I love it when a plan comes together.
A few weeks ago, I laid out my thesis for why we were likely in a "correction" in the context of a longer bull market.
While my logic was strong, it's important to remember nobody knows for sure what will happen in markets which is why I took a "wait and see" approach.
However, the latest batch of earnings reports only strengthened my conviction. And if you've been waiting on the sidelines, now is the time to start deploying cash...
...and I'll show you which stocks are high on my buy list.
Big Tech to the Rescue
As we've discussed many times before, stocks are priced based on their forward earnings.
You can ignore a lot of "noise" in the market like geopolitical threats, hot inflation prints, and a wavering Federal Reserve when S&P 500 earnings are growing.
And that's exactly what's happening; S&P 500 forward 12-month earnings started 2024 at $245 but are now up to $254:
In addition, we have swelling profit margins for S&P 500 companies...
...and rising capital expenditures, meaning companies feel comfortable spending lots of money:
This is mostly thanks to the Big Tech or "Magnificent 7" stocks that make up the majority of the S&P 500:
As long as these companies keep churning out solid earnings, the broader market should continue to thrive. And with the technical picture improving, it's looking like this correction is likely almost over.
The Market's Technical Picture is Healing
When I reviewed my 2024 market outlook a few weeks back, I noted that the technical picture for the S&P 500 was a bit damaged.
More specifically, the S&P 500 had cut below the key 50-day moving average (MA). But thanks to solid earnings from Patreon Portfolio positions like Amazon (AMZN), Alphabet (GOOGL), and Apple (AAPL), the index is now trading back above the key 50-day MA:
It's a similar story for the tech-heavy Nasdaq, which also reclaimed its 50-day MA on Friday:
And considering market sentiment is also still in "fear" territory...
...now is a great time to add to high-quality positions.
Let’s Add to Four Positions
Since I believe the market correction is likely over, I need to make some portfolio changes.