More Capital Waves to Ride Means More Upside for Markets

Shah Gilani|November 23, 2020

Investors are looking past almost all bad news, anywhere, and becoming downright giddy.

Last week, Investors Intelligence tallied the percent of bullish investors it surveyed at 59.6%. That’s up slightly from the previous week’s tally of 59.2%.

At the same time, bears continued to retreat into the bushes, with only 18.2% of surveyed investors feeling bearish, down from 19.4% the week before.

All that giddiness, however, didn’t lift all equity benchmarks last week.

The Dow was down a slight 0.7% on the week. The S&P 500 was down 0.8%. But the Nasdaq Composite edged 0.2% higher.

Then there’s the Russell 2000. It rose a very robust 2.4% on the week, notching a new all-time high.

And that’s where the story is…

Risk-On is In

The bullish bent is based on the “a vaccine is coming” narrative, which feeds into the “we’re all getting back to normalcy sooner rather than later” narrative. So, buy cyclical stocks, buy into the “rotation,” and use profits from mega-cap tech stocks to get into beaten-down companies that benefit from real economic growth.

Of course, there’s a slight problem with that plan…

In case you didn’t pick up on the fact that the Russell hit a new high, you might not have realized the rotation play into cyclicals has already happened.

That’s how the Russell got to new highs.

Other testaments to bullishness include Bitcoin jumping 300% since March, oil rebounding higher, Tesla Inc. (NasdaqGS:TSLA) getting into the S&P 500 and the onslaught of SPACs, new blank check companies coming out like bears from hibernation sniffing out private companies to devour.

More bullishness showed up in the VIX dropping to the low 20s, gold as a safe-haven being sold, and the dollar trending lower.

Safe havens are out; risk-on is in.

It’s all good, even as more businesses are being forced to close, as cities and states weigh stay-at-home measures, and COVID-19 runs rampant.

Investors are looking at those ugly incoming waves as almost already flattening and embracing risk-on positions.

It’s all good, and there’s a long way to go to the upside, precisely because there’s so much money on the sidelines. The cold, hard reality is a veritable tsunami of inflowing capital could easily take benchmarks up another 10% or more, in a short time.

But we’re not there yet.

Markets are technically “overbought,” and volume’s been thin, which coming into Thanksgiving week and the holidays isn’t unexpected.

Just as it wouldn’t be unexpected to see markets pause here and profit-taking interrupt the giddiness.

We should be so lucky.

Any dips, the deeper the better, are all buying opportunities. That’s because the small waves of capital that have boosted stocks have the potential to rise to walls of money flowing into equities and other risk-on assets.

That’s the longer-term capital wave forecast, but what’s in front of us is this:

The New Year is hot on our heels, and I know I speak for most of us when I say that I’m ready to bring on 2021 and see what new possibilities come with it.

Of course, if you’ve been following along with me, you know we’ve had the chance to make a lot of money as well, but that’s a big part of why I’m ready for 2021; there are more opportunities than ever before to make the biggest, best money out there.

In fact, I’ve been homing in on four industries in particular that I think have staggering profit opportunity as we end 2020 and head into 2021. At the same time, I’ve uncovered two industries (and dozens of stocks within them) that need to be avoided at all costs.

Unfortunately, I would not be surprised if some of these “left-for-dead” stocks are lurking in your portfolio or retirement account.

That’s why I’ve decided to host a special event for you tomorrow, Tuesday, November 24, at 1:00 p.m. EST.

During this event, which I’m calling “Buy This Not That,” I’m going to touch on 50+ stocks that you either should consider buying right now or kicking to the curb.

Make sure to click here to download your exclusive notes sheet as well – I go through these stocks FAST.

Click here to add the event to your calendar: iCal | Google | Outlook – you won’t want to miss out.

Sincerely,

Shah