Stocks are moving sideways. Now what? Now the fun begins!

You may have noticed we’re talking about money a lot these days. There’s a good reason for it. There’s good money to be made.

But with stocks now trading at roughly the same level they were two weeks ago, it’s clear we’ve moved out of the blind optimism stage.

In an update to my Manward Letter subscribers yesterday, I reminded readers of the many stages of disaster recovery.

There’s the warning phase… the actual strike of the disaster… the heroic phase… the honeymoon phase… and, where we are with this coronavirus mess right now, the disillusionment phase.

As citizens watch their businesses implode and see their bank accounts go bust, they’re getting angry. They’ve realized the true value of Liberty… and what it feels like to lose it.

Laws and Money

All across the nation, folks are protesting. Here in Pennsylvania, many businesses and even county governments are learning the governor’s close-your-doors decree is not enforceable.

They’re opening their doors.

The line to get in our hometown’s one restaurant that is “illegally” open to sit-down seating is long. Going out to eat has turned into a political statement.

The governor is fighting back.

It turns out enforceable laws don’t matter when you’ve got reams of regulations to follow. The governor threatened to take the liquor licenses of restaurants that reopen. The health department said kitchens that open aren’t up to code. The insurance commissioner said opening voids insurance contracts. And, of course, counties that reopen will not receive money from the governor.

Clearly, disillusionment is high.

Now… spread that across 50 states. We can see why stocks have given up on their blind surge higher.

Just as the disaster response textbooks tell us to expect, most folks don’t know what to do with a bevy of confusing data. It has investors wondering what comes next.

But if we thumb through the next few chapters in those books, we see there’s some good news ahead.

Immense Opportunity

We see there will be some “trigger events” in the weeks and months ahead. In an earthquake scenario, these could be aftershocks or the collapse of a teetering building. After a hurricane, it could be a random storm that dumps a few more inches of rain, pushing levees to their brink.

In a pandemic… it’s a few outbreaks and some scary data.

It’s expected – for at least a year.

But then comes the good part. The reconstruction. It’s nearly a straight line higher. There will be setbacks. The mood will get grim at times, but the fear will be gone and growth will prevail.

For investors, there’s immense opportunity in every phase.

But ask a professional investor where he’ll make his money and he won’t tell you what you might expect. It’s not those straight-line shots that make the most money.

Unless you’re lucky enough to buy at the bottom and sell at the top, the runs that have everything moving in tandem are a false positive that appear only with the gift of hindsight.

Instead, the real money is made when the market gets confused. It’s not volatility that we’re looking for; it’s scattered market breadth. When some stocks are surging and others are falling, that’s when the pros drool.

Here’s why…

Data-Driven Profits

When all stocks are moving in the same direction, it’s because the herd is spooked. Something has it excited, and it’s simply moving to move. But when one stock is up while its industry brethren are down… it’s almost certainly moving because of data. And we’d much rather invest in data than blind emotions.

We’re in the data phase.

For a guy who’s spent a couple of decades in the market, this is the good stuff.

Our equations… our algorithms… our charts… our ratios… are all fueled with data. The more we get, the better the returns.

Now that most folks have lost their blind optimism, the fast-moving rally is over.

That’s good.

Now the big money will be made.

We’ve entered a stock picker’s market.

And that’s a very good thing.