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There's a saying in investing: "Do more of what's working, and less of what's not."
People forget this lesson. Folks get worried when a boom goes on "too long." They know what goes up must come down... eventually. So they start to get creative. They make complicated, indirect bets – or worse, they bail out altogether.
The problem is, booms don't die of old age. You might be tempted to try and outsmart the market... But it's usually better to stick to what's already working.
Today, there's a boom underway that most investors want to abandon "just because." But as I'll show, that's the wrong bet to make right now.
A lot of folks fell into this trap at the end of 1998. No one would have faulted you for selling your tech stocks then...
The sector was already up 110% in two years. It was an incredible move higher.
If you thought, "This can't last much longer," you weren't alone. And you could have locked in solid gains by selling... So why not?
You might have said, "Things will get ugly when this tech bubble pops." You'd have been right eventually. But if you had sold at the end of 1998, you would have missed more than half of the total rally.
The sector went on to climb another 130% from the end of 1998 to the peak in March 2000.
It was a true bubble. Prices had stretched far beyond fundamental logic. But here's the thing...
The rally in tech was working. And it paid to stick with it instead of trying to outsmart the trend.
The same thing happened after the 2008 financial crisis. U.S. stocks bottomed in March 2009. Then, the market took off...
Five years later, the S&P 500 Index was up 200% from its bottom. It was a big move... And folks were scared that the bull market was running out of steam.
Investors worried that China's economy would falter, causing a global slowdown. And falling oil prices and an imploding energy market did nothing to ease those fears. But U.S. stocks kept rallying...
If you had sold everything in 2014 – five years into the bull run – you would have left triple-digit gains on the table. The good times lasted another five years. And the market went on to rally another 100%.
Said another way, U.S. stocks were working. To lock in maximum gains, you needed to stick with them... far longer than it probably felt comfortable.
This leads us to an important truth about the markets... During bull runs, prices can rise to incredible heights – higher than anyone believes is possible. So right when it seems like a boom should be ending, prices typically have much further to go.
Today, the prevailing belief is that the energy stock boom we've seen in the past two years is nearing its end. And it's easy to see why...
Aside from the recent sell-off, energy stocks have soared since late 2020. Take a look...
The Energy Select Sector SPDR Fund (XLE) roughly tripled from late 2020 to its high earlier this year. It makes sense if you think you missed it. But in an energy boom, prices can go much higher...
During the mid-2000s, oil prices soared for years. And energy stocks followed suit. They jumped roughly 350% over six years. Take a look...
Energy booms can last longer – and soar higher – than anyone imagines. And that means you don't want to give up on energy stocks.
Most folks believe this boom is on its last legs. But selling now, "just because," isn't a wise move. The current boom could still have years ahead of it.
Good investing,
Brett Eversole
P.S. There are several key reasons why the energy boom could surge higher for years to come. You see, investors are ignoring a huge tailwind behind this sector... an inevitable force that the mainstream media is completely missing in the "noise" of current events and market volatility.
I recently sat down to uncover the full story... including how you could make triple-digit gains as this long-term trend plays out. I urge you to check it out right here.
Further Reading
As much as oil prices have soared, speculators should be euphoric today. But that's not the case... Find out why the contrarian bet is for oil prices to continue higher right here: Why You Shouldn't Bet on an Oil Bust.
Investors tend to panic at exactly the worst times. They run for the exits precisely when the potential upside is greatest. Lately, even the investment pros are making this mistake... Learn more here: The Investment Pros Haven't Been This Scared Since 9/11.