What’s Working (And What’s Not) In Today’s Market

It’s hard to believe, but the first quarter of 2017 is nearly in the books. And so far the market has continued its torrid pace. In fact, ever since the November election, the investing landscape has gone through a dramatic change of expectations with respect to economic growth, market valuations and inflation.

And those expectations seem to be coming to fruition…

#-ad_banner-#On March 10, the U.S. Bureau of Labor Statistics released employment data. Total nonfarm payroll employment increased by 235,000 in February, and the unemployment rate remained about the same at 4.7%. The consumer price index, which measures inflation, came in at 2.74% last month, compared with 1.02% in February 2016. And residential housing starts jumped 6.2% in February over the same time last year.

All these economic factors gave the Federal Reserve the green light to tighten the money supply by bumping interest rates up 25 basis points on March 15.

Right now everything seems to be firing on all cylinders. Consumer confidence is at the highest level it’s been in 17 years. Unemployment is low, inflation is on target, housing is continuing to recover and the stock market is reaching new highs.

As I’ve said many times before, we’re likely more toward the end of the bull market than the beginning. But that’s no reason to remain on the sidelines. In fact, this means it’s even more important to make sure you’re precise with your stock picks. That means you should only buy solid companies whose share prices are on the rise, and put in objective controls that dictate exactly when to sell. (That’s where my Maximum Profit system comes in. More on that in a moment…)

But first, let’s take a second to look beneath the hood and see what sectors are performing the best so far this year… and which ones are lagging.

Nearly everything in the market has had a strong start to 2017, minus oil and gas, which is the biggest laggard with a loss of 9.3% so far this year. But as you can see, the technology and health care sectors are currently leading the pack. This shouldn’t come as too big of a surprise to Maximum Profit readers, since some of our biggest profits have come from those sectors.

For example, in February we booked a 34% gain in roughly eight months from Wellcare Health Plans (NYSE: WCG). We’re currently sitting on gains of roughly 38% from our veterinary supplier pick, which also happens to be one of the top-performing stocks in the S&P 500 this year.

We’re also profiting from some real winners in the tech sector. One, a giant semiconductor firm, is a relatively recent addition to our portfolio. Despite this, we’re already up 30% (and counting).  All told, we’re exposed to tech through five holdings (up 30%, 12%, 50%, 25% and 44%, respectively.

I have to admit, health care being the second-leading sector in the S&P was a bit of a surprise to me. I know that we’ve benefited from this trend, but if you take a step back and look at the larger picture, it’s actually pretty surprising. Who could honestly have predicted that we’d have an industry with major regulatory reform hanging over its head as one of the top performing sectors? I’m of course talking about the Affordable Care Act and the uncertainty surrounding it.  

But that’s the beauty of the Maximum Profit system. It doesn’t care what’s happening on Capitol Hill or Wall Street… It only wants to find us stocks with big upside potential and avoid (or get us out of) stocks that are losers (or are about to be).

That’s because the system relies on two of the most widely-studied financial metrics out there that have consistently been proven to work: Momentum and cash flow.

Now, I can’t get into all the details of how the system works in today’s essay (for more on the specifics, see my previous article here). But as I mentioned earlier, these two indicators work in concert to tell my readers exactly when to buy (i.e. when a solid company’s shares are on the rise) and when to sell (i.e. when business conditions have changed or momentum in the share price is beginning to fade). And it’s all compiled into a simple, objective number that even the most novice investor can understand — what we call the Maximum Profit score.

By having objective measures like this, it ensures that my readers and I don’t let our emotions get the better of us. We don’t have to question ourselves. We simply follow the system and, more often than not, come out with a nice profit at the end of the day.

This week I told my Maximum Profit readers that we would be loading up on two more stocks from the technology sector, a company from the basic materials sector (the third-best industry) and one stock from consumer services.

Judging from the number of exciting picks the system is producing, it seems that — like I said earlier — there are indeed still gains to be had in this bull market. And when there’s not, the system will let us know.

Meanwhile, our most recent picks are sporting some of the highest Maximum Profit scores I’ve seen in a while. If you’re tired of playing the guessing game and want to put a proven system to work for you, then I invite you to check out this presentation to learn more.