U.S. stocks delivered great performance in January and February and are now taking a breather in March. As such, I expect the S&P 500 index to trade between 2,625 and 2,825 for a while. The trading range might end up being a little higher or a little lower, but for now, a repetition of the trading range that took place between late October through early December seems most likely to occur. I anticipate that the market indexes will continue advancing later this year.
Many individual stocks are also in trading ranges, so this is a good time for traders to put in sell limit orders on stocks with identifiable ranges, and gather a list of stocks that you’d love to buy when they bounce at off-price support.
Trading Range = Buying Opportunity
For long-term investors, trading ranges are just a short-term concern. If you’re not a “trader” and prefer to buy shares of great companies that you will hold for several years, stick with your plan! You can always find good buying opportunities when you have excess cash available within your portfolio.
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Using a proven system, we've been able to outperform the market, year after year, delivering a portfolio that outperformed their comparable U.S. market indices by margins of 50% to 100% and more—with less risk.
On an unrelated topic, I yet again saw an article where an economist, Paul Krugman, is predicting a recession this year or next year. (Keep throwing darts, Paul. You might eventually hit a bullseye!) Please ignore such articles. If the economy requires a life vest, it will become obvious. Unemployment numbers will spike upward, corporate earnings growth will disappear, the Fed will begin lowering interest rates, to name just a few economic signals.
The last thing I’d like to say about recessions is that recessions are a normal part of the economic cycle. Yes, we will have a recession … eventually. And life will go on. There’s no reason to panic. A recession does not mean that people cannot make money in the stock market; it does not mean that a depression will ensue; and it does not mean that a stock market crash will occur. But you can be darn sure that news headlines will tout all of those potential scenarios, because that’s how they get viewers to tune in each day.
Always remember, no matter how badly any particular stock market or economic cycle devolved in the past, U.S. stock markets always bounced back and began reaching new all-time highs. As a matter of fact, we had a big stock market correction in the first quarter of 2018, and those very same markets rose to new all-time highs in the third quarter.
Bottom line: Enjoy the booming economy. You’ll have plenty of time to prepare for a recession later.
And while the good times are rolling, why not take out a subscription to my Cabot Undervalued Stocks Advisor? I specialize in stocks that feature a combination of growth and value—stocks that have been undervalued by the market despite strong sales and earnings growth and good business models. With markets still lagging well behind their September 2018 highs, there are plenty of good growth and value stocks out there.
To find out which ones I’m recommending now, click here.
Note: This post was excerpted from a recent issue of Cabot Undervalued Stocks Advisor.