The Economy’s Engine
We received a ton of great feedback from last week’s article about housing stocks. MidasWave.com membership is exploding, the portfolio is doing great and we are very grateful for the opportunity to share our thoughts with you each week. This week we are analyzing financial stocks – a.k.a. the engine for the global economy. Financial stocks are very important and serve as a great proxy for both Main St & Wall St.
The Economy’s “Tell”
An economist’s primary job is to analyze and predict how the economy is performing and how it will perform in the near future. The problem is that most economists fail to predict major changes – until after they occur. As a student of the market, I’ve stumbled across a direct correlation between how financial stocks are performing and how the economy will perform in the near future. Without exception, this little “tell” that I’m about to share with you works like clockwork and accurately predicts nearly every major recession in the last 100 years. The “tell” is to look at how both the market and specifically financial stocks are performing. For many reasons (which are beyond the scope of this article) the stock market is a forward looking mechanism and does a great job of moving – AHEAD of Main Street.
Financials Move Ahead of Main Street
Either directly or indirectly, financial stocks are involved with every single transaction in the broader economy. That is why I watch financials like a hawk. Most recently, a slew of European bank stocks imploded just before the European Central Bank (ECB) injected over a trillion dollars to stimulate their economy. The same thing happened in the US before the 2008 meltdown and every other major crisis over the past 100 years. The converse is also true, after the crisis, financial stocks tend to rally hard and that is typically followed by a healthy economic “boom.” If you want specific buy and sell signals, consider joining MidasWave.com and see if you qualify!
