Which Stocks Are A Good Bet In 2011?
The Dynamic Wealth Report
January 6, 2011
by Jay Chernoff, Editor
There’s a
healthy debate going on right now… just turn on the financial news and
you’ll be sure to hear about it. Is 2011 going to be a bullish year for
stocks? We’re less than a week into the new year and there are already
plenty of opinions to go around.
Let me get right to it… I think stocks are in good shape for 2011.
I understand why some people are skeptical. Hey, we’ve just had a really
nice 4-month run in stocks. It’s only natural to assume the good times
won’t continue indefinitely.
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Here’s the thing…
I think it’s entirely too early for the skeptics to worry about a bear
market turn. There are simply too many good things going on to believe
we are nearing the end of the nice run in equities. And I fully expect
the upward trend to continue.
So what makes me so confident? Quite a bit actually… there are several
positive influences on equity prices heading into 2011.
First off – and I can’t understate the importance of this – the Federal
Reserve will continue to do whatever necessary to keep money flowing
into the economy. The Fed has made it clear they’ll stick with their
quantitative easing measures until the jobless rate improves. And that
could take awhile…
In the meantime, the markets love all the extra liquidity.
Another important factor in 2011… we know taxes aren’t going up. Taxes
were a major point of uncertainty… now made completely clear.
Speaking of politics, the year after a midterm election is historically
a good year for the stock market. You see, there’s always less
uncertainty over the political agenda after an election. And that’s a
bullish signal for the market.
And that’s not all…
Many corporations are in great shape.
Corporate profits have been skyrocketing. And I expect it to continue. Companies are focusing on cutting costs and improving productivity.
Labor costs will remain low until management teams can prove new hires
will increase the bottom line. That means increasing profits, not just
revenues.
What’s more, valuations are still reasonable. Most companies aren’t
considered overvalued right now. Many of the biggest companies are flush
with cash. And smaller firms could be the target of mergers and
acquisitions… that’s always a positive for share prices.
Here’s the best part…
Hiring is just starting to ramp up.
We’re seeing significant economic improvement in most areas already. And
2011 is likely the year when unemployment starts to return to more
reasonable levels. That means a lot more people will have money to spend
– and invest.
And since unemployment levels won’t drop overnight, interest rates are
going to remain low for quite awhile. Inflation simply isn’t on the
table right now.
In other words, in 2011 we might be able to enjoy the best part of
having low interest rates and an improving labor market. That’s a nearly
ideal scenario for the stock market.
So what’s it all mean for your investment strategy in 2011?
The last couple years, we’ve seen a trend towards the macro trade. ETFs
have made it easy to trade indices, sectors, and nearly any grouping of
assets we’re interested in.
Well, I think that’s going to start to change in the coming months.
Investors have been ignoring the individual company lately… and they’ve
been missing out on some great opportunities. But not for much longer…
Outsized returns in undervalued stocks will draw investors back into
individual names. Nothing gets an investor’s attention like double and
triple digit returns!
Here’s the bottom line – expect the bullish trend in stocks to continue
in 2011. What’s more, investors will start looking to individual
companies for higher returns. That means equity research is going to be
in the limelight once again. But doing your homework will all be
worthwhile when profits start rolling in! Get ready for an exciting
2011…
***Editor's Note*** Just wanted to let you
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One of the most active ETFs this week is Energy Select Sector SPDR ETF
(XLE). It’s up over 17% over the last 52 weeks. XLE tracks the
performance of a basket of companies in the energy sector. Energy stocks
are moving higher as the economy improves and the price of oil climbs.
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