60 Years of Data Say NOW Is the Time to Buy Stocks (3 Picks)

The tech wreck, the bond vigilantes, oil prices through the roof, it seems like [music] we just can't catch a break. But our guest today has 60 years of market history pointing to something completely different. The [music] best time to own stocks may be just around the corner. Welcome back to Navellier Market Buzz. Today we're joined by Jeff Hirsch, The Stock Trader's Almanac, which is celebrating its 60th year. Jeff, welcome and congratulations. >> Thank you. Great to be with you guys. Good to be on with my friend Louis. >> Yeah. Yeah, Jeff's not just a great market strategist. He's the guy who tracks all the seasonal patterns, market anomalies like the January effect, the presidential election cycle. Nobody knows the calendar of the stock market better. >> Appreciate that. >> Yeah, it's an important time of the year. It's October. The market's going through some jitters and volatility. Very typical October. We like to say Octoberphobia. Don't fear it, embrace it. This is the best time of the year to buy stocks. It's the best month of the midterm year. It's the sweet spot of the four-year cycle, the best six months. It's really just the time of the year. I mean, everyone like they always say, you know, sell in May and go away. I like to say you got to buy in October to get your portfolio. So >> I love that you mentioned that because October though has been pretty turbulent. So are you seeing a year-end rally coming? >> I do. I do. October's got a bad reputation. Lots of crashes and and master crashes. It's it's been a bear killer bargain month for years. We are geared up for the fourth quarter rally. The only caveat, you know, is the inflation or not the only, there's two caveats. The inflation, you know, I think is holding our best case scenario back as well as the fact that this midterm year, which is normally a rough year for stock market four-year cycle, has done so well. It kind of it tends to pull a little bit of those those gains from the third year, the pre-election year, the best year forward a little bit and the sweet spot. Still gains there, but just takes a little bit off the top. So maybe not quite as much in a year like 22 when we had a a textbook, you know, bear market October bottom turn. So, yes, rallied maybe a little bit less strong with the gains so far. >> Before we talk about next year being the third year presidential election cycle, I just want to ask you briefly, we know we have very good earnings in the pipeline. We've already had a lot announced this week. The forecasts are unbelievable. But, we do have a Russell realignment in November and you know, it's unusual. Russell normally realigns in June, but this year they're going to twice. I would think that would help small caps quite a bit. That the stocks that going to be out of the Russell 1,000, 2,000 indices would just naturally benefit. Do you have any idea of how the Russell realignment's going to impact the small caps? >> I'm not sure about the realignment itself, but the small caps, you know, have been taken on the chin on the street a lot lately. And I just posted recently the seasonal pattern of the Russell 2,000 and also the Russell 2,000 versus the 1,000. So, this is very typical weak seasonal period. It's about to end. I think any rebalancing that puts better small caps into the Russell 2,000 is bound to be good for it. I'm a fan of the small caps. This is small cap season. You had mentioned the January effect. You know, not to be confused with our January barometer, but the January effect is small caps starting outperforming large caps in January really starts right around Halloween and then kicks in big time last couple of weeks of December. So, this is the October. It's the best time to buy stocks, especially tech and small caps to add in that rebalancing juice and the seasonal setup and the correction and the fact that small caps have woken up after several years of uh you know, being in the dog house. So, >> Yeah, and I would add that the dollar is pretty strong lately. So, that usually helps small caps and more domestic companies cuz clearly our economy is stronger here. So, let's go back to the January effect. So, we usually get an early one in November and then we get an early one in November, we get a a good one in January. It's kind of like the predecessor setting it up. And then, of course, next year is the third year of a presidential election cycle. So, I mean, is that 7 months, 10 months? What What can we expect for next year's rally? >> I think we run to about mid-July. We've been lately with NASDAQ's best 8 months, a little bit more than than Dow and S&P. It's been pulling the rest of the market forward. There's been lately some dips in January, a little bit of profit taking the new year. February is the weak spot. So, other than the usual and perhaps unexpected, you know, announcements from Washington or elsewhere that might derail things, I think the rally goes through mid-year and then another year-end rally. One of the the things that we we feature in the Almanac and what we do is the 50% move from the mid-term low to the pre-election year high for the Dow. It's 66.6% for NASDAQ. But, the other part of it is that the bulk of the move is that sweet spot mid-term Q4 to pre-election Q2. Big cluster of annual highs in the pre-election year in December, and a lot of them at the last trading day of the month or very close to the end of the month. So, probably look at that mid-July to September weakness like we tend to get when everyone's on vacation and before the institutions come back and window dress and clean house and get ready for year-end. >> So, Jeff, the headlines recently have been spooking everyone. We have inflation and the bond vigilantes are back and treasury yields are falling. What is the bond market telling us? >> That the US economy is growing robustly and it's hard to hold back this this technological AI super boom that I've talked about. Bond yields up a lot recently in the past couple years, but I just saw an article that 30-year mortgages are as high as they've been since 2023. Wow, that's not that long ago. And from my recollection and memory and knowledge of history, these bond rates are pretty historically normal and average, and it's just that we were in such a zero rate power environment for so long that it feels differently. So, to me it's a growth story. Um yeah, there's some inflation issues, but inflation is what, you know, lifts asset prices and it comes with a territory of economic growth. Be nice if we were a little bit more thoughtful about some of the foreign engagements and the energy policy, but that's that's something that we can't control. Meantime, as Lou, you know, you're you're pointing out there that the growth is incredibly mean. Nominal GDP in Q2 was 8 and 1/2%. We're seeing, you know, our friend Mark Skousen talk about growth output, you know, the all the whole supply chain being growing phenomenally. Yeah, inflation's up. It's going to be up when we have growth. I think this technological revolution is like nothing we've seen before, nothing before. It's bigger than electricity. It stacks everything on top of it. Going back to the fire, the wheel, indoor plumbing, internal combustion engine, the microprocessor, the internet, the cell phone, it's all on top of it. Now, most of the bandwidth's out there, they're going to build some more. Everyone's got a this main frame computer in their back pocket now. It's just hard to to hold back growth. >> Yeah. Yeah. And Elon announced the flying car yesterday. >> I saw that. Big fan of Elon. Um you know, not necessarily on a personal level, but what he's done as a business person, an innovator. Uh I mean, I'm in SpaceX. I just said there's no way I'm not going to be involved in this. I waited when the IPO come out, I just put out a bid at the IPO price, you know, but finally I get the cancel order and it got hit and went a little bit lower, bought some more. I'm nicely in the black on that. >> Yeah, kudos to Elon for winning the Showman Award. So, let's go back to the bond market. So, we had obviously hit this inflation is. And what I noticed is when the CPI came out, the two-year spikes and then it fizzles. The 10-year and everything was going up, too, but I was watching the two. And then when the PPI came out, which was much worse, okay? You know, we had warehousing costs up 3.4%. I mean, that's a lot, okay? And rates kept falling. So, I guess the question is, were they falling because the details of the retail sales report were weak once you back out, you know, gas station sales and things? Or was it falling because bond investors just wanted to get in and finally make money? Because, you know, when rates are going up, they lose money. When rates are going down, they make money. So, I'm just curious how much of this is technical uh versus uh whether we did truly hit the peak of >> the bond market. Rates are going to have to go up a little bit at some point. I'm not so sure that they're going to go up. Everyone's like talking about this new rate hiking regime. We've had one quarter cut one quarter point hike by the Fed. Yeah. This guy Waller seems to be a a a bit more thoughtful and calculated on this. I'm wondering what your take is on him. I completely appreciate his his lack of rambling on. He did basically mic drop at his presser last time. We raised rates a quarter point. Good night. That's it. The Fed needs to be talking less and putting guardrails up there and listening to the bond market. So, you know, the initial rally off of the inflation numbers and the sell-off tells me that it's more of a growth story than some sort of sinister inflation story. >> I used to work for the Fed. In fact, I worked for the Fed when Volcker was in charge and we went from, I think, uh under 10 to to almost 20 and then back to 10 and and back up again. Volcker was playing with monetization. It was just screwing up the whole economy. But, he did break the back of inflation. But, no, I like Waller. I mean, he basically says, "I got to follow market rates and market rates will tell me what to do." So, I guess that's >> Fed was Fed was built on to do? To follow market rates and and and not dictate? >> And I like how he's rebuilding the Fed from the inside out where he's trying to make them rethink all the reports they do, the Beige Book survey, and everything. And, you know, I get very frustrated with the European central bankers because they say, "Oil is up, so we got to raise rates." Well, the problem is oil is inelastic. You can raise rates all you want, but it's not going to affect the price of oil cuz it's inelastic largely. So, I get really frustrated with the other central bankers. I don't know if that's an education problem or what it is, but you one thing that's very interesting a Bloomberg reporter is I'm talking today that British Columbia can't borrow from Canada anymore. I guess I don't know if the Canadians don't trust them or what. British Columbia actually comes to America to borrow. I found that to be fascinating and it just shows that our markets are liquid and uh >> That's That's the bottom line why the dollar's so strong. The markets are liquid, the economy's strong. >> Yeah. >> All these fears about the AI apocalypse I I think are, you know, overblown. There's concerns, but this is going to change the world implicitly, globally, and to everyone individually. >> Well, don't all the criticism that comes from the Chinese and Russian bots, doesn't all that disappear after the midterms anyway? And then we just focus on the holidays, friends, family, football, food, and that kind of stuff. >> The midterms, this four-year cycle stuff is real, man. I mean, it's Everyone wants to wants to be concerned about whether the house flips or how many seats the president's party loses or whether both flip or which party's in control. And honestly, you know, Republicans are better for Congress, Democratic presidents are better for Congress, but what matters is the event, the cycle, the fact that we get through it. I mean, the the time around the around the midterm elections is bullish and getting past this whole process is what what matters and that's what creates the four-year cycle, that's what creates the pre-election year, you know, being the best year and this midterm, you know, Q4 sweet spot. So, yeah, it's getting past the midterms is going to be nice. >> Back to AI and the incredible order backlog. To me, it looks like we're we're booked out to 2032. Do you Do you see it going that far? And you think your your Governor Hochul will allow the data centers to be built because, you know, New York Upstate New York's perfect for data centers with cheap electricity and fast internet. >> Apparently, apparently the governor's race in New New has tightened since the debate, if you've seen any of that. >> Yeah. >> Um so it may not be up to her. >> Okay. >> However, it's it's pretty blue here. The data center issue is this NIMBY thing. I think at the end people will realize that it creates jobs and helps the communities and the environments if they just uh instead of putting a moratorium on it, just get in there and do their work and be vigilant in making sure the companies do the right thing. But what else we going to do with all these these spaces? I mean I had a thought to take some of the empty malls and turn them into data centers, but uh >> Wow. >> I'm not sure people want to touch that now with the whole political >> I'll I'll look forward >> Want to invest? >> No, I look forward to you being a governor soon. Okay, I like that. >> I was a trustee in my village before dissolved. So I do have a little experience with the general municipal law in the state of New York, but I think this boom goes on for a long time. The bookings that you're talking about that better than I do, but my read is that we're in the early innings of this secular boom. And I'm just starting to really ramp up on it myself. It we've barely, you know, touched the tip of the iceberg here with what it can do. What I use it's getting better. It's getting more accurate. There's still errors, there's still a lot of stuff that that's wrong, but it's improving. I think we're going to be able to put the guardrails on it. I know everyone's worried about there's got to be a kill button. I think some of that's really blown out proportion, hyped up. I mean there was some story about the the bots hacking into the government websites. You read the further down the next paragraph somebody did a search for information and they went and looked up public website information. It's not always this jumping out of the sandbox operating thing, but fear sells and they're going to continue to do that, but technology prevails and I don't know of any other technological revolution in the past that has not created more jobs than it's than it's gotten rid of. So we're just going to have to switch and become, you know, AI prompt writers and and users and get it to do more than I mean everyone's using it from construction people, the auto body guy takes a picture and and gets the estimate. They're redesigning rooms. It's just beginning. >> Okay, Jeff, let's get to stocks because you have a quite the impressive track record. Can you share which of your portfolios you like the best right now and where are your favorite picks? >> Well, we just put out a new basket of stocks to subscribers for the best 6 months of the year. We are continuing to dig for stocks that are going to be benefiting from this this boom is AI boom tangentially. But this list is got a pretty diverse basket. What we do is a fundamental screen at the seasonal, you know, time of the year with some technical overlays. We're looking for companies that are under Wall Street's radar, under followed, have an acceleration of growth and revenue and earnings and good valuations. So, we got 14 stocks that we put out there last night to subscribers and you know, a couple of them, I guess, I'll give you a couple of big ones. But one of the the the big ones is Enphase Electric, NVT. This is basically, you know, a data center play where they produce the products that has all the electric electrical connectivity in commercial spaces. So, I did pick up some of that one myself. Another one in the industrial products area is Nordson, NDSN. Brand new pick for us. Here's one that is a little different, consumer discretionary, IMAX, IMAX. So, that's just three of the 14, a little taste. We also have, you know, the full seasonal sector buying spree that we're into, you know, with XLK and biotech, which I own, as well as semiconductors and and telecom and it's just that if you if you look at the the sector seasonality page in the Almanac, there's just this cluster of of bullish seasonal periods beginning for all these sectors right now, October. So, you know, best time to buy stocks, best time for most of the sectors. And of course, we had our seasonal MACD buy signal for the best months of the year for the Dow, S&P, Nasdaq, and the Russell 2000. So, market went a little bit down after that, but you know, these things happen. Just gives everybody a good opportunity to get in here um at this usual mid-October bottom. >> on what MACD is? Uh cuz I think some people don't know what that is. >> Forgive me for tossing it out there loosely. MACD is a technical indicator. Stands for moving average convergence divergence. It was invented by the late great Gerald Appel, who I'm sure you knew as a youngster. Uh and what he did was he took a few exponential moving averages, not the simple ones. Exponential moving averages are moving averages that put more weight on the more recent data point, and it's shows a shift in momentum. It's it's a tool that you use for confirming or denying, you know, or improving entries and exits for for stocks and market timing based upon other analysis, whether it be seasonal for us or fundamental for the stock picks or you know, some of the sector trades. It's an entry exit improver. >> Well, Jeff, this has been such a enlightening conversation. Where can people learn more about Almanac and your services? >> Well, there's you can search it up, as they say these days. It's not just It's not Google it. It's search it up now. You can go to stocktradersalmanac.com, on X and other places at almanactrader, LinkedIn. But, go to the website and then you'll see get STA. You can get it for free with a subscription and see all my stock picks and ETF recommendations and market timing. And we also do a monthly webinar with subscribers where I run through the deck for about 20 or 30 minutes, and then we open the floor to questions where people can ask me whatever they want. Nothing's off limits for another half hour an hour depending upon how many questions you >> Well, great. As always, all of Jeff's links will be in the description below. Thank you all so much for watching. Let us know if there's any specific stocks that you want Louie to cover in our midweek episode. Give this video a like and subscribe, and we'll see you Wednesday for our next video.