The Davos Crowd Is Predicting We'll Clean Up with These Picks

The International Monetary Fund (IMF) today boosted its forecast for global growth for both this year and next - telling folks at the World Economic Forum in Davos, Switzerland, that the world economy would zoom along at a hefty 3.9% pace for the next 24 months.

But it also warned that the next recession "may be closer than we think."

This is a big deal.

And a big opportunity.

You see, this rosier-than-ever scenario serves as a proof point for the "cheap money physics" prediction I've been making for my paid-up Private Briefing readers for two months.

The best part is, the higher-than-expected growth/higher-than-expected recession risk dovetail perfectly into our "accumulate" strategy that's given us massive gains on stocks across the board. That strategy lets us take advantage of the growth now and hold back some cash to "average down" on stocks that we like in case of a pullback.

Let's take a gander at the IMF forecast, look at how that fully supports our "cheap money physics" call on the Trump administration tax cuts, and consider some stocks that are worth zeroing in on.

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When Money Gets Cheap, Stocks Get Going

Every year near the end of January, the Alpine resort town of Davos is the site of the World Economic Forum's annual meeting. The nonprofit WEF, founded in 1971 (when it was called the European Management Forum, a name that changed in 1987), says it is "committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas."

Most folks just refer to the meeting as "Davos."

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And because it's viewed as a gathering of the world's economic cognoscenti, Davos is the focus of intense media attention.

And this year is no different.

For us, this year's gathering is of interest because of this forecast. The 3.9% growth that the IMF is predicting for this year and next is up 0.2% for both years from what it predicted back in October.

According to Bloomberg Politics, that would represent the fastest growth rate since 2011, when the world was rebounding from a financial crisis that took the U.S. economy and many of its counterparts to the precipice of depression.

But it's the "trigger" for this lickety-split acceleration in growth that caught my eye; about half the catalyst for the boosted growth forecast stems from the Trump administration tax cuts passed in December and enacted after the first of the year.

We've been talking about those tax cuts since early December - describing them as the "next" source of cheap money that could keep U.S. stocks in their current growth mode. We've even ID'd some of the biggest beneficiaries.

The tax cuts are the latest opportunity created by our "cheap money physics" theory - which has been proven in the "real" markets again and again.

That theory (really one of the fundamental laws of financial physics) is simple: Cheap money can't be contained - it always squeezes out somewhere and makes its presence felt.

And if you identify where the impact will be the greatest, this cheap money can make you rich.

Indeed, it was the cheap money trigger provided by federal bailout money, rounds of quantitative easing (QE), and the zero-interest-rate policy (ZIRP) of the U.S. Federal Reserve that ignited this long-running bull market in U.S. stocks to begin with.

And thanks to the "tailwind," this new infusion of cheap money that the tax cuts represent, U.S. stocks continue to surge. The S&P 500 rocketed 19.4% last year - including 6% in the fourth quarter, a "grand finale" no doubt aided by the promise of lower corporate taxes.

Just three weeks into the New Year, U.S. stocks are already up 4.3%.

Since the March 9, 2009, market bottom, U.S. stocks as measured by the S&P 500 are up 317%. The Nasdaq Composite is up 482%.

The cheap money "triggers" that have fueled that stunning bull market have also been among the catalysts for global growth - which was last this robust back in 2011.

Now, the IMF says that cuts to the U.S. corporate tax rate will serve as the biggest "shot in the arm" to the world's No. 1 economy - the United States.

Those tax cuts will lift U.S. growth to 2.7% this year, 0.4 percentage points higher than the IMF was forecasting back in October. And thanks to those tax cuts, that projected U.S. growth was the highest among the world's most developed economies.

According to the IMF, economic growth is accelerating in 120 countries - or about 75% of the world economy. That means the "recovery" is the broadest it's been in seven years.

And as we know from our study of markets - and such technical indicators as the "advance/decline line" - the broader the trend, the more likely it is to continue.

Among developed economies, growth will be stronger than previously forecast in the Eurozone (2.2% this year, up from 0.3% in October) and Japan (up 1.2% this year, 0.5% better than in October). The United Kingdom - trying to navigate Brexit - will advance at a 1.5% clip this year and next, the IMF says.

The advantage the U.S. economy is gaining from its tax cuts is visible when compared to some developing economies, whose forecasts are largely the same as they were in October.

China will see its economy surge at a 6.6% clip (up 0.1% from three months ago). India will grow at a 7.4% pace - a forecast unchanged from October.

The current economic upturn is unlikely to become a "new normal," IMF Chief Economist Maurice Obstfeld told journalists during his briefing in Davos on Monday.

And yet, the IMF says there are reasons to worry that this recovery isn't destined to be as long-lasting as some might wish...

Among the concerns: major economies hitting their growth limits, worries that the biggest markets - the United States and China - could slow, and the ripple effect risks of a downturn in stocks. And because there are fewer "cheap money" triggers to work with, the world's governments and central banks will face tougher battles.

"The next recession may be closer than we think, and the ammunition with which to combat it is much more limited than a decade ago," Obstfeld, the IMF economist, told reporters.

That's okay with us. We'll cash in on the current surge in stocks. And by identifying the best long-term opportunities, we'll also look to "accumulate" shares of wealth-building plays if they temporarily stumble.

Let's look at two of my very favorites.

Cash In on Two Big Cheap Money Winners

The near-term benefits of "cheap money" tax cuts coupled with special opportunities and long-term market potential line up some big wealth-building plays to consider.

The first is my "Single-Stock Wealth Machine." I mean Alibaba Group Holding Ltd. (NYSE: BABA), of course.

Clean Up

The IMF detailed big growth numbers for China's economy - regardless of the fact that it didn't boost its forecast. Alibaba is like if you took Amazon.com Inc. (Nasdaq: AMZN), Wal-Mart Stores Inc. (NYSE: WMT), and a few other retail/e-commerce/cloud computing/social media firms all together at their earliest stages and turned them loose in an economy just as its middle class was first emerging. The potential is astronomical.

We've already detailed how each share of Alibaba you buy now for $180 could be worth more than $1 million in four decades (yes, you read that right). That means this easy-to-own, single-stock play on the emerging, wealth-generating juggernaut that is China tops any "buy" list.

The next stock filled all sorts of "Top 10" lists at the end of 2017, for good reason: Its shares surged a hefty 96.7% last year - an incredible achievement for what anyone would consider a mature American big cap.

I mean none other than The Boeing Co. (NYSE: BA).

I've seen this growth coming; I've been recommending this stock since 2011, letting my readers know to accumulate a position on the dips.

And there have been some dips, most notably back in 2013. That's when a spate of fires linked to the Li-ion batteries on the then-new 787 "Dreamliner" had shares plunging and pundits calling for the company to flatline.

I said then that Boeing would beat the problem and come back to dominate aerospace (and reward shareholders with the foresight to see that), and that's just what happened.

My paid-up subscribers following along have seen market-beating gains north of 321%.

The future looks very bright indeed, just like the present.

It's true in aerospace that innovation never rests, and the winner of today's battle can always find itself on the defensive further on down the road, but Boeing and its world-beating, ultra-efficient 787 Dreamliner has thoroughly beaten its perennial European rival, Airbus, and its once-mighty A380 "Mega-Jumbo."

The jetliner king has years of order backlogs on its books already, keeps selling new airliners, and just boosted its 20-year outlook on commercial airplane demand. And now it's getting into drones - with a plan to "Tesla-ize" aviation.

Note: Check out Bill's special presentation on the drone revolution that could see early investors reap as much as $115,900. You can learn how to get access to all of Bill's Private Briefing investment research, too, by clicking here.

Alibaba and Boeing. What's not to like?

My recommendation for both of these stocks: Buy at market and - you guessed it - accumulate on dips.

We'll continue to bring you "cheap money" winners and "accumulate" plays for 2018.

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press.

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