Stocks Poised For Record Gains On Record Growth And Stimulus

With the economy set for historic growth this year, and stocks poised to soar, this is one of those times in the market that people will look back on either with great excitement for taking full advantage of it, or with utter regret for missing out on an opportunity of a lifetime.

Stocks got off to a strong start this year, then pulled back a bit in mid-February thru early March.

Panic set in for some investors as they braced for more downside. Some sold. Others shorted. And some refused to buy this market for fear of it going lower.

But then it didn’t.

And since then, all of the major indexes have made new all-time highs, and look ready to do it again.

If you missed out on this latest rally due to disbelief, or fear, it’s not too late.

Because it looks like there’s a lot more upside to go.

Fear Not

There was nothing ominous in the pullback we saw earlier in the year. It was just your normal, ordinary pullback.

Nor was there anything ominous in the modest pullback we saw just last week. Not every week can be an up week.

These are just normal ebbs and flows.

In fact, stocks usually pull back about -5% roughly 3-4 times per year. (A pullback is defined as a decline between -5% and -9.99%.)

And stocks usually correct -10% on average of about once a year. (A decline of -10% to -19.99% is called a correction.)

Every bull market has them.

These are the pauses that refresh before the next leg up.

While they’re never fun when they’re happening, if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell.

New Highs Beget Higher Highs

So why have so many people been so afraid of a pullback?

Is it because the market has performed so spectacularly over the past year?

More than likely, that’s the case.

For some reason, people seem reluctant to buy stocks after making new highs. I suppose they may feel like they missed the move, or that now stocks have more room to fall.

But statistically, this is just not true.

Studies have shown that stocks making new highs have a tendency of making even higher highs.

In fact, using S&P price data going all the way back to the 1950’s, it shows that stocks typically go up in the subsequent six months following new all-time highs.

This means that stocks making new highs aren’t at any greater risk of going down. Quite the contrary, there’s a higher probability of stocks going up even further!

More . . .

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Zacks Investment Research

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Written By: Zacks Investment Research