An Extremely Rare Market Opportunity is Here

An extremely rare market event just happened, and it’s providing an incredible opportunity for stock market investors to make money. This event is making stock market news headlines around the world, as it’s only happened one other time in history. The share market news today shows the NASDAQ and S&P 500 going through a fundamental shift, and this is changing stock market analysis everywhere. As the share market transitions to a new reality in 2024, this market news is providing stock market investors and traders with an extremely rare market opportunity to generate extreme profits. You need to know about this fundamental shift that’s happening, and how it’s going to affect your stocks in 2024. This could change 2024 stock market predictions for everyone as stock market analysts are forced to update their 2024 stock market forecasts.

Something extremely rare happened in the US stock market on Monday. This has only happened one other time in history, and it is providing an incredible opportunity for investors to make money in the stock market – if you know what’s happening, and where to put your money. I’m Stock Curry, I’m a former Merrill Lynch and Morgan Stanley investment banker. I’ve been investing for over 25 years, and these kind of opportunities come around extremely rarely.

In order to understand what’s happening and how to make money off of this event, you first have to understand what The Magnificent Seven are. The Magnificent Seven are a set of seven stocks that have been responsible for most of the rally in 2023. Back in 2013, CNBC analyst Jim Cramer popularized the FANG term, comprised of Facebook, Amazon, Netflix and Google as a shorthand for the best performing technology stocks in the market. Apple was then added in 2017, making it FAANG, with two A’s. However over the last year, a new moniker given by Bank of America analyst Michael Hartnett highlights the most valuable and popular owned companies on the American stock market, known as The Magnificent Seven. Those seven stocks include Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. Now Alphabet, which is Google, actually has two stocks which make it up. So technically it’s eight stocks and seven companies.

The reason that these seven companies, or eight stocks, are so important, is because of the way that the S&P 500 and the Nasdaq are weighted. See, even though the S&P 500 is made up of 500 different companies, and even though the Nasdaq is made up of 100 different companies, they don’t all have an equal weighting in the index. Some stocks have a far larger impact on the overall market index, while other stocks have a smaller impact on the overall market index. And when it comes to The Magnificent Seven, those eight stocks make up 28% of the S&P 500, leaving the remaining 72% to the remaining 493 stocks. That’s right, just seven stocks of the 500 make up more than a quarter of the S&P 500 index. And in the Nasdaq, it’s even worse. Those Magnificent Seven stocks make up almost 40% of the Nasdaq.

Now you’ll notice Broadcom here which now makes up 4% of the Nasdaq. That’s because the Nasdaq was so heavily weighted in the Magnificent Seven, at one point it hit 50% of the index. So the Nasdaq reweighted itself to make the Magnificent Seven just shy of 40% of the index, and then added Broadcom. But with those seven stocks making up such a large portion of the S&P 500 and the Nasdaq, if they rise, they can bring the entire stock market up with them. And that’s exactly what we’ve seen happen in 2023. Together Apple, Amazon, Alphabet, Nvidia, Meta, Microsoft, and Tesla are all up around 70% year to date. And with those stocks up 70%, it has actually caused the entire S&P 500 index, as well as the entire Nasdaq index, to rise.

But what’s shocking is that while the Magnificent Seven have risen and they’ve brought the entire stock market up with them, the remaining 493 stocks in the S&P 500, and the remaining 93 stocks in the Nasdaq 100, have actually traded flat. Shockingly, they are all still near the October 2022 lows, while it’s only the Magnificent Seven that have risen. With the most recent data, the S&P 7 is up 80% in 2023, while the S&P 493 is basically flat. The Magnificent Seven are up about 20 times as much as the S&P 500 overall. The fact is, 2023 has been the Magnificent Seven’s market. The other stocks are just kind of living in it. And this kind of extremely narrow rally in the stock market, where the vast majority of the stock market is traded flat, while just a few select stocks have rallied, is completely unsustainable. But all of that is starting to change.

Something remarkable and extremely rare happened in the US stock market last Monday, and it is changing the entire stock market, as well as providing an incredible opportunity to make money. Last Monday, all three major US indices finished at new 52 week highs, with the Dow Jones Industrial Average closing at its highest level in nearly two years. And yet, not a single member of the Magnificent Seven finished in the green. In fact, they were all deeply in the red, with every single member of this elite group finishing at least 1% lower. And this shocked everybody because it is extremely rare for the Nasdaq to finish higher without any help from its most heavily weighted stocks. In fact, Monday’s session marked only the second time in history since Facebook parent Meta Platforms made its debut into the Nasdaq in 2012, where the Nasdaq managed to finish in the green while all seven of the magnificent seven stocks closed in the red. Now, the fact that this has only happened one other time in history is significant, because the last time this happened it marked a significant shift in the overall market and it provided some incredible opportunities to make money.

It’s unsustainable to think that you could have a market where seven stocks lead pretty much everything. At some point, you have to hope that the other 493 members of the S&P 500 start to catch up, and that is exactly what is now happening. On Monday, while The Magnificent Seven were all in the red, most of the other stocks in the stock market rose. Now, to understand why this is happening so that we can figure out how to make money from this, first let’s take a look back at how all of this got started. How did the magnificent Seven stocks rally and leave the entire rest of the stock market behind?

Well, if you recall, back in October of 2022, when the stock market officially bottomed out, the Magnificent Seven stocks started to rally as A.I. hype entered the market. With ChatGPT being released and being a huge breakthrough in the way that AI basically worked, it caused all of the Magnificent Seven stocks to start to rally, and this brought up the market indices – not because the entire stock market was rallying, but rather just because of the heavy weighting of those Magnificent Seven, making up 30% of the S&P 500, and 40% of the Nasdaq. This, in turn, brought the entire stock market up with it – or at least the indices, not the rest of the stocks. Now, as AI hype continued and grew larger and larger and larger, those stocks continue to rally, with many up 100%, some even up 200% in just one year.

But over the last couple of weeks, things have started to change. It’s no longer Nvidia leading the AI boom when it comes to chips. Things are starting to broaden out, and in some ways, the AI sector overall is starting to get hit with some regulation that’s hurting the industry. Two weeks ago, AMD launched their Instinct MI300 AI chips in order to challenge Nvidia. Then, a few days ago, Intel unveiled their new AI chip to compete with Nvidia and AMD. On top of the increased competition, the escalating US-China tech war is also hurting American companies. The US, which leads the world in global semiconductor market share, recently issued sweeping restrictions on the sale of advanced chips and chipmaking equipment to China. President Biden is worried that China is going to use these new AI chips from Nvidia, AMD, and Intel in order to make more sophisticated military weapons. And to help prevent China from doing that, President Biden has banned the sale of these new AI chips to China.

Now, what you have to understand about the stock market, is that the stock market is supposed to be priced based upon the future expectations of earnings. And during the AI boom, throughout most of this year, the expectations of a significant increase in profits due to AI caused the stock prices of many of these Magnificent Seven stocks to rally. However, once President Biden came out and started banning the sale of AI chips to China, this now eliminated a huge market share for these American companies. And with this huge market share now gone, this now significantly lowers the profit expectations, and the profit outlook, for these American companies. And with a decline in profits, this also results in a decline in stock prices.

In fact, even as the world has changed, Wall Street’s profit outlooks haven’t budged. Analysts project that companies in the S&P 500 index will earn around $247 per share in 2024, and that’s basically the same level they were at on May 5th. In the same time, the index has risen 14%. In this disconnect between a rapid stock rally and an unchanged view on per share earnings in the S&P 500, something has to give. Just because interest rates stopped going up, does not mean that stocks can keep rallying while profit estimates remain unchanged. So one of two things has to happen here – Either stock prices have to get in line with Wall Street’s expectations, or Wall Street’s profit expectations have to increase in order to catch up to the current stock prices. And currently, it does not look like Wall Street’s estimates are going to rise.

Therefore, two things are happening right now which provides some incredible money making opportunities. The first thing that’s happening is that these Magnificent Seven stocks that rallied earlier in the year are now starting to come down in price to get back in line with Wall Street’s expectations. Now, that obviously provides an opportunity to short these stocks. However, shorting stocks which are running up on hype and bullish FOMO is a very dangerous game to play, because you’re trying to bet that the fundamentals are going to play out, while market psychology is buying the stocks regardless of the fundamentals. It’s not a game I like to play. Therefore, let’s look at the other side of the coin.

The other side of the coin is what about these other 493 stocks in the S&P 500 that have yet to rally, that are still near their October 2022 lows? Well, as it turns out, those stocks remain undervalued, meaning Wall Street’s estimates and profit expectations for those stocks are higher than what their current stock price is pricing in. And over the past week, what we have seen as the Magnificent Seven stocks have gone down, and yet the overall stock market has gone up, is that money is starting to move out of the Magnificent Seven and into the overall broader stock market. This means the overall broader stock market is going to start to rally and get back up to Wall Street’s estimates of prices. This provides an incredible opportunity for investors to buy these undervalued stocks.

Now, when it comes to interest rates, as interest rates stop going up, this is by and large going to benefit small cap stocks above any other stock. And if you look at the Russell 2000 index, it is still down significantly from the highs. While the Dow, the S&P 500, and the Nasdaq all reached new all time highs this week, the Russell 2000 is only up about 25% from those October 2022 lows, and still lags 75% below the all time highs when you look at the difference. So it is the Russell 2000 that provides the best opportunity to make money right now. So if you’re looking to buy stocks, and you want to buy stocks that are going to rally up 50% to 100% over the next year, the best chance to do that is by buying small cap stocks, which remain near those October 2022 lows. That’s what I’m doing. This is not a recommendation for you to go buy, sell or hold any particular asset. I’m not a financial advisor. I’m just telling you what I’m doing now.

In addition to the movement of money out of the Magnificent Seven and into the broader stock market, there’s also a sector rotation that’s happening right now. As money starts to move out of these technology stocks, it’s also helpful to understand where money is moving into, beyond just small caps. You see, the stock market tends to predict the economy, and the stock market overall hit a market bottom in October of 2023. Now yes, I know the actual market indices – that is the S&P, Nasdaq – they all hit a bottom in October of 2022. But remember, 497 stocks remained flat. It’s really only been in November of 2023 that the overall stock market has really started to rise. And when you see the overall stock market start to rise as it did in November of 2023, that is where we know the market bottom has now been reached, and we’re just now starting to enter a true bull market.

But if you look on this chart, you’ll notice that as the market bottom is reached, down here on the bottom left, and the market starts to rise, as that is is just now starting to happen, the economy tends to fall. And that’s exactly what we’re seeing right now. Remember, the stock market predicts the economy by about 6 to 9 months. And as the stock market rises, we can expect the overall economy to actually enter the bottom of its recession or downturn. I don’t know if it’s going to be a soft landing or a mild recession, but whatever’s going to happen, we’re probably entering the bottom of that. And as the Fed starts to lower interest rates, this is going to help stimulate the economy and bring us out of this lull in the economy, and help get things turned around again. As all of that is occurring, this helps bring the stock market higher and higher and higher, adding fuel to the bull market, which is really just now starting.

Now if you look at the top of this chart here in the green, you’ll see where money moves. Right now we see money moving out of technology. What that also means is, as the Federal Reserve stopped raising interest rates, a lot of money went into finance stocks as well, since the banks generally perform extremely well amid high interest rate environments. But as interest rates start to come down, money starts to move out of finance, since they’re no longer as profitable, and it starts to move into other sectors. So look at the second green bar here. You’ll see where the money moves. Money starts to move into other technology stocks outside of the Magnificent Seven. These are your small cap technology stocks, your up and coming companies, some of the companies that got left out of the rally, such as PayPal, maybe Block, stocks like that. And it also starts to move into other industries, such as basic materials and industrials. For these, think your mining companies or steel companies, any rare earth metal miners, any steel manufacturers, anything like that. That is where the money is starting to move.

So if you’re looking for sectors to move money into, think about mining companies. Cleveland-cliffs for example, Vale, which is a Brazilian mining company. Think about any rare earth metals, think about US steel, such as X, any manufacturing companies. These are the kind of companies where the money is moving into at the current time, as it starts to get pulled out of technology companies. And this is one of the main reasons why we’re seeing the Dow also reach new all time highs, even though it’s not technology heavy. It’s because money is moving out of technology and into broader companies like Dow stocks. So this is the opportunity to make money here. It’s extremely rare. It’s only happened one other time in history, and it’s a major shift in the market.

Now as you go to make money, and as we start to move our money out of technology into small caps, into industrials, into basic materials, I also want to let you know of a opportunity to get some free gifts. On Tuesday at 7 p.m. Eastern Time, I am doing my annual Christmas Giveaway, where I’m giving away 11 prizes to 11 lucky winners. There will be ten winners that are going to win a prize pack, including a hat, t-shirt and socks. And there’s going to be one lucky winner that’s going to get a brand new tablet. That giveaway is happening live on Tuesday at 7 p.m. Eastern Time, or 4 p.m. Pacific Time. Make sure you get registered for that giveaway so that you can win. All you have to do is go to scroll to the bottom of this article and click “Sign Up for Giveaways” to get registered to win.

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