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This doesn’t have to be complicated. In fact, the basic formula that drives any bull market is pretty simple. It comes down to two conditions.
- Economic conditions need to be pointed toward growth.
- There has to be a reason to buy stocks.
Right now, both of these conditions are in play.
Let’s start with economic growth…
Investors got exactly what they wanted from the Fed this week.
The Fed bumped up rates by another quarter-point – bringing the Fed funds rate to 5.5%.
Fed Chair Powell said the Fed may make one more 25 bps rate hike at its September meeting. And he hinted that the campaign to fight inflation over the last 18 months is basically over.
Of course, he couldn’t come right out and say “mission is accomplished and inflation is now vanquished.”
Chair Powell didn’t even say the Fed has more work to do, which had been a consistent theme at every meeting up until now.
What he did say was that he and the other Fed governors who decide interest rate policy will be “data driven.” That is to say, they will let the inflation data between now and September 20 determine their next move.
The latest inflation data that came out this morning shows that the Fed is truly done with rate hikes.
Today’s Personal Consumption Expenditures (PCE) report for June came in at 3% – below expectations. That’s right in line with what we saw from the Consumer Price Index (CPI) last week, which also read 3%.
Plus, GDP growth that came in better than expected at 2.4%.
It’s looking more and more likely that the Fed has engineered the so-called “soft landing” – where rate hikes bring inflation down without sending the economy into a tailspin.
Now, investors have obviously been way ahead of the Fed in recognizing that inflation was becoming a non-factor. That’s why stocks officially broke out into a new bull market in early June. It’s why the Dow is now less than 1,000 points away from a new all-time high.
And it’s why – with the Fed and inflation out of the way – stock prices could be headed much higher through the end of the year.
The Reason to Buy Stocks
Why am I so sure that stock prices are heading higher?
Because there are a few very good reasons to buy certain stocks right now – investment trends that are changing the way America does business.
Take the energy sector. U.S. oil companies are producing more oil than they ever have. Imports from Saudi Arabia have slowed to a trickle. And with growth picking up for the U.S. economy, our homegrown oil companies will be more profitable than they’ve ever been.
The renewable side of the energy sector is just as exciting. The electrical grid is getting upgraded with utility grade batteries made right here in the U.S. New solar and wind installations break ground almost every day.
Upstart electric vehicle (EV) companies are just now ramping up to billions in revenue. A new charging network based on Tesla’s supercharging standard is being built. New mines are opening to feed the basic materials at new EV battery factories…
Autonomous driving taxis and trucks will be operational in the next 12 months.
The simple fact is: there hasn’t been this much transformative innovation hitting the U.S. economy in decades. And there’s one force driving all of it…
I’m talking about Artificial Intelligence or AI.
Now, you probably have some idea about the most popular use for AI right now: Chat GPT. Search engines like Microsoft’s Bing! are now using Chat GPT to give us better search results.
Like, you can now get a whole term paper written just by asking an AI Chatbot a simple question…
You can have AI make a poster for you, or write a poem…
These applications are fun, but they are just the tip of the iceberg.
U.S. oil companies are using AI to precisely target their drilling and optimize oil flow through their pipelines. They’re even using AI to pinpoint potential breakdowns, like where valves may burst and create costly delays and repairs.
AI is helping regulate power across the electrical grid to prevent dangerous surges and keep costs low.
AI is the brains that enable autonomous vehicles to navigate streets and highways.
I’m not exaggerating when I tell you that Artificial Intelligence is quickly making its way into every aspect of the U.S. economy.
And it’s only just begun…
You’ve probably seen the gains that some AI stocks have already made. And you may be worried that it’s too late to get invested and BUY these AI stocks.
Let me assure you that this is not the case.
It’s still the first inning of the AI transformation.
It’s like buying Amazon in 2000, or Apple in 2005 or Netflix in 2010.
Sure, these companies had run up a lot. But the biggest gains were yet to come. And very few people had any idea how big these companies would get – and how much money investors would make from them.