This Stock Market Indicator Says the S&P 500 Is Headed Higher: 2 Growth Stocks to Buy Now Before the Rally

 

This Stock Market Indicator Says the S&P 500 Is Heading Higher: 2 Growth Stocks to Buy Before the Rally

Aiming to curb inflation, the Federal Reserve raised the benchmark federal funds rate by 525 basis points starting in March 2023, the fastest rate hike since the 1980s. This aggressive monetary policy paid off. Inflation has cooled sharply over the past 16 months, so much so that the futures market is signaling the end of the rate hike cycle, according to CME Group's FedWatch Tool.

What now? The Fed has led six other rate-hiking cycles since 1988, and the S&P 500 has returned an average of 23.7% in the 12-month period immediately following those events, according to data from Morningstar. In other words, if the current cycle of rate hikes has indeed ended, history says the S&P 500 -- the benchmark for the broader U.S. stock market -- could rise by about 24% next year.

Here are two growth stocks to buy before the rally.

Building good relationships with customers is an important part of any business, and every interaction is an opportunity to delight or disappoint potential buyers. HubSpot helps businesses address this imperative with a customer relationship management (CRM) platform, a suite of productivity software that empowers marketing, sales, service, and operations teams to attract, engage, and retain customers.

HubSpot lags behind CRM rivals Salesforce and Microsoft in overall market share, but has still achieved a significant market presence thanks to its somewhat unique strategy.While Salesforce relied heavily on acquisitions, HubSpot generally developed its products in-house to ensure seamless integration. The company also uses a freemium pricing strategy that allows businesses to move from free to paid tiers of products as their needs evolve.

The combination of easy-to-use software and attractive pricing makes HubSpot particularly popular with small and medium-sized businesses (SMBs). In fact, its market presence and user satisfaction scores among SMBs are so high that HubSpot was recognized by research firm G2 as the best global software company in any category in 2023.

HubSpot reported solid financial results in the second quarter that beat expectations on both the top and bottom lines. Its customer base increased 23% to 184,900, and average subscription revenue per customer increased 2%. On the other hand, revenue rose 25% to $529 million and non-GAAP (adjusted) earnings soared 205% to $1.34 per share.

Looking ahead, HubSpot is well positioned to maintain its growth trajectory. Management values ​​its addressable market at $72 billion by 2027, and the company has made a habit of adding new tools and capabilities to its CRM platform.

For example, HubSpot recently launched two generative AI products that automate various tasks to streamline marketing, sales, and customer service.The stock currently trades at 12.1 times sales, a discount to the three-year average of 17.4 times sales. That's a fair price for this growth stock.

Etsy (NASDAQ: ETSY ) operates a number of e-commerce marketplaces, including Elo7 for Brazilian handmade goods, Depop for fashion resale, and Reverb for musical instruments. But the company is best known for its eponymous Etsy marketplace, a digital shopping destination synonymous with vintage, artisanal and often customizable goods.

Etsy's focus on non-commoditized products is somewhat unique among retailers, and while its marketplace may not be ideal for every occasion, its strategy still resonates with consumers. Etsy is the eighth most popular online marketplace in the world and the fourth most popular online marketplace in the US.

However, the company reported mixed results in the second quarter. Gross merchandise sales (GMS) fell 1% and GMS per active buyer fell 6% as consumers continued to struggle with high inflation. Still, revenue rose 7% to $629 million on strong marketer adoption of ad services. However, GAAP net income fell 12% to $0.45 per share as the company continued to invest aggressively in product development.

On the other hand, Etsy is poised to accelerate growth in the future, especially as economic conditions normalize. The company already has a strong position in a market that management values ​​at $466 billion, but Etsy is relying on artificial intelligence to better engage buyers with more relevant search results and product recommendations. CEO Josh Silverman says this could "unlock enormous growth in the coming years."

The stock is currently trading at 4.1 times sales, the cheapest valuation in more than five years. It creates a compelling buying opportunity for patient investors. As always, it would be wise to start with a small position and add more shares over time.

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In the dynamic world of stock market investing, staying ahead is essential. Investors are constantly looking for reliable indicators that can guide their decision-making process. Currently, a major stock market indicator suggests that the S&P 500 is poised for an upside rally. In this article, we'll dive into the bullish indicator and highlight two growth stocks that smart investors should consider adding to their portfolios ahead of the expected rally.

S&P 500 indicator pointing north

In the midst of an ever-changing market environment, keeping a close eye on relevant indicators can provide invaluable insights. The S&P 500, a broad representation of the US stock market, serves as a barometer for the overall health of the market. Recently, this key index has been flashing positive signals that signaled the potential for an upward move.

One of the significant indicators that gain the attention of analysts is the continuous increase in corporate profits. Robust earnings growth across many sectors points to a thriving economy and sets the stage for equity appreciation. In recent quarters, S&P 500 companies have consistently beaten expectations, boosting investor confidence and signaling a booming market.

Growth Stocks: Seizing the Opportunity

With a promising outlook for the S&P 500, investors are eagerly looking for growth stocks that will benefit from the expected rally. Here are two compelling growth stocks you should consider adding to your portfolio: innovative approach and good financial results.

 Thanks to the long-term steady growth of revenues, the company has proven its ability to navigate challenging market conditions. With a strong focus on , it is well positioned to take advantage of the expected market upswing.One of the key factors driving growth is its commitment to The company is creating a unique niche in the market and solidifying its competitive advantage.

As the S&P 500 braces for potential gains, it is emerging as an attractive investment option that is expected to deliver substantial returns.consistently gaining attention for its impressive products, the company continues to resonate with consumers, driving customer acquisition and retention.

It stays ahead with a progressive approach. This establishes the company as a market leader and expands its market share.As the S&P 500 prepares for potential upside, it shines as a promising addition to investment portfolios and offers the potential for substantial capital appreciation.

In the dynamic environment of investing in the stock market, paying attention to reliable indicators is essential for informed decisions. The current positive outlook for the S&P 500, supported by robust corporate earnings growth, suggests a potential near-term recovery. 

To take advantage of this expected growth, consider adding growth stocks like a to your investment portfolio. By aligning your investments with the trajectory of the market, you will achieve optimal returns when the market embarks on a potential upward journey. Remember that smart investing involves careful research, thoughtful strategy, and taking advantage of opportunities at the right time.