When the Big Money Index Plummets, Go Buy Stocks
Stocks are washed out.
If our data could talk, it’d yell the following:
When the Big Money Index plummets, go buy stocks.
Let’s face it. It’s been a lonely road keeping a bullish outlook.
Bearish worries about elevated interest rates, a strong dollar, and a potential reignition of inflation have ruled the media headlines.
How can I possibly be constructive at such a fearful time?
Simple. It boils down to cold-hard evidence-rich data suggesting that now is a wonderful time to strap on the helmet and buy high-quality equities.
Before you dismiss this against-the-crowd idea, review the evidence.
Today, we’ll unpack the current money flow situation through the lens of Big Money. Then we’ll study history to get a gauge of what to expect next.
Hug a bear. They’re gonna need it.
When the Big Money Index Plummets, Go Buy Stocks
Two weeks ago, I listed 3 reasons to buy stocks in January. Today, I’ll give you a 4th.
Under the surface of the market, a wave of selling has driven many stocks to oversold levels. The Big Money Index (BMI) is a real-time gauge of institutional investor appetite for stocks.
Just this week, it fell below 37%. These are levels last seen in November 2023.
Below is a 3-year BMI chart overlaid on the S&P 500 (SPY ETF). I’ve drawn a horizontal line highlighting this relatively low reading:
What does a free-falling BMI tell us? It lets us know that more stocks are getting sold relative to those getting bought.
I’m sure you’ve felt the discomfort in your portfolio. Plenty of stocks are heading lower day after day, especially growth stocks like technology and semiconductors.
The pain doesn’t stop there as interest rate sensitive areas have been flogged too with Real Estate and Consumer Staples names underperforming.
If you’re inclined to sit on the equity sidelines until the coast is clear, you could miss a mammoth sized rally.
Here’s why.
Back to October of 2014, a BMI reading below 37% has forecasted market-beating returns for both large- and mid-caps.
Here’s the proof. Over this 10-year period, we’ve encountered 276 days with a sub-37 BMI. Here’s what comes next for the S&P 500 and S&P Mid Cap 400:
- 3-months later, large-caps gain 7.6% and mid-caps gain 8.6%
- 6-months later, the S&P 500 jumps 11.4% and the S&P Mid Cap 400 jumps 11.9%
- Be bold with a 12-month hold and the average climbs to 21.5% for large-caps and 22% for mid-caps
And to show how powerful these average gains are, I’ve also included the S&P 500 total average over the same period.
Don’t make investing complicated. Follow the money.
When the Big Money Index plummets, go buy stocks!
This is why, yesterday, we sent out a MAP PRO update highlighting other insights and 6 stocks to consider for the months and year ahead.
Don’t stare…get in there!
Let’s wrap up.
Here’s the bottom line: Stocks are washed out. The BMI has fallen to low levels last seen since late 2023.
Be thankful. Moments like these offer a brief window to scoop up quality assets on sale.
The biggest opportunities can be found in small- and mid-cap stocks accelerating their earnings…not on the lips of the media.
Data helps you spot them.
Don’t invest blindly. Use a map!
****Also, one update that is coming soon. We are going to start gating some of our signal studies in our weekly Big Money Insights. Don’t worry, members will always have access to these!
Non-members will still receive outstanding commentary and market thoughts. It’s the powerful actionable insights that will make being a MAPsignals subscriber that much more valuable.
Finally, if you’re a serious investor looking for cutting-edge insights and powerful outlier stocks, get started with a MAP PRO subscription. Enterprise customers please reach out for your data-driven needs.