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☕ This could be a “train’s leaving the station” moment

Mar 21, 2024

Good morning! 👋

S&P futures took out my annual target of 5,200 in pre-market trading and the index is tracking higher as I type at 5,255.89.

WOW!

I’ve been doing this a long time - arguably since dinosaurs roamed the earth or at least that’s what it feels like some days – and I can’t recall taking out an annual target this early in any given year.

Makes sense, though.

Unka Powell said 3 rate cuts are still on the table this year.

I can’t imagine how he’s gonna pull that off, but I doubt very seriously he gives a you-know-what about what I think.

The move follows yet another winning day on Wall Street that saw all three major indices close at new highs. Both the NASDAQ and the Dow climbed more than 1% while the S&P 500 tacked on 0.9% to close above 5200.

I hope you’re on board.

This could very well be a “train’s leaving the station” moment.

Here's my playbook.

1- JPow: No news is good news

I laid out two scenarios ahead of the Fed’s remarks yesterday, one of which would be that the markets find their footing “fairly quickly” if JPow keeps rates steady or talks cuts.

We could spend all day blathering about whether he’s right or not.

I’d rather focus on being profitable.

As screwy as the Fed is, traders know that it won’t stand in the way of a rally.

Savvy investors, ditto.

MyPOV: History shows very clearly that the world’s best companies will get on the gas if the cost of capital goes down as a function of looming rate cuts. That, in turn, will create a massive run in sales, profits and, of course capital investment – substantially all of which leads to higher stock prices over time. I think we’re on the cusp of another investing super cycle. Upgrade to Paid

2 - Small caps to rise 50%?

My colleague, Tom Lee of Fundstrat, told CNBC that he sees the Russell 2000 small cap surging 50% this year. (Read)

I had to read the headline several times to be sure.

Tom makes a good case.

And, not for nothing, there’s a lot of similar touch points to mine.

$6T on the sidelines
Bullish sentiment high, but actual retail investment positioning low
Institutions caught on the sidelines and need to go to work
Small caps are trading at less than half the valuation of large caps

Even though I generally prefer single stocks, IWM might be a great choice.

3 - Implantable tech is here but the next step is closer than you think

Neuralink has just shared a live video showing a patient using the company’s brain implant to move a mouse and play chess. (Read and Watch)

This is only the beginning.

Everybody is thinking robotics but I’m coining a new term here today...

Humanitics.

It will not be long before we’re reading about companies like Tesla, Nvidia and Boston Dynamics working to translate what they’ve learned via robotic research back to humans.

I think it’ll create a new generation of millionaires.

4 – Dividend investors: Don't buy small banks, do this instead

Small and regional banks are popular with dividend investors.

And now that they’ve been shellacked, I’m getting a lot of questions about whether or not it’s time to nibble – meaning buy a few shares here and there.

Nibble is the operative word.

I wouldn’t.

For two reasons:

Many small and regional banks are overexposed to riskier CRE loans coming due
Income is dropping as higher rates have pressured the rent rolls (meaning vacancies are up as space goes empty)

I’m not alone in my thinking, incidentally.

A new report from Klaros Group highlights 282 US banks at risk, of the 4,000 the company analyzed. (Read)

I’ve seen this before.

What happens next will catch a lot of dividend investors by surprise.

Buy the big banks instead.

Why?

Because there’s likely to be a new wave of M&A which sees the big players gobbling up the small players, many of whom won’t make it.

Make sense?

5- To buy or not to buy is the wrong question

Every time the markets drop, the questions start rolling in... should I buy more of this or that stock?

I get it - down days can be scary, unsettling, and downright nasty.

Many investors think they’re being smart by waiting for a pullback or better prices but history shows beyond any shadow of a doubt that buying is exactly what you want to be doing most of the time.

Not every company, of course.

Just the world-class players making must have products and services the world can’t live without, fortress-like balance sheets and visionary CEOs.

A line of thought I call, “buy the best, ignore the rest.”

Put it another way.

Do you wish you’d bought NVDA under $200 or Palantir while it languished around $6?

If you are like most people, the answer is yes.

So the question becomes not whether or not to buy now but how you will feel five years down the road if you don’t.

Keith’s Investing Tip: Scared money never makes money, at least not consistently anyway. Missing opportunity is almost always a more expensive proposition than trying to avoid risks you can’t control.