We Could See a Double-Digit Rally in Stocks Over the Next Year

Normally, I’d recommend avoiding the kind of economic data I’m sharing today.

That’s because on a daily basis, it has no real value for investors. The day-to-day changes usually don’t reveal any hidden secrets for future stock price performance.

Today is different, though…

You see, a handful of leading economic indicators are back in an uptrend. The economy is getting better.

And that makes this one of the rare times when economic indicators are worth understanding.

History shows that this new signal means you want to own stocks right now. We could see a double-digit rally in U.S. stocks over the next year.

Let me explain…

When it comes to economic indicators, it’s hard to know what’s important and what’s not. For investors, what’s important isn’t finding a single piece of data you can use to your benefit.

Instead, you want to focus on the big picture. And when the trend in most indicators shifts, you need to take notice.

That’s exactly what’s happening today.

The Conference Board Leading Economic Index (“LEI”) for the U.S. tracks 10 economic indicators. When all of these indicators are showing signs of growth, this index moves higher.

The LEI covers things like unemployment, building permits for houses, and orders for manufacturing goods.

When it’s in an uptrend – above its 10-month moving average – it’s a sign that the economy is strengthening. And it’s a sign that you want to own U.S. stocks.

For the first time since 2018, these leading indicators are trending higher. Check it out…

As you can see, the LEI (the black line) is moving higher again. And it just crossed above its 10-month moving average.

The economy is recovering. This leading indicator index proves it. And that means investors need to pay attention…

Since 1990, owning the S&P 500 when this index is in an uptrend has led to decent outperformance. Take a look at the table below…

Over the past 30 years, the typical annual return for the S&P 500 is 7.8%. But buying after an extreme like today’s has yielded even better results…

Similar cases have led to 5% gains in six months and a solid 10% gain over the next year. The results are clear… We want to own stocks while the economic rebound continues.

This could lead to even higher highs in the S&P 500 in the coming months. And it’s why, despite the worries you might have, you need to own stocks today.

Good investing,

— Chris Igou

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Source: Daily Wealth