I hope you followed my advice and stayed in the market last month.
If not, I hope after you see what I have for you today that you’ll get back in.
As we’ve talked about in several recent conversations, I live by the credo “always have some money invested in tech stocks” – no matter how much “noise” you hear out of Wall Street and Washington.
Otherwise, you’ll miss opportunities to buy winning stocks when they are “on sale.” Worse, you’ll miss taking a big profit from the rebound.
And brand-new market data from Lipper proves this.
The S&P 500 Index rose 8.7% last month. That makes October the single best month for the broad market since October 2011, when the S&P 500 rose 10.9%.
And this all happened in the face of Wall Street’s fears about everything from a rising dollar to China’s slowing growth to the possibility that the U.S. Federal Reserve will raise interest rates by the end of the year.
With that in mind, today I want to review some historic economic numbers.
And then I’ll show you why you should be bullish about tech investing for the rest of 2015…
Wall Street Spooks Itself
If you’ve been following the financial news, you’ve seen the confusion and fearful misinformation out there regarding the market and the likelihood of an enormous October decline.
Indeed, long before Halloween rolled around, I had lost count of the number of “stories” suggesting we might see a stock market crash by the end of that month.
It was almost as if every mainstream pundit felt the need to write their own economic “Tales from the Crypt.”
Here’s a perfect example of just what I’m talking about. On Oct. 6, the online journal ETF Daily News carried this teaser headline: “Stock Market Crash October 2015? 9 of the 16 Largest Crashes in History Have Come This Month.”
The article hedged its hysteria a bit by pointing out that the data didn’t ensure we’d see the market plummet. But its general thesis was still: “We should all be on alert.”
Just the opposite occurred. Through Nov. 5, the S&P 500 was up more than 2% for the year. While those aren’t stellar profits, it’s far from a crash.
And what we should “be on alert” for isn’t a crash – but tech stock “Buy” opportunities.
Because without drawing significant media attention, tech stocks have managed to crush the broader market.
The tech-centric Nasdaq Composite Index had gained 8.3% this year – more than four times the S&P 500’s return over the period.
With that in mind, I want to look at key economic data that helped drive the market higher and why I believe these factors constitute an “unstoppable trend” that will be good for tech investors at least through the end of this year.
Looking Good at Home and Abroad
Let’s start with the excellent jobs numbers that were released on Friday.
At 5%, the jobless rate stands at its lowest level since April 2008 – before the Great Recession.
Nonfarm payrolls for the month rose by a seasonally adjusted 271,000, which is more than 50% higher than what economists had predicted.
U.S. exports are also doing much better than what most analysts had expected, especially when you look at what’s happened with the dollar. Measured in October, the dollar has gained 13% in the past year against a basket of other currencies. With such a big surge, you’d expect to see exports down sharply.
That’s because when the dollar rises in value against other currencies, U.S. goods become more expensive overseas. However, despite their relative costliness, American exports remain strong.
And those strong U.S. exports are a particularly welcome sign for technology investors. That’s because technology accounts for roughly 18% of all U.S. exports. In fact, based on 2013 numbers, the last year for full data, the World Bank estimates the value of our tech exports at $147.8 billion, up 11.6% since 2009, when the economy was coming out of the financial crisis.
Now exports are off about 4% for the first nine months of the year. But that’s only one part of the story. There’s a more important number to watch.
In September, the U.S. “trade gap” (the difference between exports and imports) fell 15% from the previous month. And despite the strong dollar, exports actually gained 1.6% that month.
Consumers Ignore the Noise
If consumers are worried about the recent spate of negative economic headlines, they sure aren’t showing it. That’s a good thing because consumer spending, which includes smartphones and wide array of high tech devices, accounts for nearly 70% of economic growth.
Spending rose 0.6% in September, which was 50% more than what economists had expected. Not only that, but these shopping sprees are roughly 14.1% higher than the same month last year.
As they’ve done throughout 2015, car sales remain on fire.
Last month, U.S. auto sales rose 13.6% to 1.44 million cars and light-duty trucks. At that pace, 2015 could come in higher than the 17.4 million vehicles sold in 2000 – and set a new annual sales record.
This historic performance is being “driven” by such advanced connected car technology as in-dash infotainment systems, assisted braking, lane departure warnings, front and rear cameras, and sophisticated audio and Bluetooth integration.
Federal data suggests another encouraging trend, one that promises to keep the current economic ball rolling: Consumers may be spending more money simply because they’re earning more money.
The U.S. Bureau of Economic Analysis says that real disposable personal income, which adjusts for taxes and inflation, rose 3.5% in the third quarter. That was nearly three times the second quarter’s 1.2 % gain.
Meantime, the housing rally shows no signs of slowing.
The National Association of Realtors says that existing home sales have shown annual sales increases for 12 consecutive months. In September, the last month for data, they came in at 5.5 million units. That’s an annual increase of 8.8%. Residential construction rose 17.2% as the ratio of mortgages in foreclosure fell 22.6% to just 1.46% of all home loans.
Again, that bodes well for high tech because today’s buyers are filling their homes with smart appliances, sophisticated home theaters, web-based surveillance cameras, LED lighting made from semiconductors, and Wi-Fi and broadband systems.
With such broad-based economic gains, no wonder small-business confidence is rising. Witness business owners’ willingness to borrow in order to fund new growth.
The Thomson Reuters/PayNet index for September rose 11% from a year ago to 140.4. Borrowing in transportation, warehousing and construction led the advance.
We are looking at closing out 2015 in about seven weeks with enormous momentum.
This bodes well for technology investors for a very simple reason.
In one way or another, from chips to mobile commerce and from connected cars to smart homes, high tech plays a crucial role in our daily lives and the overall economy.
Thus, I’m expecting to close the fourth quarter with the Nasdaq still smoking the overall market.
And to me, that means you should continue to focus your investing dollars on tech stocks if you really to bolster your net worth.
In the coming weeks, as this unstoppable trend rolls on, I’ll be right alongside you, showing you how to do just that.
Follow us on Twitter @moneymorning.
Why Apple Beat the Market: Wall Street was braced for poor earnings and iPhone sales from Apple in Q4 2015. Those fears couldn’t have been more overblown, and Apple turned in stellar financials, beating the market by 530%. The numbers behind this record-breaking earnings report prove there’s still plenty of upside left for Apple…
About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.
Disclaimer: © 2015 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.