The First Half of 2018 Should Close with a "Big Bang" in Small Stocks

Excerpt from Louis Navellier's Marketmail - 06/26/2018

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Even though a wave of tariff escalations sent the Dow Jones average down 2% last week, the truth of the matter is that the U.S. has the leverage, since China needs the U.S. because it is its biggest export market. 

This week marks the annual Russell realignment, so I expect to see many stocks surging higher as they are added to the Russell 1000, 2000, and 3000 indices (Note: The Russell 3000 index is composed of the Russell 1000 & 2000 indexes). Quarter-ending window dressing will also positively impact stocks this week, especially growth stocks with strong sales and earnings, Furthermore, the crisis in emerging markets is causing worldwide capital flight to the U.S. dollar. In 2017, most investment funds flowed into international stocks, including emerging markets and multinational stocks, but in 2018 that flow has been diverted to domestic stocks, propelling the Russell 2000 index higher. The critical path now is into domestic micro-, small-, and mid-capitalization companies with strong forecasted sales and earnings.

On my Tuesday podcast, I reiterated that the stock market is still the best place to be, since the S&P 500 yields approximately 1.9% and dividends are taxed at a maximum federal rate of just 23.8%. That means investors earn more staying in the stock market than by putting their money in a bank, where their interest income is taxed at a maximum federal rate of 40.8%. Furthermore, the 10-year Treasury bond yield has declined significantly since mid-June's Federal Open Market Committee meeting. This means the yield curve is "flattening," removing pressure on the Fed to hike key interest rates in upcoming months. This creates a 'nirvana' environment of moderate interest rates, 4% GDP growth, and strong company earnings

 


In This Issue of Marketmail

Bryan Perry sees the stars lining up for a second-half rally, particularly in dividend growth stocks. Gary Alexander takes time out to honor Charles Krauthammer, including some of his financial commentaries. Ivan Martchev expands on something I've long said about many ETFs - they act like a scam on small investors, and Jason Bodner gives us an example of how it often pays not to sell into a panicky market.

 

Income Mail: Setting Up for a Sizzling Second-Quarter Earnings Reporting Period

"FOMO" Will Make Domestic Dividend Growth Investing the Second-Half "Sweet Spot"  

by Bryan Perry

  

Growth Mail: R.I.P. Charles Krauthammer (1950-2018)  

Krauthammer's Common-Sense Solution to the Entitlements Crisis  

by Gary Alexander

  

Global Mail: The ETF Industry is Like a $3.6 Trillion Scam
A Practical Example of a "Bad" ETF

by Ivan Martchev

 

Sector Spotlight: Don't Let the Bad News Bewitch You into Selling
An Example of Not Selling into Bad News

by Jason Bodner

 

A Look Ahead: This "Trade War" Will Likely End with Fewer (and Lower) Tariffs   

Despite Negative Political News, "Positive Business Outlook" is at Record Highs  

by Louis Navellier