Is the US stock market about to Melt Up? The Dow Jones Industrial Average has just beaten the Nasdaq Composite Index by approximately 3%, albeit, the two indices shared a similar path over the past 12 months. This is surprising given the robust performances of the FAANG stocks i.e. Facebook, Apple, Amazon, Netflix, Google (AKA Alphabet).
But for one highly respected market analyst, this type of market action has been seen before. And according to him, you don’t want to miss the markets next move!
For the past several years, Stansberry Research analyst, Dr Steve Sjuggerud, has been advising his clients to stay invested in US stocks on the back of his “Bernanke Asset Bubble” and stock market “MELT UP” thesis. Based on his analysis, US stocks could be about to enter the final and most powerful rally phase of the bull market that first started in 2009, after the Global Financial Crisis.
Why we have not missed the “Melt up”?
Traditionally, the Dow Jones Industrial average is made up of American blue chip (old- school industrial stocks) like plane maker – Boeing, investment bank – Goldman Sachs, manufacturing powerhouse – 3M, and fast food chain – McDonald’s. Alternatively, the Nasdaq tracks the performance of big tech companies like Apple, Alphabet, Facebook and Microsoft.
Last year, stock prices of Facebook and Alphabet soared by 33% and 16% respectively. According to Dr Sjuggerud, this performance has largely been driven by the bull market in tech stocks, rather than a late stage “Melt Up”, and at United Global Capital, we’ve been taking advantage of this trend in a big way.
But according to Dr Sjuggerud, this market performance in tech stocks could be about to enter overdrive.
While Dr Sjuggerud expected the soaring performance from the big tech giants “What’s more amazing to me is that the old-school names in the Dow have outperformed the tech names in the Nasdaq.”
According to Dr Sjuggerud, the correlation between the two indexes indicates that the “True” Melt Up phase to end the bull market has yet to come.
Looking back at the previous technology bull market in 1999, he notes, the two indexes also tracked each other for 6 months prior to the last tech boom “Melt Up”. However, after that highly correlated period in 1999, the tech-heavy Nasdaq suddenly shot up by over 100% in the 6 months that followed.
“This tells me that you haven’t missed the true Melt Up stage yet – where the most speculative names separate themselves from the old-school names and take off’”
As shown in the table below, the Dow Jones produced a total return out-performance of 2.9% over the past 12 months from October 2016 to September 2017. And according to Dr Sjuggerud, there is still time to get invested and take advantage.
At United Global Capital, we have also noticed the strong positive momentum in the Nasdaq and other sub-components of the Nasdaq.
If you want to know how you can take advantage of this potential “MELT UP” safely, and protect your profits when the market turns, contact United Global Capital today for a no cost, no obligation consultation on 03 8657 7640 or email [email protected] to learn more.
The information contained in this article is General in nature and has been prepared without taking into account your objectives, financial situation and needs. When assessing any investment, you should first consider that past performance is not a reliable indicator of future performance.