Introduction
Luke Lango opines in his most recent article that, “thanks in large part to the AI investment megatrend and long-awaited rate cuts from the Federal Reserve, the U.S. stock market has been booming for the past two years caused, in large part, by the craze around artificial intelligence that has sparked an exceptional surge in investment with companies racing to create the infrastructure necessary to support next-gen AI….The result has been stocks soaring for two years, Up 24% in 2023 and 23% in 2024 and, in our view, this boom is about to get even ‘boomier.’
What follows is a continuation of an edited ( ) and abridged (…) version of Lango’s article to provide you with a faster and easier read:
“Why We See Stock Market Bullishness In Our Future
Thanks to Donald Trump’s victory and Republicans’ newfound control of Congress, a wave of deregulation, pro-business policies, and tax cuts are likely to sweep the nation over the next few years. Those dynamics will only add to the current economic boom [and, in fact], this is already happening. In his first month in office, President Trump has already signed executive orders to deregulate the energy industry, announced big new growth initiatives like Stargate (which will pour $500 billion into AI infrastructure over the next four years), and talked about enacting more tax cuts.
[The above] sounds great as long as you remember that all market booms inevitably end with busts it’s not a question of “if,” it’s simply a question of “when.”…
- After the two boom years in 1935 and ‘36, stocks immediately crashed about 40% in 1937…
- Following the market boom in 1954 and ‘55, stocks went flat in ‘56, then dropped 15% in 1957…
- Similarly, post-1995/96, stocks kept partying throughout 1997, ‘98, and ‘99 – only to crash about 50% throughout 2000, ‘01, and ‘02…
All booms of this nature turn into busts. It is simply a matter of timing so does that mean you should get out of stocks and run for the hills now to avoid the inevitable meltdown? Absolutely not.
The Final Word on Gaining a Stock Market Edge
Usually, the last 30 minutes of a movie is the best part of the film. The last episode of a TV show is almost always the best one, just as the last few minutes of a ballgame are normally the most exciting. Similarly, the last few years of a stock market boom can often be the most profitable. Take the Dot Com Boom of the late 1900s:
- The Nasdaq Composite rallied 40% in 1995, about 20% in ‘96, another 20% in ‘97, and then 40% again in ‘98, but tech stocks saved their best for last, with the Nasdaq soaring almost 90% for its best year ever in 1999. Then the bust started in 2000.
The point…[I am making here is that the best year for tech stocks in the ‘90s was the final year of the Dot Com Boom – and hat’s why you don’t want to leave a stock market party early but, [then again,] you also don’t want to leave too late.
What’s An Investor To Do?
Embrace the boom. Beware the bust. Ride stocks higher, then head for the exits when the warning signs appear. Of course, that’s much easier said than done, I know, and that’s why we created Auspex: a stock screener that scans about ~14,000 stocks every time we run the model. It’s designed to help us uncover the stocks most likely to rise over the next 30 days, highlighting only those few with favorable fundamental, technical, and optical characteristics. Click here to gain access to those picks before we release them on Monday.“
