The Biggest Investing Mistake You Might Ever Make: Part 2

NYSE: SPY | SPDR S&P 500 ETF Trust News, Ratings, and Charts

SPY – Today’s part 2 of 2 article features the SPY, MMP & AMZN, and reveals “The Biggest Investing Mistake You Might Ever Make.” Read on for all the details.

In part 1 of this series, I explained why several blue-chip economists expect an economic boom for the next few years unlike any we’ve seen in decades, or will ever likely see again in our lifetimes.

This is exactly the kind of boom that some investors worry could cause the economy to overheat, interest rates to rise, and trigger a lost decade for stocks.

That’s actually one scenario that Moody’s warned about last year, 10-year yields soaring to 4.3% and triggering a multi-year bear market in the S&P 500. 

However, most economists disagree with Moody’s, expecting 10-year yields to rise no higher than 2% to 3% allowing stocks to potentially rally for another decade.

And of course, that’s just the broader market. As we all know (or should know) by now, it’s a market of stocks, not a stock market.

Reason 3: Blue-Chip Bargains Are Set To Soar

In any normal quarter, analysts cut estimates by 2% to 4% ahead of earnings, so that companies can beat expectations and management can look good.

Following the 2017 corporate tax cuts, estimates rose by the largest amount ever recorded. Well in the last three quarters earnings estimates have been rising for a record-breaking three quarters in a row. And at an accelerating rate.

Energy, industrials, and consumer discretionary are the three sectors most expected to benefit from 2021’s historic pandemic ending booming time.

Magellan Midstream (MMP): A Great Low Risk/High-Yield Way To Profit From A Recovery In Energy 

(Source: FAST Graphs, FactSet Research)

Amazon (AMZN): The Ultimate Growth Stock Is Undervalued And Set To Soar 

(Source: FAST Graphs, FactSet Research)

But what about soaring interest rates?

Reason 4: Fundamentals, Not Interest Rates Determine Stock Prices

 

For 10 years low rates have been seemingly all that investors have cared about. So naturally, many newer investors think that low rates are all that’s needed for stocks to go up. And the inverse, that rates going up is always bad or stocks seems intuitive as well.


(Source: Ben Carlson)

In the modern era, primarily the last 25 years, all stocks have done well in rising long-term rate environments.

  • growth, value, small, large, didn’t matter, stocks went up as rates rose

In case you don’t believe JPMorgan’s research that stocks tend to go up as long as 10-year yields are below 5%, consider this.

  • the greatest bull market in history, the tech bubble of the 1990s, occurred when 10-year yields were 7% or almost 5X where they are now

But didn’t the tech bubble lead to a lost decade for stocks? And didn’t it wipe out a lot of speculators? Indeed it did. However, do you know that buy and hold investors still did alright even when faced with the worst speculative mania in US history?

  • From 1995 to 2002, including the 80% Nasdaq crash that ended in October 2002, the Nasdaq delivered 5% annual total returns for buy and hold investors

Now imagine not buying at overvalued levels in 1995 but paying a reasonable or even attractive valuation for some of the world’s greatest companies.

(Source: Imgflip) 

You don’t need to pray for luck on Wall Street to achieve your financial dreams. You only need to practice disciplined financial science based on the most time-tested and best-proven investing concepts.

Want More Great Investing Ideas?


9 “MUST OWN” Growth Stocks for 2021

How to Ride the 2021 Stock Market Bubble

5 WINNING Stocks Chart Patterns

K.I.S.S. for the March Stock Market


SPY shares were trading at $387.38 per share on Monday afternoon, up $3.75 (+0.98%). Year-to-date, SPY has gained 3.61%, versus a % rise in the benchmark S&P 500 index during the same period.


About the Author: Adam Galas


Adam has spent years as a writer for The Motley Fool, Simply Safe Dividends, Seeking Alpha, and Dividend Sensei. His goal is to help people learn how to harness the power of dividend growth investing. Learn more about Adam’s background, along with links to his most recent articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SPYGet RatingGet RatingGet Rating
MMPGet RatingGet RatingGet Rating
AMZNGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

7 Simple Strategies to Beat the Market

Steve Reitmeister has been investing successfully for over 40 years. In his new presentation he shares his top 7 strategies learned over the years to help investors beat the stock market (SPY). Discover these strategies now to improve your investing results in the months and years to come.

:  |  News, Ratings, and Charts

AutoNation: A Great Value Stock

Shortages in parts, especially semiconductors, this year, has been a boon to auto dealerships. Consumers resorted to buying used cars and parts, which benefits a company such as AutoNation, Inc. (AN). The stock has seen strong revenue growth and share gains this year. Since AN is still very much undervalued, there is a lot more upside left for investors.

:  |  News, Ratings, and Charts

Go From Zero to 60 with a Still-Early-Stage Stake in Fisker

Admittedly, it took a long time for Fisker (FSR) to unveil its all-electric SUV. With that event now completed, FSR stock is prepped for a rally.

:  |  News, Ratings, and Charts

Bull Market Update: Year End Targets?

4,700 seems to be a point of serious resistance for the S&P (SPY) leading to an extended consolidation period hand in hand with violent sector rotation. Why is this happening? What happens next? And how to trade this environment? The answer to these questions and more are discussed in this market commentary below...

:  |  News, Ratings, and Charts

Go From Zero to 60 with a Still-Early-Stage Stake in Fisker

Admittedly, it took a long time for Fisker (FSR) to unveil its all-electric SUV. With that event now completed, FSR stock is prepped for a rally.

Read More Stories

More SPDR S&P 500 ETF Trust (SPY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPY News