This Global 'Divergence' Is Worth Knowing

A rebound continues in U.S. stocks... What to make of the April sell-off... The biggest investing story no one is talking about... A 'divergence' from the Fed... Look across the pond... Cheap, hated, and in an uptrend... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] A rebound continues in U.S. stocks... What to make of the April sell-off... The biggest investing story no one is talking about... A 'divergence' from the Fed... Look across the pond... Cheap, hated, and in an uptrend... --------------------------------------------------------------- Just like that... Very quickly, after a sell-off during the first half of last month, the S&P 500 Index is within one or two good days of making a new all-time high again... In a sign of a possible renewed uptrend, the benchmark U.S. index even crossed back above its 50-day moving average on Friday, after spending the last few weeks below it... Uncle Sam's jobs report on Friday was a catalyst for a move higher the past few days. It showed fewer "nonfarm payrolls" added in April (175,000 new jobs, the lowest in six months) than Wall Street's expectation and a slightly higher unemployment rate of 3.9%. That's perfect bad news for the market bulls who are counting on the "Fed cut" trade. The sentiment has carried over into the start of this week... Yesterday, a pair of Federal Reserve members – Richmond Fed President Thomas Barkin and New York Fed President John Williams, Fed Chair Jerome Powell's underlings – suggested rate cuts are still to come later this year... Speaking to a South Carolina Rotary Club, Barkin said carefully that he's "optimistic that today's restrictive level of rates can take the edge off demand in order to bring inflation back to our target." At a conference in Beverly Hills, California, Williams was blunter: "Eventually, we'll have rate cuts." Both Williams and Barkin are voting members of the central bank's policy-setting committee. Today, nonvoting member Neel Kashkari published an essay raising the prospect that rates might not be "restrictive" enough to bring inflation lower than 3% annually. When he floated this idea in public [a month ago]( it sent the market for a wild ride. But today, not so much... The S&P 500 finished higher for a fourth straight day, albeit slightly... The Dow Jones Industrial Average was up for a fifth day in a row, and so was the small-cap Russell 2000 Index, which led the major indexes with a tiny gain of 0.2%. The Nasdaq Composite Index was off slightly. Longer-term bond yields were also down, with the 10-year Treasury trading below 4.5%, down from around 4.7% on April 25. Similarly, the 30-year yield is at 4.6%, below a recent high of around 4.8%. [Last Monday]( we asked, "Was that it?" about the pullback in April, suggesting the stock market sell-off could be finished. There's a good argument to make that it is, and was, a garden-variety "correction." As our Stansberry's Investment Advisory team wrote in [a new issue published on Friday](... The S&P 500 Index was down by as much as 5.5% at one point in April. Before that, the index had gone 58 trading days without even a single 2.5% peak-to-trough drawdown. The last such stretch without a 2.5% drawdown lasted 60 days and ended at the beginning of 2020. For many investors, this fall might feel more painful than usual after the lack of volatility. But it's important to remember that it's just a dip. And stock market corrections of 10% or more are common. Going back to 1980, 25 out of 44 years had an intrayear correction of at least 10%. Even last year, in which the S&P 500 finished up 24%, had a correction. Moreover, our proprietary Complacency Indicator – which is quite good at predicting corrections, including last year's – triggered a new warning in March. So we knew that the market's torrid pace was unlikely to continue. So, in short, if what we just saw does go down in market history as a "regular" correction and a blip in the overall long-term chart of U.S. stocks, we wouldn't be surprised... But that doesn't mean the market has gotten 'cheap,' either... Our team also just updated our Market Valuation Indicator. This measures the free cash flow of the majority of the companies in the S&P 500 with respect to their total market capitalizations to gauge how "cheap" or "expensive" the market might be. And, as our Investment Advisory team wrote... At the end of March, the market surpassed its valuation level from December 2021... right before the last bear market. It's now the most expensive it has been in 23 years. We're not saying that a bear market is necessarily imminent. The heightened valuation just means that we should expect relatively low market returns from these levels over the long term. Most investors, however, are expecting the opposite... Chalk it up to the buzz around artificial intelligence ("AI")... expectations for Fed rate cuts and a cheaper cost of borrowing money... or anything else... but U.S. stocks look downright pricey. And according to this indicator, the S&P 500 is in "bubble" territory. Subscribers can find more details on this and all of the exclusive Stansberry's Investment Advisory market indicators [here](... And if you don't already have access, [click here to learn more about starting a subscription today]( to our flagship publication. A global divergence – for now... We talk a lot about the Fed here in the Digest. But investors who remain narrowly focused on U.S. monetary policy – and many of them do – are missing what other central banks around the world are planning. I suggested [in March]( that the Fed and the European Central Bank ("ECB"), for example, appeared aligned on the timing for potential rate cuts this year. Officials from both sides of the Atlantic Ocean were offering suggestions about June... But with the "stubborn" first-quarter inflation numbers in the U.S., that possible coordination looks like it's not happening. Market expectations for rate cuts in the U.S. have shifted into late this year, if at all. At the same time, though, expectations for rate cuts in Europe have stuck. There, inflation has cooled more than it has in the U.S. The European economy has been barely growing, most recently at 0.3% annualized in the first quarter of 2024. And ECB President Christine Lagarde has been unambiguous that investors should expect lower rates as soon as June. She first raised this possibility in March and strengthened her message last month. "You heard me loud and clear," she told attendees at a press conference on April 11, referring to less restrictive policy. This sets up an interesting "divergence" between two of the largest central banks in the world (and others): The ECB is all but officially "easing" financial conditions for European banks already, and the Fed is not quite there but wants to... Indeed, as Powell said during a press conference after the Fed's meeting last week when asked about this apparent scenario... I think that may happen... The difference between the United States and other countries that are now considering rate cuts is that they're just not having the kind of growth we're having. Their inflation is performing about like ours, or maybe a little better, but they're not experiencing the kind of growth we're experiencing. We actually have the luxury of having strong growth and a strong labor market, very low unemployment, high job creation, and all of that, and we can be patient, and we will be careful and cautious as we approach the decision to cut rates, whereas other jurisdictions may go before that. The Fed is still saying it will cut rates before anything else, like a rate hike, but this scenario of the ECB being ahead of the Fed on an interest-rate policy "pivot" plays into the dollar's relative strengthening against other major currencies since March... and some of the market volatility in the U.S. lately. It also presents an intriguing opportunity... Looking across the pond... European stocks have been "hated" for quite some time, compared with U.S. stocks. The S&P 500 has outperformed European blue-chip stocks for 15 years. But as True Wealth Systems (TWS) editor Brett Eversole wrote in [a brand-new issue for subscribers]( last week, this could change in the years ahead... A clear trend is beginning to appear... European stocks as a whole are poised to soar in the coming years. Our TWS computers have been flashing green on European stocks for months. So we're taking their advice... This month, we're adding the bluest of European blue chips to our portfolio... and buying a basket of the region's biggest and best companies. Why now?... The big catalyst and the timing for this recommendation, as Brett detailed, is what's going on with central-bank policy now overseas compared with the U.S... The European economy has almost concluded its "soft landing" – bringing the inflation rate back to 2% without causing a recession. That means the ECB's promised rate cuts should come soon... and "one of the worst headwinds for European stocks is about to fade away," Brett said. The ECB's preferred measure of inflation is down 77% since it peaked in October 2022... and it's only 0.4 percentage points above its 2% target. That's better than the Fed's preferred core Personal Consumption Expenditures ("PCE") Price Index, which checked in at 2.8% as of March, the latest month for available data. This sets up a great opportunity in European stocks and non-U.S. markets generally, Brett said. Lower rates fuel higher stock prices... And if the Fed eventually cuts rates, that would be another catalyst for foreign shares as the dollar weakens. As Brett said... First, the dollar is entering a major downtrend. As we've written a few times this year, it hit a secular peak in September 2022. To date, the currency has tumbled 7% off that peak. Since currency moves like these can take many years to play out, this will be a long-term tailwind for countries outside of America. As the dollar falls, investors start to eye foreign markets where currency depreciation won't affect their investment. This is the biggest investing story that no one is talking about. The dollar bust is still in its early stages... which means we're getting into this opportunity before the crowd. Not only that, European stocks could outperform U.S. stocks in the years ahead, Brett said. Brett noted that the International Monetary Fund has projected that European GDP will keep growing over the next two years – from 0.4% this year to 1.5% in 2025 – while U.S. growth will slow from 2.5% this year to below 2% in 2025... Plus, European shares are cheap right now compared with the U.S. market... The basket of stocks Brett is recommending would need to rise by about 45% just to come in line with the S&P 500's expensive valuation today. Finally, European stocks have entered what looks like the start of a new uptrend and have turned higher on the expectations of rate cuts. Putting it all together... Longtime readers of Brett and his mentor Steve Sjuggerud's work know that this combination – cheap, hated, and in an uptrend – has made for compelling "buy" opportunities over the years... Count this one among them. Brett told True Wealth Systems subscribers... Thanks to our TWS computers, we've spotted the European rally early. And today, we have the perfect entry point to invest in the region. Existing True Wealth Systems subscribers and Stansberry Alliance members can find Brett's entire case for European stocks and the details of this new recommendation [right here](. And if you don't already have access to True Wealth Systems, if nothing else, I hope I've woken you up to the opportunity that's taking shape in Europe. There is a world beyond the U.S. And stay tuned to the Digest in the weeks ahead for information on how you can get access to more of Brett's work. In this week's Stansberry Investor Hour, Dan Ferris and I talk with a longtime friend of Stansberry Research, Cactus Schroeder. Cactus is a Texas oil industry veteran who shares his take on what's happening in the energy sector right now... [Click here to watch the interview now](... and to hear the full audio version of this week's Stansberry Investor Hour (in which Dan and I also discuss recent developments in cannabis, weight-loss drugs, Starbucks, and more), visit [InvestorHour.com]( or find the show wherever you listen to your podcasts. --------------------------------------------------------------- Recommended Links: [MAY 15 COULD SPARK ANOTHER BANK RUN]( Bank runs could sweep America beginning May 15, according to the man who predicted the 2023 bank run. You have just days to prepare for a panic in the U.S. banking system that could double your money six different times if you get OUT of cash and into a little-known vehicle that appears during every banking crisis. See his outline (and No. 1 recommendation) [here](. --------------------------------------------------------------- [The Sneaky (Yet 100% Legal) Way for Obama to Return to Power]( The ONLY way Democrats can keep the White House is to bring back Barack Obama. And there's a sneaky (yet 100% legal) way to achieve this. In fact, this disaster scenario is already underway. See what they're up to, and how you can get ready today. [Here's the full video exposé](. --------------------------------------------------------------- New 52-week highs (as of 5/6/24): ABB (ABBNY), Agnico Eagle Mines (AEM), Booz Allen Hamilton (BAH), Cameco (CCJ), Colgate-Palmolive (CL), Commvault Systems (CVLT), Donaldson (DCI), Dimensional International Small Cap Value Fund (DISV), Cambria Emerging Shareholder Yield Fund (EYLD), Comfort Systems USA (FIX), iShares U.S. Aerospace & Defense Fund (ITA), Markel (MKL), Ryder System (R), RadNet (RDNT), Sprouts Farmers Market (SFM), Teradyne (TER), Trane Technologies (TT), The Trade Desk (TTD), Tyler Technologies (TYL), Veralto (VLTO), and Vertiv (VRT). In today's mailbag, two takes on Warren Buffett, whom we wrote about [yesterday]( in a recap of last weekend's annual Berkshire Hathaway shareholder meeting... By the way, as we promised, Stansberry's Investment Advisory lead editor Whitney Tilson has continued his look at Berkshire and its shareholder meeting [today in his free daily e-letter](. That includes an in-depth review of the company's first-quarter earnings report that was released Saturday... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Corey, Great, great Monday Digest. Thanks. Needed that. Can't go wrong with Mr. Buffett..." – Subscriber Jeff B. "Unfortunately, for all the great investing and general life wisdom and advice Buffett dispenses, for those who know what's really been going on in this country/world, Buffett has been a major money conduit to the [Chinese Communist Party] military, along with his sidekick, Bill Gates..." – Subscriber Gary S. All the best, Corey McLaughlin Baltimore, Maryland May 7, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,359.4% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,313.5% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 882.1% Extreme Value Ferris WRB W.R. Berkley 03/16/12 717.3% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 617.9% Retirement Millionaire Doc HSY Hershey 12/07/07 482.3% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 452.7% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 420.4% Retirement Millionaire Doc TTD The Trade Desk 10/17/19 358.9% Stansberry Innovations Report Engel NVO Novo Nordisk 12/05/19 351.1% Stansberry's Investment Advisory Gula Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,580.9% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,226.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 811.7% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 421.7% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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