Issue 3 » IBD’s Amy Smith is Bullish on Short- and Long-Term Trends
Amy Smith of Investor’s Business Daily is the former host of IBD TV’s daily “Market Wrap” video and co-host of the “How to Make Money in Stocks” radio program. Smith also authored the companion book “How to Make Money in Stocks Success Stories,” published by McGraw-Hill in 2013. Smith is an in-demand speaker at national IBD events, sharing her insight into current and future market trends. We were honored to have her as a featured speaker at 3W’s first Santa Clarita Family Wealth Summit in May. We profiled Smith in the premiere issue of Wealth | Wisdom | Wellness, and circled back in mid-December to get her reading on the market as we headed into the first quarter of 2018.
3W: What is IBD’s take on the current market?
Smith: Wall Street soared on rising tax cut reforms. Global stocks around the world embraced improving economic data and are counting the benefits that will be created by the historic tax reform bill. The Nasdaq popped above 7,000 before pulling back some. And the Dow is above the 24,000 benchmark level, at 24,754 as of Dec. 22.
Many people are asking when we will finally get a pullback and shake the branches a bit. No one can predict exactly when that will happen, but when it does, the pullback could be swift as buyers dry up and a vacuum occurs.
Investors should look at the longer term and not be overly concerned with a six-to-10 percent pullback, which is an intermediate correction. This is healthy for the overall market and gives stocks a breather.
After a mild correction, investors get a fresh opportunity to get into stocks that take off with the overall market. A more serious correction of 20 percent or more would be called a bear market.
But even if this happens, the longer term for investors is very positive for 401K and retirement accounts. Stick to the plan and don’t panic.
In other news: Holiday spending was on track to be the highest in at least 12 years, according to a CNBC survey in early December. For the first time in the survey’s 12-year history, spending was going to top $900 per household. And almost a third of Americans said they planned to spend more than $1,000. That means the economy is healthy and on a good track for now.
3W: What should investors expect from equities in 2018?
Smith: Analysts expect equities to rise, but by how much is anybody’s guess. Year 2 of a presidential cycle doesn’t usually provide any kind of an investment edge historically. But the tax cuts should help businesses with their profitability. Earnings growth anticipates a six percent price appreciation, but the tax cuts could boost that to 13 percent. Investor psychology could push returns much higher.
On the other hand, valuations are already very bullish and on the high end. And some of the gains we have seen recently in the market are already baked in. The Fed will likely continue to raise interest rates, but not at a fast pace.
3W: What’s up with Bitcoin? The stock is partying like it’s 1999.
Smith: If you traded the internet bubble back in 1999-2000, the action in the cryptocurrencies and blockchain-related stocks should bring back some memories, because this is what it felt like.
There are some people who think these currencies will go to the moon, such as Ronnie Moas from Standpoint Research, who said: “I don’t know how much gold there is in the ground, but I know how much Bitcoin there is, and in two years there will be 300 million people in the world trying to get their hands on a few million Bitcoin.”
And others like Jaime Dimon, CEO of JP Morgan Chase, say Bitcoin is a complete fraud.
Whether it is a bubble or not – time will tell. Traders are beating the bushes looking for anything with a connection to the group. Longfin (LFIN) had a 12-fold move in a matter of days. When a stock pops 1,000 percent in only two days, one has to wonder if the market cap is justified.
CEO and Chairman Venkat Meenavalli stated publicly that the current valuation is not justified. Longfin announced in December that they were buying Ziddu.com, a company focused on the blockchain technology behind Bitcoin with zero revenue.
Meenavalli went on to state: “We have nothing to do with this euphoric mania,” and later added that the valuations are “not a reality.”
Document Security Systems doubled in one day following news that it had trademarked the word “AuthentiChain.”
Traders who choose to gamble in the Bitcoin area should know the risks and keep a tight rein on their positions. Investors need to realize that when there is dangerous speculation, what goes up can come crashing down.
3W: Another mover in the market is Tesla.
Smith: Tesla received its largest order for all-electric big-rig semi-trucks from UPS. The package shipper just announced it had placed a reservation order for Tesla tractor-trailer trucks, the largest order received for the vehicle since Tesla introduced it in November.
UPS follows soda giant PepsiCo, which placed a reservation to early December, although the vehicles won’t be shipped till the end of 2019.
Anheuser-Busch also placed orders for the Tesla electric tractor-trailer earlier this month to “reduce the environmental impact and increase the efficiency of its operations.”
Food distribution company Sysco has placed a reservation for 50 of Tesla’s new electric trucks, which have an estimated range between 300 miles and 500 miles on a single charge depending on the model.
Down the line these orders could add to Tesla’s profitability, which could cause the stock to rise. The stock did not make much headway in 2017 and was in fact down for the year.