It's been a rough few weeks for some popular tech stocks that dominate the Nasdaq.
Concerns over rising interest rates from an overheating economy have sent some shares crashing as much as 30% in a matter of days.
However, there are several reasons why if you let yourself be scared out of stocks right now, you'll likely regret it for the rest of your life.
Reason 1: The Pandemic Is Almost OverJNJ's single-shot vaccine has now approved. The company says 4 million doses will ship in the US this week and 20 million by the end of March. 100 million by the end of June.
Here's a timeline of how vaccinations could ramp up in the next five months:
- March 31: 240 million doses distributed
- May 31: 420 million doses distributed
- June 30: 500 million doses distributed
- July 31: 700 million doses distributed" - Business Insider
These are merely the number of doses excepted to be delivered, not actually administered.
- however, the US is expected to increase daily vaccinations to 3 million per day by the end of May
- 50K US pharmacies alone have the capacity for 3 million daily vaccinations
Expert consensus is now early to mid-July = US herd immunity and the end of the pandemic in this country.
That includes Moody's which is assuming a July 4th herd immunity date as its base case forecast. A forecast that includes 6% GDP growth in 2021 and 5% in 2022.
- Better two-year growth than even during the tech boom '90s.
And guess what? Economic forecasts have been rising all year. That includes blue-chip economists at Bank of America.
The US economy will experience "stellar" growth in 2021 as the COVID-19 pandemic subsides, Bank of America said in a note on Monday...
The bank increased its 2021 US GDP growth estimate to 6.5% from 6.0% as it has become "more convinced" that the consumer will get out and spend this year, the note said. The bank also sees heightened economic growth extending into next year, bumping its 2022 GDP growth estimate to 5.0% from 4.5%...
"Vaccinations are running at a faster-than-expected-rate, which should pull forward the timeline for successful reopening of the economy. This will help to unleash demand for leisure and other COVID-sensitive services even earlier than previously anticipated," BofA said. " - Business Insider
Why is BAC even more optimistic than Moody's about 2021 and 2022 growth?
- $1.7 trillion stimulus vs $1 trillion assumptions
And we can't forget that the other major stimulus package this year, infrastructure might be even bigger and generate decades of economic growth.
This brings us to the second major reason if you sit out the next few years, you might never forgive yourself.
Reason 2: The Best Corporate Earnings Growth In Decades Is Coming| Year | EPS Consensus | YOY Growth |
| 2020 | $138.61 | -14% |
| 2021 | $172.26 | 24% |
| 2022 | $198.81 | 15% |
| 2023 | $223.21 | 12% |
(Source: FactSet Research Terminal)
The worst recession in 75 years, which saw a 33% quarterly GDP contraction, resulted in a modest 14% EPS decline in 2020. By the end of this year, corporate profits will be at record highs, and analyst bottom-up forecasts call for double-digit earnings growth for three consecutive years.
BUT WAIT THERE'S MORE!
While the S&P 500's normal historical earnings growth rate is 5% to 8%, there is one major reason why we might see high-single-digit or even double-digit EPS growth all the way through 2025.
The Democrats are expected to roll out a massive infrastructure bill after the American Rescue Act stimulus bill is signed into law.
- Senator Joe Manchin is the most conservative Democrat in the Senate
- and has publically come out as very pro infrastructure spending
How pro infrastructure?
The most important thing? Do infrastructure. Spend $2, $3, $4 trillion over a 10-year period on infrastructure," he told Inside West Virginia Politics, a news program. "A lot of people have lost their jobs and those jobs aren't coming back. They need a place to work." - Business Insider (emphasis added)
Manchin is so pro-infrastructure that he's willing to double Biden's $2 trillion proposal!
Do you know what $400 billion per year in infrastructure spending would mean to GDP growth if it were deficit funded?
About 2% extra annual growth, or 4+% GDP growth for a decade.
- not even the booming 90% were that good
Think that it would be insane to spend $4 trillion on infrastructure funded entirely with debt?
- a meta-analysis of dozens of infrastructure studies finds that inflation-adjusted returns on investment are 11% to 15%
- vs 0% inflation-adjusted borrowing costs for the US Treasury right now
Unlike almost every other form of stimulus, infrastructure spending literally will pay for itself via increased economic productivity for years to come.
Literally, the more you spend on infrastructure, the lower your future debt/GDP will be.
In part two of this series, I'll share with you some of the fattest blue-chip pitches on Wall Street, coiled springs set to rocket higher. Not just in 2021, but for years to come, powered by the greatest economic boom we'll likely ever see in our lifetime.
A boom that if you miss out on, due to fears about rising interest rates causing a market crash, could end your rich retirement dreams.
Want More Great Investing Ideas?9 “MUST OWN” Growth Stocks for 2021
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K.I.S.S. for the March Stock Market
SPY shares were trading at $376.56 per share on Friday afternoon, down $0.14 (-0.04%). Year-to-date, SPY has gained 0.72%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Adam Galas
Adam has spent years as a writer for The Motley Fool, Simply Safe Dividends, Seeking Alpha, and Dividend Sensei. His goal is to help people learn how to harness the power of dividend growth investing. Learn more about Adam’s background, along with links to his most recent articles.
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