5 Reasons to Own America 2.0 Stocks in 2021
The first half of 2021 has truly been a rollercoaster for Strong Hands investors.
But just wait for Act 2!
just between us, personally i believe we're going to crush it second half of 2021. the pain of going thru this is going to be 1000% worth it. i know because it's happened in my own accounts after similar setups. our time cometh. stay strong. be #BOP
— 🇺🇸Paul Mampilly (@MampillyGuru) May 19, 2021
Innovation and technology are gaining momentum. And I believe it will take our America 2.0 stocks rocketing to the moon!
And that’s just one reason to get excited about the second half of 2021.
I’m seeing FIVE main reasons why growth stocks are coming back with a vengeance. Watch today’s video to find out why I believe the best is yet to come for your portfolio:
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American 2.0 Stocks
Our focus is exclusively on what we call Fourth Industrial Revolution stocks or America 2.0 stocks.
A lot of the world refers to them as growth stocks. From my perspective, we are living in a special time. It’s like living in the moment where the Industrial Revolution was taking off more than 100 years ago. It’s a similar moment in our judgment.
We call it the Fourth Industrial Revolution and America 2.0. We believe this is a unique moment to be invested. If you have been with us for a while you have seen that our stocks, America 2.0 stocks, Fourth Industrial Revolution stocks, growth stocks have been flat after having this rocket ride up through 2020 until February 15 of this year.
They stopped going up and then they started going down. They bottomed out about the middle of last month around May 15 or so. They have mostly stopped going down and now they are trading in a range. I want to tell you why our stocks are setting up to soar higher in the second half of this year.
I have five reasons why I believe that’s going to be the case.
#1 Low-Interest Rates
Everyone knows one of the critical factors in any kind of investing in interest rates. One of the reasons why growth stocks started going down was the fact that interest rates as measured by the 10-year bond were going up.
They got as high as a little over 2%. Then there was a panic that perhaps we would have significantly higher interest rates. This is why it does matter. If people can get safe, 100% guaranteed returns from the bond market in government bonds or municipal bonds, it translates itself to higher interest rates you can get from being in savings accounts or checking accounts.
I recall a time in the 1990s when checking accounts even paid interest out. Very few people then are going to take more risk by buying stocks or crypto or anything else. Low-interest rates are a critical element of what keeps pushing money into the stock market in general and definitively into growth stocks, which is what our stocks are.
Interest rates are now, after going up for a while, going back down again. The 10-year bond has an interest rate of 1.6%, which is a very substantial decline from 2%.
If you are following the news, and I know there are a lot of news junkies out there concerning the stock market and financial media, you will see the Federal Reserve which is the part of the government that sets interest rates in this country has said they have no plans to raise interest rates for at least a couple years.
#2 Very Tame Inflation
Even then, they might sit in this neutral period for a longer time. That’s the second reason why I believe our stocks can soar.
Even though there are price rises, there is no actual inflation. What’s the difference between a price rise and inflation?
In a price rise, in my judgment what we are experiencing now, is related to shortages and the fact we shut the productive capacity of the world down for a year. As you go to turn that back on, it takes a while to get a factory going. It takes a while to get a company going to producing what it used to at peak capacity.
So there are shortages of semiconductors, cars, and various things. People tell me even for ketchup, even though I have tested that and there seems to be plenty of tomato ketchup. Hopefully, there will be no run like we had on toilet paper pre-pandemic.
All jokes aside, there are shortages of certain things. For instance, in North Carolina where I live we had a gas shortage for a few days related to the fact the pipeline was being ransomed. Until they could get the pipeline going, there was an insufficient amount of gas.
If you shut something down for a while, there’s going to be a shortage for a while until you can get productive capacity up. That’s what’s been causing a large number of price increases. However, those price increases are going to be cured by the fact that everyone is trying to ramp up their production as fast as they can to take advantage of those price increases.
That’s the nature of capitalism, demand, and supply. These price increases are temporary and are going to pass because there is no issue with productive capacity. Before the pandemic, we had plenty of capacity to make pretty much everything. We, I believe, are going to go back to that state.
Several industries and sectors are already back to that state. You are going to see price increases moderate and then you will see prices come down.
Then there will be no fear of inflation. Inflation, just to be clear, is where there is a systemic shortage of capacity relative to the amount of cash in the system.
It causes persistent price rises. There’s no real ability to address it. There’s a big difference between a temporary price increase and inflation. Since inflation is of no concern, this is what allows the Federal Reserve to keep interest rates flat and low for long periods of turn.
#3 Household formation and housing
In turn, it facilitates another element that is supercritical in our judgment to an economy growing, seeing the development and even seeing innovation: Household formation. In other words, people buying houses.
If you have been watching my videos you know we talk about Millennials and Gen Z coming in and starting to buy houses. We are, at minimum, four million houses short of demand. I have seen an estimate that says 5.5 million houses. We have an extraordinarily strong housing market.
The reason why this is important is that household formation represents the basis of all consumer spending. When you buy a house, it’s an enormous amount of money. For most people, it’s the largest single expenditure in their life. Once you buy a house, you know this.
You have to go buy blinds, furniture, sheets, towels, and a million things to get that house to be in working condition. You also end up doing improvements to the house. It’s an extraordinary amount of spending that goes through the economy and keeps the economy growing.
We have that in a massive amount right now. We have a huge demand for housing with so many houses being built. We have this massive shortage that shows that houses are going to continue to be built. We are going to have household formation continue extraordinarily.
I believe it will be for three, five, seven, or potentially 10 years. We have two generations of people in this country who are looking for houses for the first time. We are short because we have not been building them for 10 years as a result of the financial bubble that happened in 2008. That’s the third factor.
#4 Nasdaq Composite Pattern
Now to more technical factors related to the overall stock market. If you go and look at the Nasdaq Composite — many people look at the Dow and I have a prediction for the Dow to hit 100,000, but in terms of my day-to-day index, I look at the Nasdaq Composite.
For those of you who are unaware, the Nasdaq Composite is every company that trades on the Nasdaq stock exchange. So, it’s a composite of all the companies on the Nasdaq. They calculate its average price.
They take all the stocks and weigh them by their market capitalization.
Then they come up with the daily performance. If you look at a chart of the Nasdaq Composite, you will see that it has been trading in a range.
I can tell you when you see that formation in the past it drives two things. One, it causes a lot of fear among a lot of people.
People think that range is indicative of a top that is going to end in either a bear market or a crash. Of course, on cue, there are a lot of people predicting crashes. In fact, in my previous video last week I had a question asking me about all these people like Ray Dalio and other folks who are predicting a crash.
In my personal experience, it’s the opposite. When you see this particular formation and you have predictions of a crash and you have all the factors — interest rates, inflation, household formation, innovation through IoT, AI, blockchain, transitions to sustainable energy, new industries like space, 3D printing — it a sign that what we are about to see is a breakout.
In other words, the Nasdaq Composite, which has the greatest representation of America 2.0, Fourth Industrial Revolution, growth companies, is going to break out. The average stock in there is going to see price rises that are quite significant. This is another sign for me that I believe the stocks in our services are setting up to rocket higher.
Usually, after a moment like this where we have had a steep correction in the range of nearly 20% — many of our stocks have been hammered even more at 30%, 40%, or 50%. You have gone through a moment where all the weak hands — people even call them paper hands — have been washed out.
The diamond hands, the strong hands as we call them across our services — we say to hold our stocks through the volatility. Don’t sell when a stock can go up more. Those are the folks holding the stocks. As demand comes back in, those people are forced to bid the stocks up.
So my fourth indicator is that the Nasdaq Composite, to me, is in a formation that’s telling me our stocks, growth, stocks, America 2.0 stocks are setting up to rocket higher. I am — as I like to say on Twitter — bullish, optimistic, positive.
#5 Innovation Stocks
The last one is related directly to what we focus on: innovation. We have gone through a Great Depression in innovation stocks. We have had this huge amount of early innovation happen, particularly in technology and biotechnology in the late 1990s and early 2000s.
Then we had this horrific crash and bear market that continued for a very long period of time in innovation stocks. The overall stock market continued to go up but it was mostly focused on non-innovation stocks like from 2000 to 2007 it was mostly focused on China stocks, commodity stocks, and value situations.
That’s what you needed to be in to benefit. Then there were all the stocks related to the financial bubble related to real estate. However, innovation stocks other than one or two stocks like Netflix or Google didn’t do very well. And in the crash, they got destroyed.
Then from 2008 to 2016, we saw the emergence of dividend-based investing. Income was a big deal. Dividend stocks took off and everyone was chasing them in a big way. As interest rates go down, bond prices go up and people chase that. Then we had shale oil.
Yes, we also had the emergence of a few growth stocks, but it was just the FAANG story. It was just Facebook, Amazon, Netflix and Google and to some extent Apple. Apple has taken off since then. Every stock market is about one thing and I believe the market since 2016 is about innovation and the Fourth Industrial Revolution.
Post a Great Depression in innovation stocks, I believe this can run for a very long time. Potentially, seven to 10 years. Maybe even a doubleheader of 14 years or more. We have gone through a complete washout in innovation stocks where these stocks got destroyed.
They may have gone public with a valuation of $2 billion or $3 billion and some of them have gotten down to $20 million or $30 million. It’s why we even have a service that focuses on these nano-cap stocks called 100X Club. We began this after the crash last year and it has done phenomenally well.
In my opinion, it’s a one-time opportunity to invest in the Fourth Industrial Revolution and innovation post a devastating market with super cheap valuations. We have many of these companies in Profits Unlimited as well, which I mentioned in our introductory newsletter.
Five Reason Rundown
There are five reasons why I believe our stocks, America 2.0 stocks, Fourth Industrial Revolution stocks, are setting up to soar.
The first one is low-interest rates. The second one is very tame inflation. I know about price increases, but I believe inflation in its real form is low. Household formation and housing are strong. The Nasdaq Composite is showing a pattern that suggests a breakout in rising prices, which is going to be great because most growth stocks trade on the Nasdaq. Last is that the bull market is for innovation stocks. A lot of those trade in the U.S. and that’s what we are primarily focused on.
Editor, Profits Unlimited