The Story of Our World Right Now

Don't write off 2022 just yet... The story of our world right now... Bad company... 'Times have changed'... Two pieces of advice... What to watch for next in the S&P 500... Kevin Kisner's on Team USA... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Don't write off 2022 just yet... The story of our world right now... Bad company... 'Times have changed'... Two pieces of advice... What to watch for next in the S&P 500... Kevin Kisner's on Team USA... --------------------------------------------------------------- There is no getting around it... This is one of the worst years for the stock market that anyone has ever seen. If you've survived thus far, or even made money betting on lower prices, kudos are in order. Hopefully, you've heeded [the bear market warnings]( we've been giving [since January](... Today, we'll begin with another one but also introduce a glimmer of positivity... Now, don't let your guard down and think it can't get worse for the stock market before December. But – on the brighter side – don't totally write off 2022 just yet, either. There could still be opportunities ahead to make gains before the year is out. This may sound like a wishy-washy statement, but I (Corey McLaughlin) will hopefully explain it to your satisfaction today... What history tells us... Nobody has a crystal ball, of course. But we do have history. And we like to look at it... because it gives us a peek at how markets behaved in similar situations in the past. This knowledge can give us an edge since most people ignore history, or look at the wrong kind. It's especially true when the relevant history took place before most of today's investors were active in the markets. Here's what we're getting at... We recently came across some of the most relevant history we've seen about the stock market of 2022. It comes via Compound Capital Advisors founder Charlie Bilello, who showed over the weekend that the benchmark for U.S. stocks – the S&P 500 Index and its earlier, smaller iterations – just experienced the fourth-worst start to a year in its roughly 90-year history... Only 1974 (inflation and oil shock), 2002 (dot-com bust), and 1962 (referred to as the "Flash Crash of '62" or "Kennedy slide") have seen worse returns for the S&P through the first 169 trading days of the year – the appropriate count as of Sunday. We see a lot of history notes about the economy and markets. We don't share them all, and we ignore some completely, but we bring this one up because it's useful in two important ways... The first takeaway... One, this history covers 14 prior instances and various circumstances (though with a common thread that I'll discuss momentarily). And it clearly suggests preparing for two likely outcomes for the 15th time: the final four months of 2022. Expect... 1. Modest gains, or 2. More significant losses To be fair, you could probably always say these options are on the table at any moment in time. That's why it's always wise to seek "boring" gains or prepare for significant losses when allocating your long-term investment portfolio. But look a little deeper at the frequency and size of finishes to historically bad starts... In the 14 previous worst starts to the year for the U.S. benchmark, stocks finished with an average gain of 5% over nine positive periods... or an average loss of 15% over six negative year-end periods. The average is heavily weighted by the two worst losing periods, each down by more than 30%. In other words, after a sustained sell-off of the type the markets have experienced in 2022, stocks have finished with modest gains most of the time and significant losses less of the time... but those losses (most notably in 2008 and 1937) can be costlier than the potential upside. You know about 2008. But the 1937 comparison might be more relevant than many people think, too... That crash happened in and around one of the worst recessions of the 20th century and occurred toward the end of the Great Depression, as the Federal Reserve tightened money supply and the government stopped spending to boost the economy. The second finding... Second, and maybe even more telling, let's simply note the years in this comparison... We're talking about the 1960s and '70s – four decades ago, the last time inflation was this high – with a few Great Depression era years, war years, and the dot-com bust and financial crisis of 2008 thrown in the mix. That's the not-so-pleasant company we're keeping right now... In other words, we're in volatile times. We don't need to tell you this if you are aware of the news or the ongoing gyrations of stocks (again today). Still, the numbers being made in the market fit the story of our world right now, which isn't always the case. We're reminded here of some great research by our Dr. David "Doc" Eifrig... Close readers might remember Doc declaring the decades of the "Great Moderation" dead... He said in [the June 23, 2021 Digest](... Today's financial industry – and in turn, its general portfolio allocation recommendations – is modeled on what has happened over the past 30 years... because in general, we've been in the same economic environment. For the most part, the past three decades have seen steady growth, low inflation, and low interest rates... The Great Moderation has powered stocks and bonds higher, making owning both assets an easy decision in the traditional "60/40 stock-bond" portfolio. The idea being that stocks could give investors capital appreciation while bonds can offer income and hedge against unexpected events... Many people simply expect that the 60/40 portfolio will keep making a "safe" 7% or 8% annual return in the years ahead... But that's based entirely on the faulty premise that the returns of the past 30 years will continue in the future. And the thing is, we're already seeing the conventional wisdom might be outdated... I find myself reflecting on Doc's essay on this point often, because it lays out the state of play for stocks and bonds for the decade ahead in a broad view. All of the points are worth [rereading today](... You see... Doc's thesis has played out exactly as he envisioned over the past year. Stocks and bonds have fallen in tandem, which a lot of people have never seen before... Inflation has eaten into historically high stock valuations. And bond yields, though rising – (which means bond prices falling – have not increased enough to keep pace with record-high inflation. One big result... big losses for the conventional "60/40" stock-bond portfolio, which many investors have relied upon during the decades of low-interest-rate, buy-the-dip environments. That's just what we've been warning would happen since the start of the year. Here's a related note from Bilello... Since 1976, we've never seen a worse start to a year for the 60/40 portfolio... According to Bilello's research, a mix of the S&P 500 and the Bloomberg U.S. Aggregate Bond Index is down 14%, four percentage points worse than the second-worst start on record (9.5% in 2002). Again, that's bad company and a big signal. Nonetheless, the entire retirement planning and investment industry is based on the past 30 years of stocks and bonds doing the same thing they've always done. That's why Doc created his alternative Intelligent Retirement model, whose allocation he updated just last week... While this allocation was down over the past three months, it's still doing much better than conventional wisdom since its launch in June 2021. As Doc explained... The Intelligent Retirement model is still crushing the market and the traditional 60/40 portfolio since its inception. It's down just 1.5% compared with an 8.8% loss for the 60/40 portfolio and a 6.3% loss for the S&P 500 Index. Income Intelligence subscribers and Stansberry Alliance members can find his complete quarterly portfolio update [here](. You might be surprised what you find. Relevant history also dovetails with our colleague Dan Ferris' big ideas... Dan has been urging folks lately to flip the previous decades on their head, meaning to expect the opposite outcomes the markets have been used to... If you haven't yet, I suggest you read [Dan's June 24 Digest essay]( for a primer. He has been following up on the thread in his recent Friday essays and in his Extreme Value newsletter, highlighting the big differences he sees between "then" and "now." He compiled them in this nice chart [in Extreme Value's July issue]( and said... You might print this out and tack it up near where you do most of your investment reading and research. It's hard to keep all this stuff in mind, but two years from now, you'll be glad you did. I'm not saying these trends will hold 100% of the time for the next several years. I'm saying times have changed, and we need to adapt in order to overcome what's in store. We won't run down the details of every point, but the idea is... don't be afraid to think differently about the markets. And to return to where we started today, if you're looking at history for some guidance, make sure you are looking at the most relevant kind. What to do now?... I'll leave you with two pieces of general advice to keep in mind for the rest of the year... which history tells us could see modest gains or more painful losses. 1) Be selective, but be careful about being a perfectionist... If you are a believer in the relevant history, we can't ignore that two-thirds of the worst starts for U.S. stocks in the first eight months have turned around and seen positive gains to finish the year... A lot of the worst for stocks might be over. (Though those two 30%-plus losses in relevant years are hard to ignore, too.) We can't know for sure what the future holds... But if you are interested in dipping a toe back into stocks after sitting out most of this year, it's a good time to be more of a selective investor and less of a perfectionist trying to time the perfect "bottom." In other words, we're not saying you shouldn't buy shares of a quality company if it has fallen to a palatable valuation, has a strong balance sheet, and pays a good dividend. After all, you can only compound your wealth in stocks if you own them first. To this point, as Stansberry Research senior analyst Alan Gula wrote in our Portfolio Solutions products, published earlier this week... Not all stocks bottom precisely when the broader market hits a low. And no matter what's going on in the broader market, there are always some safe investment opportunities waiting to be uncovered... Alan wrote about this idea in the context of warning investors to avoid the "plague of perfection," which could keep folks on the sidelines for too long or entice them to jump back in too soon. (His solution was to come up with a scoring system for major buying opportunities. He ranked each of the past six instances since the dot-com bust and compared them with June's low.) His point is to prepare for another leg lower in stocks, but also be mindful of the alternative possibility – that prices could go higher. Rather than trying to perfectly time the market, he said it's wise to simply look for cheap stocks with attractive risk-reward setups... With rampant inflation, the rising risk of a U.S. recession, the worsening European energy crisis, and the ongoing war between Russia and Ukraine, there's a lot that could go wrong in the back half of 2022. But there's also a lot that could go right. In investing, we can't wait for the perfect-10 stock market setup. We'd be waiting forever. We can't even wait for a 9.6, an 8.4, or a 6.5 setup. Instead, we must prepare our portfolios for whatever lies ahead, always look out for stocks to buy... and be ready to take action when we find them. For instance, in the past two days, our colleague Brett Eversole has written to you about the long-term setup for certain energy companies to possibly return hundreds-of-percent gains. You can hear more details from Brett about this opportunity – and how to get access to his favorite stocks to play the trend – [right here](. 2) Beware – or take advantage of – bear market rallies... At the same time that you're dipping in your toe with select stocks, know what you're getting into at the moment. After a strong summer bounce, the major U.S. indexes have fallen back near June levels... and fast. Overall, the trend remains down for the major U.S. stock indexes until further notice. This is admittedly anecdotal, but when enough folks are still debating whether this is a bear market rally or the bottom... it's unlikely to be the bottom. At a bottom, nobody cares enough to think it's a bottom because it seems like stocks will never go up. We've explained and rehashed several times that we're in a bear market and that, perhaps counterintuitively, it's wise to expect strong rallies within the broader downtrend in stocks. This is a feature, not a bug of bear markets, and it pays to keep it in mind over the long run. One day years from now, maybe some like-minded person will write something about today's market similar to what we did earlier this year about false yet strong rallies during the dot-com bust. From the June 25 Digest... You don't sit back, sip an iced tea on a summer day, and fondly reflect on that time the Nasdaq rallied 43% in April and May 2001 (including a 9% jump in one day)... You remember the 78% loss in the benchmark S&P 500 from the dot-com bubble peak in March 2000 to its ultimate bottom in October 2002. That roughly 20% rally in the S&P 500 from June to August (and stronger for the Nasdaq Composite Index) certainly gave enough folks the feeling that the worst of this bear market was over. But just a few weeks after hitting new highs, the major U.S. indexes have fallen sharply and are waffling again... Things are volatile, with a lot of people hanging on every word of the Federal Reserve and parsing how deep a recession could be... All this said, these strong bear market rallies – which we doubt are over – can present moneymaking opportunities themselves. If you're interested in short-term trading, don't mind betting against higher stock prices, and have a good guide to follow, you can profit as any uptrends reverse. Our short-term traders like Greg Diamond and Chris Igou, as usual, have been all over the daily market movements and have been recommending trades all year long. Today, they are watching key technical indicators to gauge the likelihood of a reversal in the downtrend. Without giving too much away, Greg's keeping close watch on the 4,200 level on the S&P 500. As he explained in depth to Ten Stock Trader subscribers in [his Weekly Market Outlook on Tuesday]( and reiterated in [an update yesterday](... That's the line in the sand. This is a key level because it's where the U.S. benchmark for stocks topped out in the middle of August. If the index can move above that level, it's a seriously bullish signal. But we're not there yet. So until then, Greg is preparing to recommend more bearish bets. Similarly, Chris isn't calling a market "bottom" until he sees one of his preferred indicators show that the entrenched downtrend is turning around. It has to do with a simple technical indicator we mention frequently: the 200-day moving average of the S&P 500. Again, without giving everything away, [Chris wrote to DailyWealth Trader subscribers on Tuesday]( that until he sees the index's 200-day moving average rise for 21 consecutive trading days, it won't be time to dive back into stocks whole hog. One more note before we close things out... We want to give some congratulations to Stansberry Research-sponsored golfer Kevin Kisner... Yesterday, our favorite Georgia Bulldog was named one of six captain's picks to the 12-player Presidents Cup team that will represent the U.S. when it faces a team of international stars from September 22 to 25 at Quail Hollow Club in North Carolina... We've been fortunate to be associated with Kisner since 2018... Golf fans can typically see our logo on his golf shirt when he plays in tournaments (although that will understandably be replaced by the Presidents Cup logo and the U.S. flag and colors this time around). Kevin is a four-time winner on the PGA Tour, but he might be best known in golf circles for his scrappy attitude and success in match play – meaning head-to-head or team competition, as opposed to the usual individual competition of PGA Tour events. He was part of the winning 2017 U.S. Presidents Cup team and finished second earlier this year in the Dell World Golf Championship, a March Madness-type golf tournament... after [finishing fourth at The Players Championship]( – pro golf's "fifth major" – earlier in the year. In other words, "Kiz" is a great fit for a team, as U.S. captain Davis Love III said yesterday after naming the full U.S. roster, which also includes stars like Jordan Spieth, Justin Thomas, and world No. 1 Scottie Scheffler. Love said... Kevin adds some veteran leadership, a guy in the team room that everybody loves having around, and he's really, really easy to pair. We agree... I know at least a few golf fans out there who have seen the Stansberry Research logo during Kevin's appearances on the course and on television, and we're happy to be associated with him as he prepares to represent the U.S. later this month. 'Embrace Concentration' This week, Dan's excited to welcome back a familiar voice to the Stansberry Investor Hour podcast: Austin Root, our former director of research and now the chief investment officer of Stansberry Asset Management... As Austin shares with Dan, his job these days is to develop and manage investment strategies for clients. And, to him, that means drilling home the "mission critical" basics that every investor should incorporate into their portfolio, like "embracing concentration"... Please note: Stansberry & Associates Investment Research ("Stansberry Research") and Stansberry Asset Management ("SAM") are separately operated and are overseen by different boards. SAM has no special or early access to Stansberry Research's investment research. SAM receives information from Stansberry Research just like any other Stansberry Research subscriber does – after any material is published. [Click here]( to listen to this episode right now. And to catch all of the videos and podcasts from the Stansberry Research team, be sure to [visit our Stansberry Investor platform]( anytime. --------------------------------------------------------------- Recommended Links: [Economic Reckoning Coming to America]( For most people, what's coming will prove challenging. But while the majority of Americans will be caught off guard, one senior analyst says following a few clear steps today could position you to make triple-digit gains over the next six months. See his brand-new prediction and what it could mean for your money [right here](. --------------------------------------------------------------- [When Life Gives You a 'Fat Pitch,' Take It!]( When the setup is so good... so lopsided in your favor... you have to swing. It's the ONE decision that will have the biggest impact on your wealth over the coming decades. And Dr. David "Doc" Eifrig has found exactly that – the "fat pitch" setup of a lifetime. [Click here for full details](. --------------------------------------------------------------- New 52-week highs (as of 9/7/22): None. In today's mailbag, continued conversation about housing affordability – stemming from last week's talk about student-loan forgiveness... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "If I may jump into the fray and address the remarks which subscriber G.M. started and to which subscriber F.I. responded [yesterday]... "F.I. attempted to compare buying a house in 1950 which cost two times an average yearly wage vs. today's average home price costing six times the average wage, a tripling in cost. But there is more to account for that price increase than just inflation and money. Think back, dear friends, to the house your parents or grandparents lived in. My grandparents' home had one bathroom. There is no way my king size bed could have fit in their bedroom and still put a chest of drawers in it. The kitchen was a tiny thing, like one in a travel trailer almost. And the dining table was in that kitchen! There was no dining room in their house. "My brother and I grew up in a much larger house and had our own bedrooms. "And now that my kids are buying houses? Do you think they want to live in the 1950s stripped down model? Heck, no. The kind of houses the millennials are looking to buy are nicer than the nicest house in my neighborhood growing up. And this is my kids' first house! Your first house is supposed to be a cracker box, isn't it? "So my point is: the size of the houses has grown along with the price. My grandparents' house was probably 800 square feet. My parents' house was about 2,200. And mine? Well, I have two floors, plus a basement. It's a special house that expands when you clean it, then shrinks when you have company. But the houses we are buying in 2022, at least here in the ATL, are at least three times the size of the 1950s house. Do we expect to buy that for two times annual wages? Of course not. Could we buy the 800 square foot house for two times wages? Yeah, maybe. But the travel trailer would be more fun." – Paid-up subscriber Jacqueline G. All the best, Corey McLaughlin Baltimore, Maryland September 8, 2022 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 924.8% Retirement Millionaire Doc ADP Automatic Data 10/09/08 849.8% Extreme Value Ferris MSFT Microsoft 02/10/12 794.5% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 575.3% Stansberry Innovations Report Wade HSY Hershey 12/07/07 543.7% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 411.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 398.3% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 372.9% Stansberry's Investment Advisory Porter FSMEX Fidelity Sel Med 09/03/08 288.8% Retirement Millionaire Doc NTLA Intellia Therapeutics 12/19/19 288.3% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 3 Retirement Millionaire Doc 1 Extreme Value Ferris 4 Stansberry's Investment Advisory Porter 2 Stansberry Innovations Report Engel/Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,320.9% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,162.0% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,053.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 847.5% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 413.1% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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