We’re halfway through October, and it’s already living up to its reputation.
What’s that?
It’s known as the most volatile month of the year. (We experienced a bit of that the other week when stocks plunged on renewed trade tensions between the U.S. and China, after the latter announced rare earths trade restrictions, and the former proposed 100% tariffs in retaliation.)
But in spite of that notorious volatility, the month of October generally ends higher. (And we’re in the midst of seeing that too, as the major indexes are either already in the plus column for the month, or within striking distance of doing so.)
And with another earnings season having just begun (stocks typically go up during earnings season), I’m expecting October, once again, to end with big gains. And with earnings season already off to a great start (many of the big banks have reported record or near-record earnings), it could turn out even better than expected.
Adding to the bullish outlook is the fact that Q4 is historically the best quarter for stocks.
So, there’s that too!
The market has performed exceptionally well, so far.
YTD, the Dow is up 8.57%; the S&P is up 13.3%; the Nasdaq is up 17.5%; and the small-cap Russell 2000 is up 9.95%.
But the outlook is for much, much more.
And there’s a myriad of reasons why, beyond just the recurring seasonal tendency.
That includes the tamer inflation reports, the resiliency of the economy, the recent interest rate cut (and the two additional cuts expected in late-October and then again in December), and of course, the ongoing AI boom!
For those who missed the recent rally, or wished they would have taken better advantage of it, the good news is the next leg up could be even more spectacular.
And that’s exactly what I’m expecting.
History Repeats Itself
Last year saw the S&P 500 soar by 23.3%.
That was the second year in a row of 20%+ gains. (2023 was up 24.2%.)
That’s a feat rarely seen in the past.
In fact, it was the first time it was up 20% or more for two years in a row since 1995-1996. (Prior to that, you’d have to go all the way back to 1954-55.)
In 1995 the S&P was up 34.1%. That was the beginning of the dot-com (technology) boom.
In 1996 it was up 20.3%.
So, what happened in 1997? It was up another 31.0%.
1998? Up another 26.7%.
And in 1999, it was up 19.5%.
A spectacular rally that lasted 5 long, glorious years.
Yes, the dot-com bubble arrived in 2000. But not before people got rich over the preceding 5 years with a 220% increase in the S&P, while plenty of individual stocks were up several hundred percent to several thousand percent.
And I believe we could possibly see the same thing again now. Maybe 5 years or more of boom times – for similar reasons, and some unique to the present day.
Tech Booms: Past And Present (AI Tech Boom Is Alive And Well)
The tech boom back then saw everybody go nuts for technology stocks, driven by the internet and dot-com companies.
It was new and exciting. And the internet was forecast to change the way people shopped, did business, and interacted with each other.
The promise was real, as we now know.
So, what’s the parallel?
In part, it’s another tech boom.
But this modern technology boom is being driven by Artificial Intelligence (AI).
And it’s forecast to be just as transformative as the personal computer, the internet and the mobile phone. And it’s expected to touch virtually every industry in some way shape or form, as well as impact ordinary lives.
The AI trade has worked so well for a reason -- because the AI boom is real, and is supported by real earnings, and real growth potential.
But there are plenty of other catalysts that make the market outlook even more exciting.
Continued . . .
------------------------------------------------------------------------------------------------------
Saturday Deadline: Claim your Free Copy of Finding #1 Stocks
One single idea changed Kevin Matras’ life as an investor, allowing him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin explains his top stock-picking secrets and strategies based on this powerful concept.
In 2024…while the market gained +27.4%...these strategies produced gains up to +307.1%.¹
You can take full advantage of them without attending a single class or seminar, in a lot less time than you think. Opportunity ends midnight Saturday, October 18.
Get your free book now >>
------------------------------------------------------------------------------------------------------
Government Shutdown Should Have No Impact On The Market
Let me quickly speak to the recent government shutdown.
First, the markets generally don’t seem to care. It was looking like we were headed for a government shut down weeks before it happened, and the market soared. And when it finally did happen, the market gained even more.
Since 1980, there have been 14 government shutdowns (10 if you exclude technical shutdowns, i.e., procedural delays, etc., that lasted less than 24 hours). The average length of those shutdowns is 9 days. The longest one was in 2018/2019 and lasted 35 days. 1995/96 was next at 21 days. And 2013 was third at 16 days. (Although, that has recently been knocked down to fourth place, as the current shutdown hit day 17 on Friday, 10/17.)
How did the market do during those past shutdowns? The S&P averaged 1.69%. A full 9 of those 10 times was higher. Only decline was in October 1990, when it lost -3.60%. The government shut down for only 3 days. But recession fears had gripped the market, and stocks had been falling for months prior to that.
So, it’s no surprise that the market, so far, has given the shutdown a collective shrug.
Inflation And Interest Rates
While inflation is still too high, it’s been more moderate than the Fed had been worrying about.
Last month’s Consumer Price Index (CPI, retail inflation) showed core inflation (ex-food & energy) at 3.1% y/y, in line with the previous month and down from 3.3% a few months back.
The Producer Price Index (PPI, wholesale inflation), however, just eased to 2.8% y/y, down from the previous month’s 3.7%.
And the Personal Consumption Expenditures (PCE) index (the Fed’s preferred inflation gauge), came in at 2.9%, the same as the previous month and forecasts for the same.
These reports underscore the Fed’s latest narrative that inflation is not expected to go up substantially. And that recent price increases will be a “one-time” shift due to tariffs, rather than ongoing increases.
This gave the Fed the green light to cut interest rates by 25 basis points in September (the first cut in a year). And the confidence to forecast two more cuts (presumably by 25 bps each), by year’s end.
And given the market is a forward-looking mechanism, it does not seem to be wasting any time in acting on that.
Plus, when interest rates do begin to fall again, you can be sure plenty of money tied up in money markets will find their way back into equities, further supporting stock prices.
The Earnings Outlook Is For Growth
Let’s also not forget that earnings are the main driver of stock prices.
Ironically, while everyone was fretting over tariffs, the earnings picture never wavered and continues to point to growth.
Q2’25 earnings season, for example, showed S&P earnings up 12.5%.
Q3 earnings are forecast at 5.5%.
Q4 is forecast at 7.3%.
Q1’26 is forecast at 9.7%.
And Q2 is forecast at 11.0%.
While tariff fears and even recession fears shook the market previously, none of that is showing up in the aggregate earnings estimates.
And again, earnings are the key driver of stock prices.
Small-Caps Are Also On The Rise
The bull market rally, which is in its third year, is broadening.
Tech is still a big driver. And will be for years to come. But other industries are breaking out as well. And categories.
That includes small-caps.
Adding fuel to the small-cap rally will definitely be the aforementioned and expected interest rate cuts.
While it’s true that all-sized borrowers should see relief with lower interest rates, since small-caps tend to have a larger proportion of debt than their larger counterparts, and often borrow at less favorable terms, the resumption of interest rate cuts should have a sizable impact on small-caps.
Additionally, the budget bill that passed a few months ago, which included additional tax provisions for corporate America, not the least of which is the 100% immediate expensing of capital expenditures, will also have a positive impact.
Especially since small-caps are typically in the earlier part of their growth cycle. Those tax provisions should allow them to spend/invest more money, accelerate their growth plans, and get the entire tax benefit in year one.
In addition to the AI boom, I think we’re on the cusp of a small-cap renaissance as well.
And it’s already begun, with the small-cap Russell 2000 already making 4 new all-time highs just this month, so far.
Do What Works
So, how do you fully take advantage of the market right now?
By implementing tried and true methods that work to find the best stocks.
For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 29 of the last 37 years (a 78% win ratio) with an average annual return of more than 24% per year? That's more than 2 x the S&P, including 4 bear markets and 4 recessions. And consistently beating the market year after year can add up to a lot more than just two times the returns.
It also killed in 1995 with a 52.6% gain; 1996 with 40.9%; 1997 with 43.9%; 1998 with 19.5%; and 1999 with 45.9%. It was also up in 2000 by 14.3% while the S&P was down.
Did you also know that stocks in the top 50% of Zacks Ranked Industries outperform those in the bottom 50% by a factor of 2 to 1? There's a reason why they say that half of a stock's price movement can be attributed to the group that it's in. Because it's true!
Those two things will give any investor a huge probability of success and put you well on your way to beating the market.
But you’re not there yet, as those two items alone will only narrow down a field of 10,000 stocks to the top 100 or so. Way too many to trade at once.
So, the next step is to get that list down to the best 5-10 stocks that you can buy.
Proven Profitable Strategies
Picking the best stocks is a lot easier when there’s a proven, profitable method to do it.
And by concentrating on what has proven to work in the past, you’ll have a better idea as to what your probability of success will be now and in the future.
Of course, this won't preclude you from ever having another losing trade. But if your stock picking strategy picks winners more often than losers, you can feel confident that your next trade will have a high probability of success.
Here are a few of my favorite strategies that have regularly crushed the market year after year.
New Highs: Studies have shown that stocks making new highs have a tendency of making even higher highs. And this strategy proves it. The alignment of positive price action and strong fundamentals creates all the necessary conditions to see these stocks soar to even greater heights. Over the last 25 years (2000 through 2024), using a 1-week rebalance, the average annual return has been 37.6% vs. the S&P’s 7.7%, which is 4.9 x the market.
Small-Cap Growth: Small-caps have historically outperformed the market time and time again. Often these are newer companies in the early part of their growth cycle, which is when they grow the fastest. This strategy combines the aggressive growth of small-caps with our special blend of growth and valuation metrics for explosive returns. Over the last 25 years (2000 through 2024), using a 1-week rebalance, the average annual return has been 44.3%, beating the market by 5.8 x the returns.
Filtered Zacks Rank 5: This strategy leverages the Zacks Rank #1 Strong Buys, and adds two time-tested filters to narrow the list of stocks down to five high probability picks each week. Over the last 25 years (2000 through 2024), using a 1-week rebalance, the average annual return has been 48.4%, which is 6.3 x the market.
The best part about these strategies (aside from the returns) is that all of the testing and hard work has already been done. There’s no guesswork involved. Just point and click and start getting into better stocks on your very next trade.
Where To Start
There’s a simple way to add a big performance advantage for your stock-picking success. It's called the Zacks Method for Trading: Home Study Course.
With this fun, interactive online program, you can master the Zacks Rank in your own home and at your own pace. You don’t have to attend a single class or seminar.
Zacks Method for Trading covers the investment ideas I just shared and guides you to better trading step by step, plus so much more.
You'll quickly see how to get the most out of the proven system that has more than doubled the market for over three decades. Discover what kind of trader you are, how to find stocks with the highest probability of success, and how to trade them so you can consistently beat the market no matter where stock prices are headed.
You’ll get the formulas behind our top-performing strategies suited for a variety of different trading styles.
The best of these strategies produced gains up to +307.1% in 2024 while the S&P 500 gained +27.4%.¹
The course will also help you create and test your own stock-picking strategies.
Today is the perfect time to get in. I'm giving participants free hardbound copies of my book, Finding #1 Stocks, a $49.95 value. Its 300 pages unfold virtually every trading secret I’ve learned over the last 25 years to beat the market.
Please note: Copies of the book are limited and your opportunity to get one free ends midnight Saturday, October 18, unless we run out of books first. If you're interested, I encourage you to check this out now.
Find out more about Zacks Method for Trading: Home Study Course >>
Thanks and good trading,
Kevin
Zacks Executive VP Kevin Matras is responsible for all of our trading and investing services. He developed many of our most powerful market-beating strategies and directs the Zacks Method for Trading: Home Study Course.
¹ The individual strategies mentioned herein represent only a portion of the ones covered in the course.
We’re halfway through October, and it’s already living up to its reputation.
What’s that?
It’s known as the most volatile month of the year. (We experienced a bit of that the other week when stocks plunged on renewed trade tensions between the U.S. and China, after the latter announced rare earths trade restrictions, and the former proposed 100% tariffs in retaliation.)
But in spite of that notorious volatility, the month of October generally ends higher. (And we’re in the midst of seeing that too, as the major indexes are either already in the plus column for the month, or within striking distance of doing so.)
And with another earnings season having just begun (stocks typically go up during earnings season), I’m expecting October, once again, to end with big gains. And with earnings season already off to a great start (many of the big banks have reported record or near-record earnings), it could turn out even better than expected.
Adding to the bullish outlook is the fact that Q4 is historically the best quarter for stocks.
So, there’s that too!
The market has performed exceptionally well, so far.
YTD, the Dow is up 8.57%; the S&P is up 13.3%; the Nasdaq is up 17.5%; and the small-cap Russell 2000 is up 9.95%.
But the outlook is for much, much more.
And there’s a myriad of reasons why, beyond just the recurring seasonal tendency.
That includes the tamer inflation reports, the resiliency of the economy, the recent interest rate cut (and the two additional cuts expected in late-October and then again in December), and of course, the ongoing AI boom!
For those who missed the recent rally, or wished they would have taken better advantage of it, the good news is the next leg up could be even more spectacular.
And that’s exactly what I’m expecting.
History Repeats Itself
Last year saw the S&P 500 soar by 23.3%.
That was the second year in a row of 20%+ gains. (2023 was up 24.2%.)
That’s a feat rarely seen in the past.
In fact, it was the first time it was up 20% or more for two years in a row since 1995-1996. (Prior to that, you’d have to go all the way back to 1954-55.)
In 1995 the S&P was up 34.1%. That was the beginning of the dot-com (technology) boom.
In 1996 it was up 20.3%.
So, what happened in 1997? It was up another 31.0%.
1998? Up another 26.7%.
And in 1999, it was up 19.5%.
A spectacular rally that lasted 5 long, glorious years.
Yes, the dot-com bubble arrived in 2000. But not before people got rich over the preceding 5 years with a 220% increase in the S&P, while plenty of individual stocks were up several hundred percent to several thousand percent.
And I believe we could possibly see the same thing again now. Maybe 5 years or more of boom times – for similar reasons, and some unique to the present day.
Tech Booms: Past And Present (AI Tech Boom Is Alive And Well)
The tech boom back then saw everybody go nuts for technology stocks, driven by the internet and dot-com companies.
It was new and exciting. And the internet was forecast to change the way people shopped, did business, and interacted with each other.
The promise was real, as we now know.
So, what’s the parallel?
In part, it’s another tech boom.
But this modern technology boom is being driven by Artificial Intelligence (AI).
And it’s forecast to be just as transformative as the personal computer, the internet and the mobile phone. And it’s expected to touch virtually every industry in some way shape or form, as well as impact ordinary lives.
The AI trade has worked so well for a reason -- because the AI boom is real, and is supported by real earnings, and real growth potential.
But there are plenty of other catalysts that make the market outlook even more exciting.
Continued . . .
------------------------------------------------------------------------------------------------------
Saturday Deadline: Claim your Free Copy of Finding #1 Stocks
One single idea changed Kevin Matras’ life as an investor, allowing him to tap into the greatest force driving stock prices. In Finding #1 Stocks, Kevin explains his top stock-picking secrets and strategies based on this powerful concept.
In 2024…while the market gained +27.4%...these strategies produced gains up to +307.1%.¹
You can take full advantage of them without attending a single class or seminar, in a lot less time than you think. Opportunity ends midnight Saturday, October 18.
Get your free book now >>
------------------------------------------------------------------------------------------------------
Government Shutdown Should Have No Impact On The Market
Let me quickly speak to the recent government shutdown.
First, the markets generally don’t seem to care. It was looking like we were headed for a government shut down weeks before it happened, and the market soared. And when it finally did happen, the market gained even more.
Since 1980, there have been 14 government shutdowns (10 if you exclude technical shutdowns, i.e., procedural delays, etc., that lasted less than 24 hours). The average length of those shutdowns is 9 days. The longest one was in 2018/2019 and lasted 35 days. 1995/96 was next at 21 days. And 2013 was third at 16 days. (Although, that has recently been knocked down to fourth place, as the current shutdown hit day 17 on Friday, 10/17.)
How did the market do during those past shutdowns? The S&P averaged 1.69%. A full 9 of those 10 times was higher. Only decline was in October 1990, when it lost -3.60%. The government shut down for only 3 days. But recession fears had gripped the market, and stocks had been falling for months prior to that.
So, it’s no surprise that the market, so far, has given the shutdown a collective shrug.
Inflation And Interest Rates
While inflation is still too high, it’s been more moderate than the Fed had been worrying about.
Last month’s Consumer Price Index (CPI, retail inflation) showed core inflation (ex-food & energy) at 3.1% y/y, in line with the previous month and down from 3.3% a few months back.
The Producer Price Index (PPI, wholesale inflation), however, just eased to 2.8% y/y, down from the previous month’s 3.7%.
And the Personal Consumption Expenditures (PCE) index (the Fed’s preferred inflation gauge), came in at 2.9%, the same as the previous month and forecasts for the same.
These reports underscore the Fed’s latest narrative that inflation is not expected to go up substantially. And that recent price increases will be a “one-time” shift due to tariffs, rather than ongoing increases.
This gave the Fed the green light to cut interest rates by 25 basis points in September (the first cut in a year). And the confidence to forecast two more cuts (presumably by 25 bps each), by year’s end.
And given the market is a forward-looking mechanism, it does not seem to be wasting any time in acting on that.
Plus, when interest rates do begin to fall again, you can be sure plenty of money tied up in money markets will find their way back into equities, further supporting stock prices.
The Earnings Outlook Is For Growth
Let’s also not forget that earnings are the main driver of stock prices.
Ironically, while everyone was fretting over tariffs, the earnings picture never wavered and continues to point to growth.
Q2’25 earnings season, for example, showed S&P earnings up 12.5%.
Q3 earnings are forecast at 5.5%.
Q4 is forecast at 7.3%.
Q1’26 is forecast at 9.7%.
And Q2 is forecast at 11.0%.
While tariff fears and even recession fears shook the market previously, none of that is showing up in the aggregate earnings estimates.
And again, earnings are the key driver of stock prices.
Small-Caps Are Also On The Rise
The bull market rally, which is in its third year, is broadening.
Tech is still a big driver. And will be for years to come. But other industries are breaking out as well. And categories.
That includes small-caps.
Adding fuel to the small-cap rally will definitely be the aforementioned and expected interest rate cuts.
While it’s true that all-sized borrowers should see relief with lower interest rates, since small-caps tend to have a larger proportion of debt than their larger counterparts, and often borrow at less favorable terms, the resumption of interest rate cuts should have a sizable impact on small-caps.
Additionally, the budget bill that passed a few months ago, which included additional tax provisions for corporate America, not the least of which is the 100% immediate expensing of capital expenditures, will also have a positive impact.
Especially since small-caps are typically in the earlier part of their growth cycle. Those tax provisions should allow them to spend/invest more money, accelerate their growth plans, and get the entire tax benefit in year one.
In addition to the AI boom, I think we’re on the cusp of a small-cap renaissance as well.
And it’s already begun, with the small-cap Russell 2000 already making 4 new all-time highs just this month, so far.
Do What Works
So, how do you fully take advantage of the market right now?
By implementing tried and true methods that work to find the best stocks.
For example, did you know that stocks with a Zacks Rank #1 Strong Buy have beaten the market in 29 of the last 37 years (a 78% win ratio) with an average annual return of more than 24% per year? That's more than 2 x the S&P, including 4 bear markets and 4 recessions. And consistently beating the market year after year can add up to a lot more than just two times the returns.
It also killed in 1995 with a 52.6% gain; 1996 with 40.9%; 1997 with 43.9%; 1998 with 19.5%; and 1999 with 45.9%. It was also up in 2000 by 14.3% while the S&P was down.
Did you also know that stocks in the top 50% of Zacks Ranked Industries outperform those in the bottom 50% by a factor of 2 to 1? There's a reason why they say that half of a stock's price movement can be attributed to the group that it's in. Because it's true!
Those two things will give any investor a huge probability of success and put you well on your way to beating the market.
But you’re not there yet, as those two items alone will only narrow down a field of 10,000 stocks to the top 100 or so. Way too many to trade at once.
So, the next step is to get that list down to the best 5-10 stocks that you can buy.
Proven Profitable Strategies
Picking the best stocks is a lot easier when there’s a proven, profitable method to do it.
And by concentrating on what has proven to work in the past, you’ll have a better idea as to what your probability of success will be now and in the future.
Of course, this won't preclude you from ever having another losing trade. But if your stock picking strategy picks winners more often than losers, you can feel confident that your next trade will have a high probability of success.
Here are a few of my favorite strategies that have regularly crushed the market year after year.
New Highs: Studies have shown that stocks making new highs have a tendency of making even higher highs. And this strategy proves it. The alignment of positive price action and strong fundamentals creates all the necessary conditions to see these stocks soar to even greater heights. Over the last 25 years (2000 through 2024), using a 1-week rebalance, the average annual return has been 37.6% vs. the S&P’s 7.7%, which is 4.9 x the market.
Small-Cap Growth: Small-caps have historically outperformed the market time and time again. Often these are newer companies in the early part of their growth cycle, which is when they grow the fastest. This strategy combines the aggressive growth of small-caps with our special blend of growth and valuation metrics for explosive returns. Over the last 25 years (2000 through 2024), using a 1-week rebalance, the average annual return has been 44.3%, beating the market by 5.8 x the returns.
Filtered Zacks Rank 5: This strategy leverages the Zacks Rank #1 Strong Buys, and adds two time-tested filters to narrow the list of stocks down to five high probability picks each week. Over the last 25 years (2000 through 2024), using a 1-week rebalance, the average annual return has been 48.4%, which is 6.3 x the market.
The best part about these strategies (aside from the returns) is that all of the testing and hard work has already been done. There’s no guesswork involved. Just point and click and start getting into better stocks on your very next trade.
Where To Start
There’s a simple way to add a big performance advantage for your stock-picking success. It's called the Zacks Method for Trading: Home Study Course.
With this fun, interactive online program, you can master the Zacks Rank in your own home and at your own pace. You don’t have to attend a single class or seminar.
Zacks Method for Trading covers the investment ideas I just shared and guides you to better trading step by step, plus so much more.
You'll quickly see how to get the most out of the proven system that has more than doubled the market for over three decades. Discover what kind of trader you are, how to find stocks with the highest probability of success, and how to trade them so you can consistently beat the market no matter where stock prices are headed.
You’ll get the formulas behind our top-performing strategies suited for a variety of different trading styles.
The best of these strategies produced gains up to +307.1% in 2024 while the S&P 500 gained +27.4%.¹
The course will also help you create and test your own stock-picking strategies.
Today is the perfect time to get in. I'm giving participants free hardbound copies of my book, Finding #1 Stocks, a $49.95 value. Its 300 pages unfold virtually every trading secret I’ve learned over the last 25 years to beat the market.
Please note: Copies of the book are limited and your opportunity to get one free ends midnight Saturday, October 18, unless we run out of books first. If you're interested, I encourage you to check this out now.
Find out more about Zacks Method for Trading: Home Study Course >>
Thanks and good trading,
Kevin
Zacks Executive VP Kevin Matras is responsible for all of our trading and investing services. He developed many of our most powerful market-beating strategies and directs the Zacks Method for Trading: Home Study Course.
¹ The individual strategies mentioned herein represent only a portion of the ones covered in the course.