The U.S. stock market is shattering records.
Today, the S&P 500, Dow Jones Industrial Average, and NASDAQ all set new all-time highs. The Dow is now up 12% on the year. The S&P 500 is up 10%. The NASDAQ is up 8%.
The Russell 2000, which tracks 2,000 small U.S. stocks, also notched a new high today. It’s climbed 21% since the start of the year. And it’s coming off its best month since October 2011. At one point in November, it climbed for 15 straight days…its longest winning streak in two decades.
If you’ve been reading the Dispatch, you know exactly what (or should we say "who"?) is fueling this rally…
• President-elect Donald Trump has big plans for America…
He wants to lower taxes…loosen regulations…and spend billions of dollars rebuilding America’s crumbling infrastructure.
In other words, he wants to do things that America hasn’t tried in years. A lot of people see these policies as “pro-growth” and “pro-business.” It’s why stocks have soared to new heights.
Now, we at Casey Research love lower taxes and less red tape as much as the next guy. But we’re also natural skeptics. Right now, we wonder if the market is getting ahead of itself.
• Louis James says sentiment is fueling this rally…
As you probably know, Louis is our chief resource expert. He writes International Speculator and Casey Resource Investor, our publications dedicated to resource stocks with big upside.
According to Louis, the U.S. markets are “enjoying a Trump Honeymoon.” But many investors are forgetting something important.
Trump hasn’t done anything yet. He hasn’t built the wall. He hasn’t thrown Hillary in jail. And he certainly hasn’t “Made America Great Again.”
His first day on the job is January 20, 2017. Until then, we won’t really know what we’re getting with Trump.
Louis wrote in a letter to his readers last week:
Trump isn’t president yet. No laws, regulations, or taxes have been changed yet. And yet, the markets are giving him a great deal of credit for the things he hasn’t even started to try to do. Once the Trump Presidential Reality Show gets going next year, we’ll have a much better idea of how well or misplaced U.S. investor optimism is.
• According to Louis, Trump has his work cut out for him…
Heading into the election, many investors were worried about the soft U.S. economy. They were nervous about bubbles in the financial system. And they were wondering how the Federal Reserve would unwind eight years of easy money.
Since the election, investors seem to have forgotten about those problems. But we haven’t lost sight of the big picture.
In short, we think Trump is walking into a huge mess. If he’s going to turn the country around, he needs to do a bang-up job. His margin for error is razor-thin.
Louis explained last week:
[I]magine the dislocations and fallout from bad investments made under the prior regime as they are liquidated. And if Trump pushes the Fed to raise interest rates aggressively, it could kill what growth there is in the real estate sector. It could also burst what Doug has been calling the bond super bubble.
• Most investors are discounting any chance of a recession or financial crisis…
They’re acting like Trump is the greatest thing to happen to the U.S. and global economy in decades.
But Louis thinks the country could experience a lot of pain if Trump can’t live up to the hype. He explains:
Politicians love to dream that governments can spend a society into prosperity. We all know that’s a dangerous pipe dream. Correcting bad economic policies of the past is never easy. The hard truth is that facing the music, paying the piper, taking our medicine—whatever you want to call it—is going to cause a lot of pain. I mean that literally. It may start as financial pain as errors get liquidated, but that quickly turns into emotional pain, and then physical pain for those most impacted.
A few months from now, we’ll know if the market’s optimism is warranted. Until then, we wouldn’t recommend fighting the trend. Countless investors have lost a fortune trying to do this…
• If stocks keep rising, gold and silver could struggle…
This shouldn’t surprise anyone. After all, gold and silver are safe-haven assets. Investors buy them when they’re nervous about the economy or stock market.
But when things appear good, investors buy less gold and silver. Some folks even sell their precious metal holdings when optimism is in the air.
That’s why gold has fallen 8% since the election. It’s why the price of silver is down 6%.
Naturally, many of our readers are worried about the recent pullback. They’ve emailed us asking what to do next.
• Louis says long-term precious metals investors should stay the course…
He wrote to his readers last week:
I’m not trying to scare you here—but I don’t want to sugarcoat the truth, either. We could be in for a tough few months in precious metals. Of course, I see the fundamentals as strong as ever, and any more correction as a source of opportunities. I just want to make sure we all have our eyes wide open to the possibilities as we go forward.
According to Louis, the Trump Honeymoon isn't the only factor working against gold and silver…
• We’re in tax loss season…
This is the time of the year when many investors close losing positions. With gold and silver down over the last few months, many “weak hand” investors could unload their losing positions in the coming weeks.
This could put even more pressure on gold and silver, along with shares of companies that mine these metals.
The good news is that tax loss season ends when the calendar year ends. Come January, investors could see great buying opportunities. Louis wrote last week:
This potential tax-loss selling argues for holding off on buying anything we don’t have reason to believe is right about to pop. The last trading days of this month could be the perfect time to bag some real bargains.
It’s also important to realize that Louis has never been more bullish on gold and silver for the long term. He continues:
With all my heart and mind, I encourage all international speculators to stay the course. I can’t time the market’s moves, but I’m absolutely convinced we’re backing the right trends. Payday is coming. And that means that if we do get more “great buying opportunities,” those not all-in yet should take advantage of them.
• In short, we encourage all investors to stay disciplined over the next few months…
Don’t fight the trend. Don’t panic. Don’t get greedy. Obey your stop losses. Take profits when you get them. And treat down days as opportunities to buy world-class companies.
What’s more, there are plenty of other ways to make money in the resource market right now. It’s why Louis has also told his readers to own uranium producers, natural gas companies, and even companies that mine industrial metals.
These kinds of companies have done extremely well since Election Day. They should continue to do so over the next few years if Trump does what he says he’s going to do.
You can look inside Louis’ portfolio by taking a risk-free trial to Casey Resource Investor. We’ll even give you a full 90 days to see if his service is right for you. If you aren’t happy with your subscription, we’ll give you a 100% refund. Click here to learn more.
Chart of the Day
Louis is very bullish on zinc right now.
Zinc is an industrial metal. It’s used in everything from auto bodies to suspension bridges.
This year, the price of zinc has surged more than 66%. It’s now trading at the highest level in nine years.
Normally, when you see a move like this, you’re late to the party. But Louis and his team think zinc could be headed much higher from here.
For one, zinc should get a huge boost from Trump’s “Make America Great Again” policies, especially if the next administration spends heavily on infrastructure.
Zinc is also in a serious supply crunch. Louis and his team wrote last month:
[Z]inc faced a shortage this year as one of the biggest Chinese producers, MMG, postponed the start of the new Dugald River mine until 2018. This happened just as demand rebounded in China, the biggest user. We estimate that global zinc output has declined by 1.4% while consumption has gone up by 3.5%. The International Lead and Zinc Study Group calculates that the world will need as much as 352,000 tonnes of zinc to balance the supply in 2016 (versus 152,000 projected earlier).
The combination of rising demand and shrinking supply should send zinc much higher. Unfortunately, there aren’t many “pure play” zinc producers, unless you buy a junior company. But that can be risky.
The other way to profit from rising zinc prices is to own a diversified miner. Yesterday, Louis recommend one such company that he says will do extremely well during the Trump years.
According to Louis, this company should “see huge profit increases going forward” and that should “translate into huge gains” for his readers. Plus, the business is already profitable, paying dividends, and is growing strongly.
You can learn all about this company by signing up for Casey Resource Investor today. And remember, we’ll give you a full 90 days to decide if it’s right for you. Click here to learn more.
Delray Beach, Florida
December 8, 2016
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