The longest ever bull market started to drift last year when we have happened to be witnesses of correction like from a book. Last time something similar occurred at the beginning of 2016. That time the stock market kept going up.
This time it does not look that bright anymore, FANG stocks are not driving it that much, growth stocks are not growing as the market would expect. Below weekly chart shows an S&P 500 index for a duration of the last six years. With the assistance of technical indicators RSI and MACD we can see a beautiful bearish divergence over one and half year period. This is a significant sign that another correction is rather ahead.
A cut in the interest rates is going to help businesses to borrow cheap money for buying their own shares even more. Not like it has not been possible in recent years, probably that is one of the reasons why we have managed to inflate this bubble.
Thus, I would not expect a bear market yet, I would perhaps expect a sideways market and change of the sector leadership. Simply said, the investors are pumping money in other sectors than they did till now. They have become pickier and specialized in rather defensive stocks.
Below chart is depicting a performance of two very different sectors. The red line represents Technology and the green line shows Utilities. After the most recent correction after Christmas, the utilities sector started to outperform technology even though during 2018 the price gap was significantly wide.
The investors are being interested in dividend stocks, they want to be more secure while also getting some cash. The bonds are boring so dividends of good quality companies are simply a better choice. Tech stocks usually do not pay dividends, while utilities stocks do and this is how the trend is evolving now. Look for value while get paid every quarter!
Another sector that shows delightful potential are GOLD and SILVER. From a long-term perspective, these precious metals have smashed their resistance and rise. I have already explained why, how and what when I released an article about gold half a year ago, so I am not going to go into details. The point is, that if you have not invested in gold or silver or gold or silver mining stocks, then you should. Even though you’d be already sitting on a 50% profit, it is still not late.
The best way how to profit on a rise of gold is not only buying gold itself but also investing in gold miners. Below is a well-known ETF that tracks the gold miners and as you can see, it is rising and breaking out from whatever patterns you can imagine while crashing the resistances with rising interest of the public.
At the moment GDX is climbing the 20 EMA and the next resistance is something above 31. This is likely going to be smashed too.
Something similar is happening with individual stocks, however on EXPONENTIAL BASIS! If invested well, the profits may be measured in 100 or 200 or more percentage points. I am planning to release a separate article for specific stocks that I like and see the potential of significant rise. So if you are interested, come back later or sign up for notification on the right.
The stock market is not like it has been in recent years. Times are changing and so should also your portfolio focus!