Summary: With Sam Stovall, Managing Director of US Equity Strategy at CFRA Research; author of <a href="https://www.amazon.com/Seven-Rules-Wall-Street-Crash-Tested/dp/0071615172/ref=sr_1_1?ie=UTF8&s=books&qid=1278949993&sr=1-1" data-cke-saved-href="https://www.amazon.com/Seven-Rules-Wall-Street-Crash-Tested/dp/0071615172/ref=sr_1_1?ie=UTF8&s=books&qid=1278949993&sr=1-1">The Seven Rules of Wall Street: Crash-Tested Investment Strategies That Beat the Market</a><br> Steve spoke with <a href="https://www.cfraresearch.com/analyst-team/">Sam Stovall</a>, Managing Director of US Equity Strategy at CFRA Research, about the current state of the stock market and whether he thinks the worst is behind us. Sam has been a market analyst for many years, so he’s seen his fair share of both bull and bear markets. Sam is also the author of the book, <a href="https://www.amazon.com/Seven-Rules-Wall-Street-Crash-Tested/dp/0071615172/ref=sr_1_1?ie=UTF8&s=books&qid=1278949993&sr=1-1">The Seven Rules of Wall Street: Crash-Tested Investment Strategies That Beat the Market</a>.<br> Is The Worst Behind Us?<br> Steve started their conversation by observing that “The economy is still shut down, yet the stock market has rebounded and stabilized to a large degree.” He asked Sam if we’re really seeing a healthy rebound overall or if it’s just the top dozen or so large-cap stocks that have recovered.<br> Sam replied by saying, “Well, we are seeing a large number of companies that are moving above their 10-week moving average and also climbing above their 200-day moving average. While it does appear as if it’s the largest tech behemoths that are driving the market, I would tend to say that the breadth of the recovery is expanding, which is a positive for the overall market.”<br> Steve then stated that the market usually precedes a rise or fall in the economy by about seven months and asked Sam if he thinks that’s probably going to be the case again this time. Sam said he thinks the market’s March 23rd low is likely the bottom, noting that we’ve seen an impressive rally of about 30% since then. He thinks there’s less likelihood of a second major sell-off to a double bottom, primarily because of one key factor. “What’s happening today that did not happen in the past, like with the 2008 crash, is the very rapid stimulus response by the Federal Reserve.”<br> Steve also raised the question of whether the stimulus is really going into the economy or just into the stock market. Sam said that he disagrees with analysts who are saying the stimulus money is just creating liquidity in the market, noting that the largest stock market investors aren’t the people receiving stimulus checks.<br> He added that he thinks the market is at the point where it’s looking on down the road and considering where we’re likely to be six months to a year from now. Sam’s forecast from CFRA Research is “We expect to see 30% gains for the large caps next year, 40% for mid-caps, and 60% for small-cap stocks.”<br> Strong Sectors In A Bear Market<br> Since we’ve reached the month of May, Steve asked Sam about the old market adage, “Sell in May and go away” that has been reflected in the market’s performance since 1990, showing on average that the market has experienced its biggest gains—6.5%—between November and April, while only rising an average of 1.8% between May and October.<br> Sam offered listeners some deeper insight by adding that in two out of three years since 1990, the sectors of consumer staples and healthcare have significantly outperformed the overall market during that May to October period. He said, “I would rather stick with those defensive sectors where the demand for products and services remains fairly stable.” Steve asked if Sam would include major tech stocks, such as Microsoft and Apple, in that group of defensive stocks. Sam replied that he would include large, stable tech companies,
