March was a painful month for investors...
The start of the war in Iran sparked geopolitical uncertainty and quickly cascaded into an energy crisis. But the pain subsided as quickly as it had set in...
Markets began reversing in late March, even before we had any real good news. And after the initial ceasefire announcement on April 7, the market began forging a one-way path higher.
That was especially true for the tech-heavy Nasdaq 100 Index...
This index rallied for 13 straight days, one of its longest stretches ever. And according to history, that means a 26% rally is possible over the next year.
The Market Isn't Worried About War in the Middle East
You don't have to look hard to find economic problems caused by the conflict in Iran.
Energy prices are still dramatically higher than they were before the fighting began. They'll likely remain elevated even after a larger deal comes together. And that's effectively a tax on the consumer.
If that worries you, rest assured... It isn't worrying the market. At least, not anymore.
Stocks have already reached new all-time highs. And the Nasdaq 100 is no different... It hit a new all-time high two weeks ago... and has mostly kept climbing since then. Even more impressive, that high was the culmination of the 13-day rally mentioned above. Take a look...
This kind of sustained rally doesn't happen often. Even in the most powerful bull market, you'll get a down day or two.
Heck, we've only seen four similar rallies for the Nasdaq 100 since the data begins in 1985. According to history, buying after this kind of rally is a smart move.
To see it, I looked at each unique instance of the Nasdaq 100 rising for 11 or more straight days. That gives us a larger sample group, with 11 instances to look over. And the outperformance that came after this kind of extreme move was impressive. Take a look...
We live in a technology-dominated world. That has led the tech-heavy Nasdaq 100 to an impressive 14% annual return over the past four decades.
Still, this group is more volatile than the other major indexes. That means you can do even better at the right moments... like buying after an 11-day winning streak.
Similar setups led to gains of 3.3% in three months, 7.7% in six months, and 25.5% over a year. That's healthy outperformance over the one-year period. Plus, all 11 of those trades were winners a year later.
You might not think of consecutive winning days as a signal to buy. But this is just another way to see that the trend is in our favor. And we know that when stocks are rising, they tend to keep rising.
That's where we are right now. The markets have shrugged off the problems in the Middle East. And according to history, we can expect big gains in the months ahead.
So don't give up. And don't let your fears guide you. Instead, stick with the data... and stay long.
Good investing,
Brett Eversole
Further Reading
"The market isn't just telling us to look beyond the Iran conflict," Chris Igou writes. "It's pointing us to one promising sector." This sector recently rallied for 13 days – for the first time since 2014. And that points to even more gains from here.
"Every stock market sell-off has a silver lining," Brett says. One major index recently hit a rare oversold setup. And history shows that's a classic recipe for a reversal... with double-digit returns possible over the next year.