Louis Navellier and Luke Lango are bullish … the “Great Broadening” of 2024 … tomorrow’s PCE report could jumpstart a new bullish push … Bitcoin and the crypto world are surging
Don’t shy away from the market as it hits all-time highs.
That’s the advice from both Louis Navellier and Luke Lango.
Let’s begin with Louis, from yesterday’s issue of Accelerated Profits:
I think that 2024 is shaping up to be the best year since 1999.
Remember, about $8.8 trillion is still sitting on the sidelines in money market accounts, according to The Wall Street Journal. In other words, there is plenty of fuel to propel the stock market even higher.
What will inspire all this cash to pour in from the sidelines?
Well, we’ve already seen how positive earnings results have driven more folks back to fundamentally superior stocks and pushed the overall stock market higher. The great news is that we have several more quarters of accelerating earnings momentum.
To Louis’ point, FactSet (the earnings data analytics group used by the pros) reports that the analyst community is projecting growing earnings as we move deeper into 2024:
Looking ahead, analysts expect (year-over-year) earnings growth of 3.9% for Q1 2024 and 9.0% for Q2 2024. For CY 2024, analysts are calling for (year-over-year) earnings growth of 10.9%.
Here’s Luke’s explanation for why stocks are surging to record highs:
Because earnings are surging to record highs.
Where earnings go, stocks follow. That’s the simple truth about stocks…
Earnings are ramping. Stocks will therefore keep pushing higher, too.
Meanwhile, Luke sees this market rally broadening beyond Big Tech
He’s calling this “the Great Stock Broadening of 2024.”
Here he is, describing what’s happening:
It feels like we are nearing the major inflection point where small- and mid-caps start rallying like they did in the second half of 2020 – once it became obvious that the economy would survive COVID-related lockdowns.
After all, that’s how economic recoveries go. When the outlook is murky, investors pile into large caps. And when the recovery starts gaining traction, investors broaden out into small- and mid-caps. We’re close to that broadening phase.
We’re confident that this earnings season will prove, through robust small- and mid-cap earnings, that the economic benefits of the AI Boom extend beyond Big Tech stocks. As a result, we anticipate a significant catch-up rally in smaller tech stocks this year, which means they will produce the biggest returns in the market over the next 12 months.
This is the Great Stock Broadening of 2024.
Now, Luke wrote this before last Friday, which is when Reuters ran an article suggesting that his analysis is spot on:
Investors… funneled another $15 billion into equities in the week to Wednesday, Bank of America Global Research said on Friday.
The BofA report showed the equity market rally is broadening beyond the mega caps, as U.S. small cap funds logged their largest weekly inflow in the week to Wednesday since June 2022, at $5.1 billion.
Tomorrow’s inflation report could kickstart the next leg of this bull market
On Thursday, we get the latest reading of the Personal Consumption Expenditures (PCE) index. This is the Federal Reserve’s preferred inflation gauge.
You’ll recall that nearly two weeks ago, January’s Consumer Price Index (CPI) number came in above forecasts, resulting in a heavy down day on Wall Street.
The selling pressure was due to fears that the hotter-than-expected CPI data would cause the Federal Reserve to delay its initial rate cut, while potentially cutting rates fewer times in 2024.
Tomorrow’s PCE report could provide the Fed the cooler inflation data it wants, potentially cracking the door open to sooner/more interest rate cuts later this year.
Future traders have begrudgingly lowered their formerly-lofty expectations of seven rate cuts in 2024 to just three. But if inflation data comes in soft, we’ll likely see a bullish recalibration.
Here’s what Luke expects from tomorrow:
We’re bullish going into this week’s PCE inflation report.
According to the Cleveland Fed’s Nowcast model, the PCE inflation rate dropped from 2.6% in December to 2.3% in January.
If this week’s PCE inflation report does show that the PCE inflation rate dropped 30 basis points in January to just a smidge above 2%, that would likely result in a bullish reaction from stocks.
We are therefore cautiously optimistic on our portfolios going into this week’s PCE report.
Meanwhile, Louis is confident that we’ll get the first rate cut in June. Back to his Accelerated Profits issue:
I also think that multiple key interest rate cuts, with the Federal Reserve likely cutting rates for the first time in June, and overall optimism during a Presidential election year will create a lot of positivity on Wall Street.
So, what are Louis and Luke buying now given these market conditions?
For Louis, no one specific sector has his attention. As regular Digest readers know, Louis is a quant, meaning he lets cold, impartial data guide his investment decisions. He is forever ruthlessly focused on the data.
It’s a winning approach. Here’s Louis from yesterday, highlighting the performance of his Accelerated Profits portfolio since the start of the month:
Our Buy List is up a whopping 13% in February so far, which has more than triple the Dow’s 2.0% gain and more than double the S&P 500’s 4.6% rise.
And I’m pleased to report that 25 of our Buy List companies led the way higher, with double-digit gains between 10% and 64%.
If you don’t subscribe to any of Louis’ services, the best way to mimic his quant approach is by using his Portfolio Grader.
It’s a free diagnostic tool that evaluates the earnings strength of a stock through the same metrics Louis uses to find his official recommendations. It’s the next best thing to calling Louis directly and asking for his opinion.
For example, say you want to take advantage of Luke’s “Great Broadening” thesis by putting some money into small-cap stocks. You have three ideas on your radar: Bigbear.ai, Desktop Metal, and Bitfarms.
How would Louis’ Portfolio Grader measure up these options?
Here you go:
You can take the Portfolio Grader for a spin yourself right here.
Meanwhile, as noted earlier, Luke is fishing in the small-cap space – specifically, small-cap AI stocks
And within this small-cap AI world, there’s one area that he especially likes – AI software.
From Luke’s Daily Notes in Innovation Investor:
The first wave of the AI Boom has already mostly played out. It included the bulk buying of next-gen AI chips.
The second wave is now going to hit. It will include the bulk building of next-gen AI applications on top of all those next-gen AI chips.
We believe this “Second Wave” of the AI Boom has already started to slowly emerge…
We really like the set-up for AI software stocks here and now on the heels of the AI chip stock boom.
To sign up for Luke’s Innovation Investor service and get his specific recommendations, click here.
Before we sign off, we need to switch gears to make sure something’s on your radar
There’s enormous bullish momentum in crypto right now. Even if you hate the sector, at least be aware of what’s happening.
As I write Wednesday, Bitcoin has just topped $60,000 for the first time since November of 2021. The grandaddy crypto is within striking distance of its all-time high of $68,982.20.
Since the beginning of the month, Bitcoin has jumped 43% and Ethereum has climbed 47%. But Luke believes this is just the beginning of a sector push that will gives investors the chance to 10X their money over the next 12 months.
To prevent this Digest from running too long, I won’t dive into the details behind Luke’s forecast. But to hear more about this opportunity directly from him, click here.
Let’s do a quick recap as we wrap up:
- Louis and Luke remain very bullish and are encouraging investors to stay in this market.
- Look for strong earnings growth to lead to a “Great Broadening” wherein small-cap stocks catch to mega-caps.
- Use Louis’ Portfolio Grader to help find fundamentally superior stock ideas, potentially in Luke’s preferred area of AI software.
- Don’t miss what’s happening in crypto. Love it or hate it, it’s soaring.
Have a good evening,
Jeff Remsburg
