocks should generally trend higher.
We can see this in the U.S. Since 1990, the S&P 500 Index has been moving in the same general direction as the economy – up. Take a look…
That’s why today, a little more than six months after the December sell-off, stocks are once again near record highs.
The economy and the stock market are closely linked – at least over the long term. And it’s not just the U.S. This is true for most places in the world.
But there’s one place where the stock market has hugely underperformed the economy… And it’s setting the stage for a major catch-up rally.
That place is China.
The disparity between China’s economy and stock market just boggles the mind.
This is an economy that’s managed to grow 35-fold since 1990. It’s undoubtedly the most impressive GDP growth ever recorded in such a short period.
China has lifted more people out of poverty than there are people living in the U.S.
China now has the world’s largest car market, the biggest housing market, the largest mobile phone and Internet market… And it’s the No. 1 market for many other products I don’t have time to mention today.
But the country’s stock market has managed to grow just 24-fold since it started operating in December 1990.
That works out to a 1,100% gain advantage in China’s economy versus its stock market. Take a look…
With the Chinese economy still humming along at 6% a year, that performance gap is only going to get bigger – unless we see a major move higher in stocks.
And that’s exactly what I expect will happen.
It’s possible thanks in part to one massive investing story. My colleague Steve Sjuggerud has been pounding the table on it for years…
Longtime DailyWealth readers are familiar with global index provider MSCI. This year, it plans to quadruple the weighting of Chinese A-shares in its indexes. (A-shares are stocks that trade locally in mainland China.)
This should be a powerful catalyst. Estimates say it could send $80 billion to $125 billion of new investment dollars flowing into Chinese A-shares this year.
That’s the equivalent of investing up to an additional $800 billion into U.S. stocks in a single year. (For context, the highest amount of inflows the U.S. has ever received was $275 billion in 2007.)
But because the MSCI increase is happening over three stages – instead of one massive quadruple increase – the inflows are likely to result in a gradually rising tide, not a tsunami.
That’s wonderful. It means investors have time to position themselves to take advantage of this opportunity.
Markets are often irrational in the short term… But over the long term, rationality usually wins. China’s stock market needs to soar to catch up with its economy. And thanks to MSCI’s massive inclusion of A-shares, that’s exactly what’s likely to happen.
It could be the biggest catch-up story in stocks this decade. Don’t miss it.
By now, you likely know the details of my colleague Steve Sjuggerud’s “Melt Up” thesis. We’ve written about it a lot recently in DailyWealth. It’s the last major rally at the end of a bull market, before the big “Melt Down.”
You see, investors get greedy when a bull market nears its peak. They let their guard down and go “all-in” on the promise of much higher returns. Your family and friends will only want to talk about how well they are doing in stocks.
Simply put, we aren’t there yet. Investors aren’t going all-in today.
In fact, we can see this in a sector that soared hundreds of percent in the late 1990s – during the last Melt Up…
Health care stocks rallied for nearly an entire decade in the 1990s. But the sector didn’t really take off until the second half of the decade.
As the dot-com boom picked up steam in the second half of the ’90s, investors began to go all-in. And health care stocks soared 250% in less than five years. Take a look…
The health care sector soared during the last Melt Up. Today, I believe we are facing a similar opportunity.
The Melt Up in U.S. stocks is still ahead of us. And investors haven’t gone all-in on health care. It’s the exact opposite… Investors want nothing to do with the sector.
We can see this sentiment through the bullish percent index (BPI). The BPI tracks the percentage of stocks in a sector that are trading in a bullish pattern. It ranges from zero to 100.
The BPI flashes a bullish signal when it drops to 30 or lower (oversold territory) and then turns higher. And it flashes a bearish signal when it reaches 80 or higher (overbought territory) and then turns lower.
As you can see below, the health care sector BPI recently fell below 20. And at the end of last month, it turned higher, giving us a bullish signal…
The chart shows investors losing confidence in October. The BPI hit more than a two-year low.
This negative sentiment combined with a major market Melt Up could be a huge tailwind for health care stocks. And hundreds of percent gains are possible as a result.
Now, we can’t know for sure if the recent market drop is over just yet. So even with this bullish signal, I can’t recommend buying in until the uptrend is confirmed. But when health care stocks enter a new uptrend, the sector will likely outperform as the Melt Up takes off.
Remember, today’s sentiment is another sign that you haven’t missed the Melt Up in U.S. stocks. And health care stocks could be a big winner as stocks move higher.
In True Wealth Opportunities: China, editor Dr. Steve Sjuggerud highlights four of the most profitable trends he sees unfolding in China right now. China is committed to building a more stable and institutional market to attract foreign investors. As this happens, trillions of dollars could flow into the country… and you could earn triple-digit gains from the greatest opportunities Steve has ever seen.
What IS True Wealth Opportunities: China – Steve Sjuggerud’s Advisory Newsletter?
The investments Dr. Steve Sjuggerud focuses on in True Wealth Opportunities: China are some of the greatest opportunities he has ever seen.
First and foremost, China is in the middle of a technology revolution.
Investing in China right now is like stepping back in time. It’s a way to invest in the world’s biggest ideas… before they become the biggest ideas.
Imagine if you could invest in Amazon’s revolutionary technology 15 years ago… or Facebook’s social-networking technology four years ago.
That’s the opportunity we have in China’s technology sector today.
Steve also covers the biggest “wrong” in the world of finance.
China is the world’s second-largest stock market. It’s larger than every other stock market in the world, except the U.S. But right now, nobody owns locally traded Chinese stocks. Nobody, that is, except us…
$1 trillion – or more – will start flowing into Chinese stocks and bonds in 2018 as this wrong is righted. This is another way Steve helps his subscribers profit in True Wealth Opportunities: China.
Steve covers other big themes in China as well, like the world’s greatest property boom and the upcoming MSCI decision on the Chinese stock market. In short, any Chinese investment that he believes can earn you triple-digit or larger gains will be on the table.
In True Wealth Opportunities: China, you’ll learn the simplest – and the best – ways to take advantage of all these ideas… and new opportunities as they come up.
The goal, as always, is to make you as much money as possible.
True Wealth Opportunities: China Review – How it works?
In this monthly service, Steve explores the huge opportunity he sees building in Chinese stocks. Many of the best, most innovative companies there – in technology, real estate, banking, and more – will see their share prices rise by triple-digit percentages (or more).
How often is this service published? – Monthly.
How much capital should I have to get started? – $10,000
What will we be buying? – Chinese stocks – Internet, banking, property, and the MSCI Emerging Markets Index.
Do you put on short trades? – No.
What’s a typical holding period? – Five to seven years (or more) or until a position is stopped out.
Who is Dr. Steve Sjuggerud?
Dr. Steve Sjuggerud is the editor of True Wealth, an investment advisory specializing in safe, alternative investments overlooked by Wall Street. It’s based on the simple idea that you don’t have to take big risks to make big returns.
Since Steve joined Stansberry Research in 2001, he has found super-safe, profitable investment ideas for his subscribers that the average investor simply never hears about… until the big gains have already been made.
Over the years, for example, True Wealthreaders had the opportunity to make outstanding gains in Icelandic bonds (32%)… timber (64% and 27%)… and housing (103% and 95%), to name a few. Steve also recommended buying gold back in 2002 – when it was trading for around $320 an ounce – a call that led subscribers who took advantage to gains of 273%, 206%, and 182% in collectible gold coins, and 118% on shares of Seabridge Gold.
Steve is also the editor of True Wealth Systems, which uses powerful computer software – similar to the kind found at hedge funds and Wall Street banks – to pinpoint the sectors most likely to return 100% or more. One major newsletter industry insider called True Wealth Systems “the most in-depth research service ever developed.”
And in 2016, Steve launched True Wealth Opportunities: China.
Throughout his career, Steve has addressed hundreds of financial conferences in the U.S. and around the world, including at the New York Stock Exchange. He holds a doctorate in finance and has worked as a stockbroker, vice president of a $50 million global mutual fund, and a hedge-fund manager.
BONUS: Stay until the end of this training and receive Jeff’s Course: Become an Option Pro in 30 Days.
What you gonna get for your money with Steve Sjuggerud’s True Wealth Opportunities: China?
The cost of this newsletter is $3,000 and you will receive:
True Wealth Opportunities: Chinamodel portfolio, with over 15 open buy recommendations…
24/7 Access to the China Opportunities website.
Your Quick-Start Guide: How to Quickly and Easily Get the Best Deal on Chinese Stocks. Inside is everything you need to know to buy all the recommendations in our model portfolio as simply as possible and as soon as possible.
FREE BONUS REPORT #1: The Trillion Dollar Decision: Why A Trillion Dollars Could Soon Flow into China
FREE BONUS REPORT #2: 4 Ways to Make Money During the Largest Property Boom the World Has Ever Seen
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There are no refunds.
Because you are getting access to a full model portfolio of recommended buys, they cannot risk attracting “tire-kickers” who sign up just to see the portfolio, then cancel and get all their money back.
If you decide this isn’t for you within the next year, they can give you a pro-rated credit towards another Stansberry Research product of your choice. No questions asked.