Louis Navellier expects market strength ahead…which we can learn by watching institutional investors and traders…Luke Lango expects 5X his portfolio
Next week is the big Fed meeting that is almost certain to introduce the first rate hike since December 2018.
If legendary quantitative investor Louis Navellier is correct, expect stocks to rise thereafter, with gains continuing into the second half of March.
Here is Louis from his Accelerated benefits Market update podcast from earlier this week:
I think you will see a better rebound after the Federal Open Markets Committee meeting next week. On Wednesday, the Fed is likely to raise rates by a quarter percent to bring it more in line with market rates.
But then they’re going to be very careful about their advice. And as long as they are dovish on their advice, the market will explode.
And the second half of March will be entirely devoted to the quarterly facade. Institutional managers go out there and embellish their portfolios.
For the most recent Digest readers less familiar with the idea of ”facade”, here’s how Louis has explained it in the past:
There’s another trick Wall Street fund managers have up their sleeves. This is called “window dressing”.
As we approach the end of a quarter, the big money often buys the best performing stocks to improve their returns when reporting on the performance of their current portfolio.
This institutional buying pressure can act as a powerful tailwind for fundamentally superior stock prices at the end of a quarter. This is the type of stock that Louis’ computer algorithms are designed to find.
Thus, Louis is looking for a strong market rebound next week, followed by continued strength as we move further into March.
How do our technical experts, John Jagerson and Wade Hansen, see things?
*** What Wall Street traders tell us about the potential for deeper market declines
John and Wade are the analysts behind Strategic trader. This premier trading service combines options, insightful technical and fundamental analysis, and market history to trade the markets, whether bullish, bearish, or sideways.
So, where do John and Wade expect us to go in the near future?
In their Strategic trader Wednesday’s update, they answered that by looking at two clues we can glean from observing the buying behavior of big-dollar institutional investors and Wall Street traders.
From their update:
We can track institutional investor demand for hedging options on the S&P 500 via the CBOE’s SKEW index.
When traders panic about a potential market meltdown, the SKEW rises as demand for portfolio “insurance” or protection options increases. At present, the SKEW is still near the bottom of its long-term range.
Similarly, if traders were expecting an economic slowdown, we would see traders dump riskier stocks like small caps. As you can see in the following chart, the Russell 2000 Small Cap Index is still holding at the same support level it hit in January.
John and Wade note that, despite these reassurances from institutional investors and traders, we are not on the cusp of a sharp market decline, so they are not adding risk to their portfolio just yet.
The green light for this will come when they see significant and sustained progress towards an end to the Russia-Ukraine crisis.
*** Meanwhile, Luke Lango expects more market volatility, but urges investors to take advantage of lower prices in the tech sector
Luke is our hypergrowth specialist. In Early-stage investorit focuses on small, innovative tech companies that are transforming our world – and potentially creating huge investment wealth in the process.
As you probably know, these types of stocks have been punished by Wall Street in recent months as risk aversion sentiment has become more prevalent. But it has resulted in what Luke sees as an opportunity to buy tomorrow’s tech market leaders at bargain prices.
The challenge is to prepare for what could be more short-term volatility so you don’t miss the opportunity to position yourself for huge long-term returns.
Here’s more from Luke Early-stage investor Daily notes:
We continue to anticipate near-term turbulence in equity markets and avoid getting too bullish…
Instead of paying close attention to daily price action, we continue to emphasize a relentless focus on our “5X5” Plan, in which we expect our entire portfolio to grow 5 times or more over the next five years.
A reminder that Luke refers to innovative and disruptive technology leaders when he refers to “our portfolio”.
To prepare readers for greater near-term volatility, Luke points to commodities as a driver of upcoming market moves. Although oil prices fell 10% earlier this week, Luke believes prices could soon rebound, which could impact stocks.
Back to his daily notes:
The catalyst for the commodity sell-off (earlier this week) is not very strong.
The US administration is reportedly considering easing sanctions on Venezuelan oil to help stabilize global supplies. While that should help, Venezuelan oil production (~530,000 bbl/day) is a drop in the bucket compared to Russia’s (~10 million bbl/day). Therefore, the net impact here is still a supply constrained global oil market.
In other words, the fundamental context remains one where commodity prices should rise, not fall. To this end, [Wednesday’s] the fall in prices can be short-lived – just like the rebound in the stock market.
*** But after acknowledging the likelihood of greater near-term pressure on markets, Luke makes a critical redirect
Back to update:
We also believe that all this geopolitical chaos is creating a fantastic multi-year buying opportunity.
Today, many hypergrowth tech stocks are trading at completely washed-out valuations — almost entirely disregarding the fact that these companies will grow their businesses by leaps and bounds over the next few years.
Just consider this. While stock markets appear to be singularly focused on rising oil prices, global solar installations continue to expand rapidly; global electric vehicle sales continue to rise; global spending on e-commerce and digital advertising continues to grow, and business spending on automation software, cybersecurity and DevOps is growing rapidly…
Once today’s macro fears pass and renewed bullish sentiments combine with significant and sustained operational growth, we expect many hypergrowth tech stocks to soar over the next few years. .
As stated earlier, the challenge is being able to step in and buy when market conditions look bleak.
In Wednesdays Digest, we wrote that the big money isn’t made buying in sunny, blue-sky conditions when everyone else is bullish. It is achieved by buying when things look bleak and scared investors have left prices in the gutter.
Of course, this can be incredibly difficult. That’s why courage and a long-term vision like the one advocated by Luke are essential.
We’ll end with one of my favorite quotes on this subject. It comes from Rob Arnott, founder of Research Affiliates, which manages over $160 billion:
In investment, what is comfortable is rarely profitable.
Have a good evening,