The late Martin Zweig was a pioneer in the newsletter industry…
Zweig, who passed away in 2013, started his newsletter in the 1970s—before the internet and when newsletters were sent via U.S. Postal Service. (Perhaps some Daily readers are old enough to remember those days.)
His strategy was revolutionary at the time. He applied an empirical and scientific approach to stock picking when most advisors based their picks on gut feelings.
Zweig changed all that…
His newsletter, The Zweig Forecast, earned a reputation for making prescient calls and making people money—so much money that Zweig had to shut it down in the late 1990s because his picks moved the market too much.
According to Hulbert Financial Digest—which tracked the performance of investment newsletters—The Zweig Forecast had the best risk-adjusted returns of any newsletter in the world when it stopped publishing in 1997.
And Zweig cemented his legacy as a market forecaster on Friday, October 16, 1987. That’s when he famously appeared on TV and predicted a stock market crash. Three days later, on Black Monday, the market dropped 22%.
Zweig is also well-known for coining the phrase, “Don’t fight the Fed.”
Today, I’ll tell you why that motto still holds true and how you can boost your portfolio—and nest egg—by adopting it…
Winning on Wall Street
Zweig’s 1986 bestseller, Winning on Wall Street, holds many timeless lessons. One of the most important is: “Monetary conditions exert an enormous influence on stock prices.”
That sounds like a mouthful… But the premise is simple: When interest rates go down, stock prices usually go up; and when interest rates go up, stock prices usually go down.
That’s why Zweig told anyone who would listen to not fight the Fed. Instead, he said you should align your investment strategy with Fed policy.
If he were alive today, I’m sure he’d tell investors the same thing. Here’s why…
If You Can’t Beat Them, Join Them
In October 2018, Federal Reserve Chair Jerome Powell suggested that the central bank would hike rates in 2019. The market didn’t like the news and sold off violently.
After the S&P 500 dropped 19% and some strong criticism from President Trump, Powell raised the white flag. By the end of December 2018, he had backtracked.
The market is up 14% since then… And just last month, Powell indicated that he’d pause any rate hikes indefinitely.
This shouldn’t surprise regular Daily readers… On December 31, I predicted the Fed wouldn’t raise rates at all in 2019. And it looks like that’s coming true.
But the Fed may take it a step further… If history is any guide, we may see lower rates next.
As you can see in the chart below, the last three times the Fed “paused” rate hikes, rate cuts followed…
Based on history and Powell’s recent moves, it’s clear the central bank will backstop the markets. And that means more money-making opportunities ahead in the market.
The “Powell Put”
The Fed is going to do everything it can to prop up stocks. In fact, Powell looks like he’s going to put a floor under the market. Some are even calling it the “Powell Put.”
If investors think that the Fed will give them a safety net by keeping rates low, they’ll keep buying. And I think two types of investments will thrive in this environment.
The first is gold.
Gold is up 3.3% since I made my prediction in December and 11% since October 1, 2018… And I think it’s just getting started—because gold tends to rise when interest rates are low.
The second is dividend-paying stocks.
Last November, we told you dividend-paying stocks would catch a bid as investors sought shelter from volatility. And they did…
While the overall stock market fell nearly 20%, most dividend-payers only fell 10%. And some, like Procter & Gamble, are making new all-time highs.
With the Fed keeping a lid on interest rates, expect investors to move into dividend-paying stocks for bigger yields.
The two sectors I like best in this scenario are consumer staples and utilities. Both rose 5% last week as investors tried to lock in higher dividend yields.
So let’s follow Zweig’s advice and not fight the Fed.
Analyst, The Palm Beach Daily
P.S. How do you plan to play the “Powell Put”? Will you stock up on gold, dividend-producing stocks, or something else? Perhaps you’re avoiding the market all together. Let us know right here…
The debate over debate on whether Alexandria Ocasio-Cortez is the most dangerous woman in America continues…
From David W.: No, AOC isn’t “the most dangerous woman in America” unless you mean “the most dangerous to rentiers.” And modern monetary theory (MMT) supporters are well aware that they can’t print limitless amounts of money because they’re not morons.
We don’t need you spreading misinformation about MMT. We already have Jim Rickards for that. And conflating policies like college for all with the old Soviet Union, Zimbabwe, or Venezuela is major intellectual dishonesty. No doubt, some of your readers will eat it up… But that doesn’t justify it. MMT isn’t easy to wrap one’s head around, and I’m not sure I’ve done it myself. But let’s at least be honest.
From Brent P.: MMT won’t just make the United States like Venezuela—but far worse instead. We live in a country that really hasn’t had hard times in our lifetimes. We have lost our ability to completely be self-reliant.
Few people in this country can grow their own food. In Venezuela, many do. Our country would have a massive population decrease because of violence from people who feel entitled to someone’s else’s stuff. Under the surface of the left is a feeling of hate… and it’s just barely under the surface. Don’t take my word for it. Just watch what they say, and you’ll see.
From James F.: At the age of 29, AOC clearly has very few real-life experiences to draw from and yet, somehow, she believes she has the wisdom to offer financial solutions to the people of the United States. What unmitigated gall. AOC should come back in 20 years when she learns the meaning of, “There’s no such thing as a free lunch.”
From Michael V.: You’re absolutely right, Nick. Anyone who doesn’t see the consequences of MMT is just plain stupid or doesn’t care… Thank you for a good article.
From Michael B.: Just discussing this subject gives me heart attack pangs. I can only hope that I am situated with a place to live before it really takes hold.
I’m stunned at how utterly stupid people have become. MMT just doesn’t work. It’s well-intentioned and compassionate, but not possible. I’d love for all these ideas to become reality, but that’s just pie in the sky. Why these idiots can’t see the forest for the trees is the biggest quandary.
From John W.: I’ve seen numerous articles over the last two years in which you claim not to defer to a political side… Yet, it appears the majority of your negative perspectives are against the Democratic Party.
Also, you offer ways of supporting this administration’s policies—which I personally find disturbing. The latest example is your article referring to Rep. Ocasio-Cortez, “Is She the Most Dangerous Woman in America?”
I don’t agree with MMT, either, but this article would be less politically one-sided if you simply talked about the policy and not the (supposedly) collective thinking of progressives.
From Clark P.: If it were to go mainstream, MMT would definitely send us down the path of Venezuela and Zimbabwe, not prosperity. Thank you for the Daily updates!
From John H.: Regarding MMT and AOC: Buy gold, bitcoin, bullets, and canned food. If you don’t already own all the guns you need, well, you just haven’t been paying attention for the past 30 years.
Is Elon Musk’s worst nightmare coming true?
Musk put $70 million of his own money on the line to start Tesla. His dream is to fill America’s roads with electric cars. And with 300,000 Teslas on the road today, some think he’s on his way to achieving it.
But soon, it could all come crashing down. And one tiny company could be responsible…