Why You Should Be Bullish on This Sector Now

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After more than a decade in the market, if there’s one thing I’ve learned, it’s this: Never doubt the resilience of the U.S. consumer.

And right on cue, the latest U.S. retail sales report confirmed it.

September’s retail sales not only beat expectations but also showed broad gains across several sectors. This is more than just a number on a report – it’s a signal that the U.S. economy remains strong, and it has major implications for the future of interest rates and, more importantly, for your investment strategy.

The Resilient U.S. Consumer

In September, retail sales rose by 0.4%, surpassing the 0.3% increase economists expected. Excluding autos and gasoline stations, the growth was even stronger at 0.7%, a huge jump compared to predictions of just 0.1%.

This is a big deal because consumer spending makes up around two-thirds of the U.S. gross domestic product (GDP). As a result, the Atlanta Federal Reserve is projecting a 3.6% annualized increase in personal consumption for the third quarter, which would be the strongest pace this year.

And here’s why that matters for your portfolio: Strong consumer spending, along with moderating inflation and a stable job market, is setting the stage for a 0.25% interest rate cut in November.

Why Small-Cap Stocks Are Poised to Benefit

An environment of falling interest rates is good news for all stocks, but small-cap stocks are uniquely positioned to profit.

Smaller companies tend to carry more debt than their larger counterparts, which means they benefit the most when interest rates decline. And with rates likely to fall in the coming months, small-cap stocks could see a significant rally.

We’re already starting to see the early stages of this trend. In the past two weeks, the small-cap Russell 2000 has outperformed the S&P 500, rising 4.5% compared to the S&P 500’s 2.8%. Historically, when we get this type of “early New Year effect,” it’s often followed by a much bigger rally in January.

A Rare Window for Big-Time Profits

What’s exciting right now is that we’re entering a rare window where small-cap stocks with strong fundamentals could deliver substantial returns. With the combination of falling rates, election-year momentum, and better-than-expected earnings growth, smaller companies have the “room to grow” that can lead to significant outperformance over the next 12-24 months.

If you’ve been waiting for an opportunity to make a big move in the market, this could be it.

But What If You Don’t Have Time?

However researching into companies such as small cap stocks can be time consuming, this is why recently I hired an analyst to join the Stock Market Genius (SMG) team to help with the research.

In the SMG community, we put out Monthly Stock Research to highlight a good quality stock that we found. Such reports which would normally cost thousands of dollars but it is all available to our SMG members at a fraction of the cost.

In SMG, we also using Options to enhance our returns. We share weekly options strategy and trades to educate and help our members to enhance their investment returns. Below are some examples that we did recently.

So if you are busy and have no time to do indepth research. But would like to receive high quality professional stock research and weekly options trade ideas, you can join our SMG community at just $499 a year. That is less than $2 a day. 😎 

One Small Cap Example from Warren Buffett

Buffett has also been eyeing smaller companies while hoarding large sums of cash.

Berkshire Hathaway increases its stake in SiriusXM by $87m, now owning over 30% of the satellite radio company

Berkshire Hathaway increased its stake after billionaire John Malone’s Liberty Media finalized a deal in early September to consolidate its tracking stocks with the rest of SiriusXM. This move was part of Malone’s broader reorganization of his media empire, which also included spinning off the Atlanta Braves into a separate publicly traded company—another entity in which Berkshire owns shares.

Buffett’s firm first invested in Liberty Media’s tracking stocks in 2016 and began ramping up its position in SiriusXM’s trackers in early 2024, likely as part of a merger arbitrage strategy.

While Warren Buffett has never publicly commented on the investment, it’s unclear whether the move was made by him or his top investment managers, Ted Weschler or Todd Combs.

And if you haven’t, do join our wonderful Telegram community where I post my latest updates on stock and property investments.

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Alright! This should get you ready for the markets this week!

May Your Profits Grow!

Pete
Invest with Pete

🚨‼️ By the way, I’ll never PM anyone on telegram or any other social media platforms. If you receive any “Pete” messaging you, these are scammers impersonating me. Pls beware!

The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.

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