The Weekend Edition is pulled from the daily Stansberry Digest.
It's time for an honest look at the "Melt Up"...
Now, I know what you're probably thinking...
"But Vic, I thought the Melt Up ended with COVID-19. What happened? Is today's market action still part of the Melt Up?"
Folks, things have gotten a little crazy out in the world. I'm guessing you've noticed by now.
Market volatility has left investors scrambling. And we've been swamped with questions since the market roared back over the summer to new all-time highs once again.
They all share a common theme. And they can be boiled down to a single question...
"What does this all mean for the Melt Up?"
Well, my friends, before I get into today's essay, I have good news...
Next week, Steve will be making an announcement that directly addresses this question. And even better, as part of his announcement, Steve will unveil the latest update to his Melt Up playbook.
I've been at Steve's side through the COVID-19 crisis. And I've seen how it has reshaped his thinking...
Simply put, his upcoming announcement about the Melt Up is going to be big... It will change the way you invest over the next five years. And I believe you'll be surprised at what has and hasn't changed in Steve's playbook.
Now, I'm sure as heck not going to spoil my boss's announcement. You'll need to tune in next week to get the update straight from Mr. Melt Up himself.
But... I can't help myself. This announcement is so big that a little sneak preview won't spoil too much. So today, I'm going to tackle the Melt Up head-on...
We're going to cover the basics, of course. But we're also going to take it a step further and go over some of the nuances behind Steve's Melt Up thesis... and what it all means moving forward.
My hope is that this primer will help you understand exactly why Steve's upcoming announcement is so important for individual investors like yourself.
You'll soon see why it still makes sense to be talking about the Melt Up – even in the post-COVID-19 world. So let's get right into it...
We'll start by addressing the microscopic elephant in the room...
Of course, I'm talking about the pandemic world we're all living in today.
COVID-19 hit the markets like a meteor earlier this year. And it looked like it was coming to wipe out the dinosaurs.
This was the big one. And it guaranteed the Melt Up was over... at least, that's what it felt like.
Late March was grim... Not even the luxury of our secluded beachfront office could lighten the mood. And I could see on Steve's face that he was spooked. We both were. We warned subscribers to follow their stops and prepare for what could be a long downturn.
But there was a strangeness to all of it. I knew that this event had the potential to live outside of the Melt Up narrative.
Steve did, too. And as he told a group of his paid-up subscribers in early April...
There is no perfect precedent in the financial markets for what we are going through right now.
What you will find – if you haven't already – is that there is no shortage of prognosticators offering their opinions. And they will find any historical precedent to line up neatly with their worldview, or their desired outcome... whether it's justified or not.
Simply put, we had to do the best we could for our subscribers with the data we had...
So, driven by the data, Steve told folks to step aside... That's what the numbers supported at the time, regardless of the hoped-for outcome.
Then, we had to wait for the dust to settle. And as the data supported it, Steve slowly guided his subscribers back into the market.
Today, we're finally able to see the horizon again. And I'm not sure that any of us knew it would look quite like this...
Reality has turned out to be stranger than what we could've ever imagined. That's why Steve's upcoming announcement is so important...
It addresses the data we now have, head-on. It's more than a "desired outcome," as Steve puts it. The reasoning behind that is simple...
The Melt Up is more than just a prediction...
It's true that Steve's Melt Up thesis does contain predictions. There's no question about that. And many of them have come true.
But a lot of people fail to realize that the Melt Up thesis is built on an economic philosophy.
That philosophy guides Steve like a compass. And it points in the direction of predicable results. It's simply a matter of getting pointed in the right direction.
Once you have that compass in your pocket, it's easier than you might think to make bold predictions. And that's exactly what Steve does with the Melt Up.
So, where does COVID-19 fit into all of this? Well, there's something funny about that... For the most part, COVID-19 is just a bit player in the Melt Up thesis.
Now, don't get me wrong... I'm not saying that the Melt Up is untouchable by black swans. All economies are subject to new extreme events at any moment.
It's just that the idea behind the Melt Up gets to the very core of economic cycles. And it's darn hard to find examples of an economic cycle getting cut off early.
In this case, we're talking about the "post housing crisis market reinflation and its coming final push"...
That's the (extremely) boring way of saying "Melt Up."
Steve may not have been the first to identify it. But from the beginning, he sure as heck made it his mission to communicate his insights to mom-and-pop investors.
The idea behind it was simple...
- The world had just been through a major economic crisis.
- The Federal Reserve and the U.S. government were taking massive action to end the crisis.
- That meant interest rates would stay at rock-bottom levels for longer than anyone could possibly imagine.
- And the net result would be an asset boom... one that could be larger than any of us would ever see again in our lifetimes.
Those four components are the core of Steve's Melt Up thesis. And the philosophy behind them is simply that policymakers will push markets to ridiculous extremes just to keep things rolling in the "right" direction.
We saw this play out in 2017... The market ran so hot that it banged out a nearly 20% gain in a single year. After that, the Fed decided to do a little tightening.
But when the market corrected in response, President Donald Trump made his displeasure very well known. And then, the Fed relented...
After all, inflation was still low. And it seemed like there was more room to let the economy run hot.
Feeble attempts at policy tightening like this fit perfectly with Steve's Melt Up thesis. And after the Fed reversed course, we were on track to milk some incredible gains out of what seemed like the Melt Up's final stages.
All we had to do was sit back and watch the market take off.
Now, before I go any further, I apologize if I'm confusing you at all...
We should take a moment to get our terms straight...
When we use the term Melt Up, we could be talking about two different things. I think longtime readers understand this, but it's important to touch on here...
The first "Melt Up" describes the big economic cycle we just covered... It's the simple recipe that says Fed-imposed low rates over the long term will translate into a big asset boom.
The second "Melt Up" is really the "end of the Melt Up"... It's when retail traders pour into the markets at insane levels, looking to make a quick buck.
This is the Melt Up that comes with the bombastic predictions. And rightly so... It's a moment of pure market euphoria. Darn near everyone will get swept up in it.
If you were trading during the dot-com bubble, you know what this euphoria feels like. Bitcoin had a euphoric peak like this, too.
It seems like everyone is getting rich during the end of a Melt Up. And if you want in, all you have to do is raise your hands and start catching the money that's flying through the air.
This time last year, it felt like we were getting darn close to the beginning of this event. We had the tingle of that euphoria in 2017... but we hadn't quite gotten there.
We were right on the edge of that final Melt Up push. And then the COVID-19 meteor hit.
At first, it seemed like the COVID-19 pandemic had derailed the Melt Up for good...
And even today, I understand if you still think that it has... There's just so much volatility right now. And so much of the news is negative.
That makes it hard to get a sense of what's really going on. It's not easy to see the big picture when everyone is focused on the short term.
But I want to share one critical stat that I believe will uncloud your vision...
Over the past five years, the total return of the benchmark S&P 500 Index is 91%. That's almost double the expected total return of the market over any given five-year period.
And remember, that 91% total return includes the market's quick, unforeseen drop during the height of the COVID-19 panic earlier this year.
Plus, the market has just started making new highs again. We're on the way back up.
COVID-19 and the market panic it caused have left an indelible mark on this market cycle...
We almost had our Melt Up... Then, it got bottled up and pushed into the future.
Analyzing the results of this kind of market event leads to staggering conclusions... We're dealing with generational market forces here.
And before it's too late, you absolutely must make sure your portfolio is aligned with this incredible tailwind...
Good investing,
Vic Lederman
Editor's note: Something big is brewing in the markets right now. On Wednesday, October 21, at 8 p.m. Eastern time, Steve is delivering the most important update to his Melt Up thesis to date. He's walking through every detail of his newest prediction... analyzing the forces at work today... and preparing you to grow your money before 2020 is over. RSVP for this FREE event right here.
