When it came to your investment decisions, you would’ve done well to ignore the news for the past six months.
After the COVID panic out of stocks we saw back in March, the news has had little to no bearing on the monster rebound we’ve seen this year. With rising cases, protests across the country, and a new bout of political turmoil each day, the market has been beyond resilient – even making new highs.
That can be uncomfortable. It might even seem illogical. When we see bad things happening around the world, day after day, it’s hard to reconcile with the fact that the stock market is doing so well.
But it’s important to understand that what goes on in the world isn’t actually what moves stock prices. It’s easy to forget, but the only thing that moves stock prices is buyers and sellers. And, in particular, big-money buyers and sellers.
Today I’ll show you why, despite a dreary 24-hour news cycle, this market is positioned for more upside. And I’ll share the one sector that’s poised for the most explosive growth as we head into 2021…
Ignore the News, Watch This, Make Money
If you’re serious about making money in the stock market, you have to learn to ignore the headlines. Because it’s not the headlines that move the market, it’s investor’s reactions to them.
And with the right perspective, you can boil down “investor’s reactions” to a simple bar on a chart.
Veteran Palm Beach Insider readers know I’ve spent years building and perfecting a market-reading system that accurately predicts where the world’s biggest money managers, institutions, and hedge funds are placing their bets.
One of the products of that system is this simple bar. Here it is:
This indicator is simple to read. A green bar represents big-money buy signals. A red bar indicates big-money sell signals. And the size of the bar demonstrates the amount.
During the COVID panic in March, we saw a hefty amount of big-money selling – the most in over two years. But right after stocks bottomed in April, the selling dried up. And even as the pandemic raged on through the summer, the big-money buying kept driving stock prices higher.
With a few exceptions in June and with the most recent correction in September, the big money has been buying hand over fist for the past six months. And more recently, it’s brushed off the correction – and the wild news cycle involving the president’s COVID diagnosis – and piled back in.
I’ve learned to tune out everything I hear in the media if it doesn’t agree with this chart. Because this chart represents what the biggest money in the market thinks will happen next. And in my experience, what they think will happen next, often does – regardless of the headlines in the Wall Street Journal.
Here’s what they’re telling us now…
The Best Place to Be Going Forward
You’ll notice that the chart above is of the Russell 2000 – an index of small-cap stocks. That’s because the small-cap sector is one of the places I’m seeing the most big-money buying right now.
And when you cut through the doom and gloom of the news, this makes sense. Stimulus talks on Capitol Hill, though strained, are still on the table. That stimulus will do a lot to help American small businesses when it eventually passes.
And no matter who wins on November 3, rebuilding American businesses after the pandemic will be a top priority.
Growth is another sector I’m watching closely, as it’s attracted a lot of big-money buying and looks poised to break out above its pre-correction highs. Once again, a finalized stimulus bill will light a fire under smaller-cap, growth-oriented names.
And let’s not forget… with the Fed’s key interest rate at zero, and government bonds yielding next to nothing, there’s nowhere else for the everyday investor to grow their wealth but the stock market. That dynamic will shift American investment to stocks for the foreseeable future.
When it comes to investing, you’ll do well to keep the long game in mind. The issues facing the world today will eventually morph into the issues of tomorrow. But none of that will affect how the big money moves markets.
And right now, the big money is giving us the all-clear to buy. I hope you have your shopping list ready.
For investors looking to get broad exposure to this trend, I highly recommend the iShares Russell 1000 Growth ETF (IWF). This exchange-traded fund gives you exposure to the top 1,000 stocks in the Russell index by market cap, with a focus on growth. It’s the simplest way to follow the big money to profits in the coming months.
Patience and process!
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Jason Bodner
Editor, Palm Beach Insider
P.S. There’s another reason we’re likely seeing so much big-money buying right now.
As we speak, the biggest money managers on Wall Street are being forced to disclose their biggest investment ideas.
Once those disclosures become public, the stocks mentioned can make massive moves up in a matter of days. But, the little guy hardly ever has the chance to get in position before these moves happen.
Luckily, my system knows how to spot these moves before they happen. How? Click here to find out.