Often the best investing opportunities are bets you make against the herd, against traditional wisdom. So before we turn to the best moneymaking opportunities in the week ahead, consider the following magazine cover headlines:
The Republican Savior.Time; February 2013. Sen. Marco Rubio is portrayed as the "new voice" of the GOP.
The 100 Best Companies to Work For.Fortune; January 2001. At the very top of the list is Enron.
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Let's look at the track record: 1) Rubio's presidential campaign this year was a humiliating bust and, because he gave up his Senate seat to run, he'll be looking for a job in January; 2) Since February 1996, Apple's stock has soared 9,340.58%; and 3) Enron's epic demise needs no elaboration.
Also consider the dire headlines in 2014, when oil prices hovered at $80 to $110 a barrel. Readers were warned about "peak oil" and the permanent end of cheap energy. Since that year, crude prices have fallen about 60%, even when you factor in oil's resurgence over the past three months.
The herd mentality is hard to resist. All too many investors succumb to "group think." When an investment gets touted (or bad mouthed), they tend to behave like lemmings and march right off a cliff.
Below is the straight dope on what you need to watch in the week ahead, so you can make up your own mind about the most promising places to put your money.
On Thursday, the U.S. Labor Department will issue its latest report on jobless claims. The Labor Department reported last week that initial claims for state unemployment benefits increased by 17,000 to a seasonally adjusted 274,000 for the week ended April 30. The increase was the largest since February 2015. Another report last week showed a 35% jump in planned layoffs by U.S.-based employers in April.
Similarly "bad" news is expected on Thursday, but context is required. Jobless claims still remain at historic lows that are consistent with a resilient economic recovery.
Another important indicator on the docket this week is the latest tally on retail sales, due Friday. Those retail numbers will be scrutinized for clues on the confidence and buying mood of the American consumer in the wake of an unexpected 0.4% fall in March. The analyst consensus is that April will register a 0.7% increase in retail sales, driven by cheap energy prices and stronger wage growth.
A positive retail report would be a shot of adrenaline to a broader stock market that seems to have run out of momentum, especially if it's coupled with favorable earnings reports from consumer sector companies.
The markets have been choppy, with sectors such as banking, energy and technology getting battered. But the consumer discretionary sector has performed relatively well. It serves as a reminder that, despite current woes in other areas of the economy, the consumer still accounts for roughly three-fourths of U.S. gross domestic product.
The Consumer Discretionary Select Sector SPDR ETF(XLY) - Get Report has gained 1.43% year to date and 15.23% over the past three months, compared to gains of 0.91% and 10.95%, respectively, for the S&P 500(SPY) - Get Report .
But to ride the retail sector's tailwinds, first wait for the relevant economic data and operating results.
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According to average analyst estimates, Macy's is expected to post earnings per share (EPS) of 38 cents, down from 56 cents in the same period a year ago. Nordstrom's EPS is expected to come in at 46 cents, down from 66 cents a year ago, and Kohl's is expected to come in at 38 cents, down from 63 cents a year ago. Unless major retailers beat expectations, the retail sector could take a hit.
Also scheduled to report earnings this week are stocks that traditionally serve as hedges in times of uncertainty, including Silver Wheaton (SLW) , Eldorado Gold(EGO) - Get Report , and Pan American Silver(PAAS) - Get Report . Investor anxiety has propelled gold and silver prices so far this year.
Year to date, The SPDR Gold Shares ETF(GLD) - Get Report is up 21.41%, and the iShares Silver Trust (SLV) - Get Report is up 26.08%. Quarterly earnings for precious metals-related companies this week are expected to be strong; consider buying gold and silver stocks, ahead of operating results.
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John Persinos is editorial manager and investment analyst at Investing Daily. At the time of publication, the author held stock in Apple.