Last month was the 18th-best month for stocks in history.
It was also the best month for traditional retirement portfolios since the Soviet Union collapsed in 1991.
But this recent rally makes no sense…
The November Rally Will Not Last
Earlier this year, stocks fell for three months for a total loss of 10%. This was primarily driven by long-term interest rates soaring to 5%… And fear of inflation staying stuck at high levels.
And then some weaker-than-expected economic data gave hope that inflation might come down and the Fed would cut rates.
And so, the market took off in a V-shaped recovery just like we’ve seen for 15 years when the Fed would cut rates at the first sign of trouble.
But here’s the problem… the economy is slowing down now and inflation is still higher than the Fed’s targeted 2%.
The Cleveland Fed’s real-time inflation model (updated daily) shows its official inflation metric stuck between 3.4% to 3.6% through the end of January.
As Brad covered yesterday, Americans are now cutting back on spending and evidence for the upcoming recession is substantial.
This means that economic growth and S&P 500 earnings growth is not looking good for 2024…
Since 1948, there has never been a recession in which earnings didn’t decline at least 2%, and the average decline has been 13%.
And yet after the November rally occurred, Deutsche Bank made headlines predicting 12% earnings growth for the S&P 500 through the end of 2024. And suddenly, that became the analyst consensus on Wall Street.
But I have to ask, what universe are these analysts living in?
I hate to be the bearer of bad news… but based on the data – stocks are almost guaranteed to decline 16% to 33% next year, depending on how much their earnings decline.
But just for kicks… let’s assume these optimistic analysts are right.
What would happen if S&P 500 earnings increased by 12% even in the face of the upcoming recession?
Assuming no recession, stocks will likely be flat, but there’s a strong chance we won’t see a continued bull market rally well into 2024.
Reality will catch up with the market and these analysts eventually… but in the meantime you can set yourself up to profit.
Prepare Now to Profit in 2024
Right now, while everyone is distracted by the S&P 500 rally – that is soon going to end – an amazing ETF is already priced in for the recession. When the market tanks, this opportunity will take off.
The ETF I’m talking about is Pacer Cash Cows US 100 ETF (COWZ).
With 16% average annual gains over the last 30 years, COWZ is crushing the S&P 500 and the NASDAQ.
Why is it so successful? Because it finds the best quality companies trading at the best prices.
Companies like CVS Health, Exxon, and Kroger. Companies you know and trust, world-beaters who have been through dozens of bear markets and recessions over the decades and survived, thrived, and made investors rich.
Right now, this ETF is trading at 6.5 times cash-adjusted earnings while the S&P is trading at 13 times.
That’s a 50% discount to the market for world-class quality companies.
COWZ is priced for -4% long-term growth while it’s growing at 16% annually.
So if you’re looking to profit, while those listening to the consensus receive a rude awakening… look no further.
Now is a great time to invest in COWZ.
Safe Investing,
Adam Galas
Analyst, Intelligent Income Daily