Yesterday the Dow surged triple-digits in spite of the Fed raising interest rates again, but by a paltry 0.25%. The Fed is already behind the curve, as inflation is clearly accelerating.
But for the time being, stock investors don’t seem to care about rising rates or accelerating inflation. As the Dow surged back toward its 21,169 record-high posted last month.
Commenting on the resilience in stocks, Larry remarked last month that his call of Dow 31,000 “doesn’t seem so crazy anymore – in fact, it’s beginning to look like a conservative target.”
But he also cautioned us that “no market moves straight up or down in one direction. Markets rise and fall just like the ebb and flow of the tides. A pullback — even a very sharp one in our stock market — is way overdue.”
I couldn’t agree more.
Since then, the market pulled back a tad in recent weeks, but remains dangerously overbought and in need of a correction, to refresh stocks for further gains. In fact, Larry’s E-Wave model for the Dow still indicates trouble ahead, with a correction likely in the weeks ahead.
Meanwhile, another stock market, halfway around the world, just broke out to new highs and looks poised to tack on further gains. Plus, it is outperforming U.S. stocks in the process.
At that time, the entire world was bearish about China, including Chinese investors. But Larry always had a knack for seeing around corners to correctly identify trends well ahead of time.
Remember, China’s stock market had just suffered a major crash in 2015, falling 46% into early 2016. So, when Larry made his prophetic call, Chinese stocks were just beginning to recover, and most investors wouldn’t touch ’em with a 10-foot pole.
But Larry saw a great buying opportunity and pounded the table about buying certain Chinese stocks saying; “Now is the time to buy China, but a word of caution is warranted: Don’t get suckered into the faded glory of China’s stodgy, old, state-owned enterprises.
“These blue-chip stocks may have led the charge higher during China’s export-led boom last time, but now the game has changed. China’s new consumption-led economic machine means a whole new crop of smaller, nimbler stocks could be the big winners this time around.”
In fact, since Larry’s on-the-money call, the “stodgy, old, blue-chips” as measured by the Hang Seng China Enterprises Index gained a respectable 20%.
However, the smaller, nimbler, consumer-oriented stocks – represented by the Solactive China Consumer Total Return Index – soared half-again as much – up 30% since Larry’s call.
The good news: If history is any guide, this rally in Chinese stocks is just getting underway, so you haven’t missed the boat yet. The last two bull markets in China saw much bigger gains.
* Last time around, from October 2008 to November 2010, Chinese stocks surged 143.1%, leading all global markets out of the financial crisis, and …
* Before that, China’s stock market soared 318.5% higher in just two years, from October 2005 to October 2007!
Bottom line: Larry made a great call on China last June, and there’s still plenty of time to profit from it now. But stay focused on the smaller-cap, consumer stocks. That’s where the big profit opportunities are this time around.