Editor's Note: Normally this 2016 forecast would go to Keith's paid Money Map Report subscribers, but we're sharing this excerpt with you because his readers had a very successful 2015, and the trends he's tracking into the new year could pay off even more – no matter what the markets do. Here's Keith…
In my 2015 forecast, I predicted that defense, natural resources, and medical device companies would be the big stories of the year, despite volatility that was going to give most investors fits.
Sure enough, Raytheon Co. (NYSE: RTN) has taken off as the war against ISIS intensifies. Returns are now 214.66% and counting. American Water Works Co. Inc. (NYSE: AWK) has logged an impressive 112.66%, and Becton, Dickinson and Co. (NYSE: BDX) is rocking 124.62% to date. Bear in mind, these gains come despite the Dow and S&P 500 being modestly down for the year.
I also urged you to avoid or short companies that didn't have the quality we know leads to bigger profits and more stable income, like Twitter Inc. (NYSE: TWTR) and GoPro Inc. (Nasdaq: GPRO). Those shorts have produced returns of 36% and 71% to date.
As exciting as those numbers are, 2016 could be even better…
The Bull Market Lives On… for Us
The Fed continues to fly by the seat of its pants using badly flawed economic models with no bearing on reality, Europe's already challenging fiscal situation is being compounded by an unprecedented migration from the Middle East, China's slowing down, and Japan fell into its fourth recession in five years, only to have the numbers revised away a month later. Nationalism is on the rise worldwide, as is protectionism.
So the investing backdrop is challenging, to say the least.
But some of our favorite companies continue to pull ahead. We saw a 30% performance gap between the best and worst segments of the S&P 500 in 2015, and I see that becoming even more graphic this year. If projections hold, earnings growth may average 8% in 2016.
The run could last another three years, although not all in a straight line. Since 1926, economic recoveries have lasted an average of 58 months, so you could argue that the current expansion is past its prime at 78 months. However, three recoveries since 1981 have gone on for an average of 95 months, according to Kiplinger. Central bank meddling, wrong though it is, has that positive side.
Investors remain more interested in buying than selling. During the run-up following last August's flash crash, for example, volume was 5:1 in favor of buying several days running. According to InvestTech CEO James Stack, stocks tend to rise an average of 24% over the following 12 months when we see that happen.
Further, we'd still have to go another 36 months to match the nine-year bull market that started in October 1990 and produced returns of 546%.
Smart Risks and Good Companies Will Beat Beat Bad Markets
Overweighting U.S.-based large-cap stocks that provide products and services with the pricing power will be necessary to overcome more central bank meddling and increasingly challenging global protectionism.
Fuel for growth, technology-enabled opportunities, and allocation will be key – they're all in industries where revenue is rising and earnings are stable or increasing.
The synchronized recovery central bankers and politicians have tried to engineer will, unfortunately, remain a fantasy. Recovery, reform, and resurrection will be worldwide buzzwords.
Despite runaway debt and resulting stagnant growth, America's still the global economic leader. The BRICS are B-U-S-T-E-D but, at a 50% discount to U.S. stocks, chances are we'll be doing some shopping there in the next 12 months.
Prepare to Capitalize on Volatility
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About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.
Thanks to you
When I click on the free report link for small cap robotics it just goes to the top of the page.
I'm having the same problem Richard H described earlier today; so, please provide solution asap!