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Editor's note: The stock market and our offices will be closed on Monday in observance of Memorial Day. We'll pick back up with our normal publishing schedule on Tuesday. Enjoy the holiday.
This Economic Indicator Says the 'Melt Up' Will ContinueBy
Friday, May 26, 2017
Bull markets don't die of old age.
Yes, we are in the late innings of the second-longest bull market in history. And yes, it will eventually come to an end. But that doesn't mean we will wake up tomorrow to a massive crash on our hands.
I believe the opposite is true... that we're in the middle of a massive "Melt Up" in U.S. stocks. It's the final push higher in this bull market. And it can lead to quick but enormous gains.
Today, I'll share another reason why I believe the Melt Up is here. You see, a leading economic indicator just hit a new all-time high. And history tells us this is another strong reason to own U.S. stocks now.
Here are the details...
Stocks and the economy don't work like most folks believe. Investors make the largest gains by buying stocks when the economy is doing terribly... like in 2009.
However, bull markets tend not to end until the economy begins to lag. And this indicator says that hasn't started yet.
The Conference Board Leading Economic Index for the U.S. looks at 10 different economic indicators... everything from employment, to housing, to interest rates.
Historically, recessions tend to happen after these leading indicators start a downtrend. This index began to fall before every major recession since 1970.
It has given only one false signal – when it started to fall in 1966, and no recession materialized. That's an incredible track record with over 50 years of data.
We looked at what this indicator is saying today... And the answer might surprise you. It's giving the "all clear" sign.
The index recently broke out to its highest level in history. Take a look...
 The index just reached its highest level since the 2008 bust. You might think that seems like a warning sign. You might think it can't be a good thing for stocks...
That's the easy thing to believe. But history says we have no need to worry.
Since 1959, U.S. stocks have returned 8.4% a year when this indicator is in an uptrend, like it is today. This is when we want to own stocks.
The opposite is also true... When this indicator falls into a downtrend, U.S. stocks return just 2.4% a year.
In short, this index of leading indicators is in an uptrend today. And that means we want to own U.S. stocks.
I believe we're in the final stages of this bull market. I know that makes many investors nervous... But missing this final Melt-Up stage could cost you dearly.
This is where the biggest gains are made. I urge you not to miss out.
The U.S. economy is still in good shape. And until that changes, my recommendation is to continue owning U.S. stocks.
Good investing,
Steve
Further Reading:
"For the first time in years, greed is driving investors," Steve says. Investor optimism just hit its highest level in years. We've seen this kind of bullish extreme before... Learn what to expect right here: The 'Melt Up' Is Here – Investor Optimism Hits a 17-Year High.
"I got worried about valuations... And I missed out on the fantastic performance of stocks during the final innings of the stock market boom." Steve remembers the mistake he made in the late 1990s... and explains why now is not the time to run for the exits. Read more here: Dow 20,000 – Don't Chicken Out!
Market NotesGET READY FOR THE MOBILE-PAYMENTS REVOLUTION Today's chart highlights a company that lets you pay for anything, anywhere...
A big change is coming in how we pay for things. If you've been following Steve's writing recently, you know he believes that no one will carry a wallet in five years. The shift to a cashless society is coming quicker than you think... It's already happening in China, and the technology is catching on in the U.S.
One of our favorite ways to profit from any big trend is through "picks and shovels." These companies provide the tools, products, and services that fuel long-term trends. Today, we can see this concept at work with Square (SQ)... The company makes point-of-sale systems for businesses. Vendors use its software to read chip cards, process mobile payments, send invoices, and even track their inventories.
Square has thrived with the rising popularity of mobile payments... The company recently reported its first-quarter revenue increased 22% from last year's first quarter results. And as you can see below, shares have soared over the past year, hitting new all-time highs. As the economy continues to "go cashless," Square will likely reap the benefits...
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