Senate Votes "Yes"; What Comes Next?

October 2, 2008

On Monday, the House voted "No" and the market plunged 777 points. On Tuesday, the Senate voted "Yes!" by a 74 to 25 margin to overwhelmingly approve the White House's $700 billion economic bailout plan.

Of course, the plan is not without strings. The revised bill includes:

• $150 billion in tax breaks for individuals and businesses
• Increasing the amount of bank deposits covered by the Federal Deposit Insurance Corp. (FDIC) to $250,000 from $100,000
• Requiring insurers to treat mental health conditions more like general health problems

Now, just because the Senate strongly endorsed the bailout plan and the House will likely follow suit Friday doesn't mean the financial crisis is over. Credit markets are still clogged up, and banks around the world continue to rely on government intervention to overcome these challenges.

In two weeks' time, we've stomached the failures of Lehman, AIG, Merrill, Wachovia and WaMu—forgive me if I left any off the list! Obviously, Wall Street still faces severe problems, and these problems are taking a toll across the rest of the economy. Just today, the Labor Department reported that the number of people seeking unemployment benefits rose by 1,000 last week to settle at 497,000—that's a 7-year high! What's more, rising unemployment could further constrain consumer spending, which accounts for 70% of the U.S. economy. This news knocked 200 points off the Dow in early morning trading.

But!

I need you to understand that the panic-selling and emotional declines we've witnessed in the market in recent weeks won't last forever. Right now, nervous investors are sitting on the sidelines with over $3.5 trillion at the ready, waiting for the opportune moment to get back into the game. And when the time comes, that money will pour into the most fundamentally superior stocks—the ones with the strongest quarterly earnings reports!

Don't let the failures in the financial sector distract you from the bigger picture. These failures are a necessary part of the healing process for the global economy. Once the weakest companies have been eliminated and it's back to business as usual, some investors will begin making money hand over fist as money floods back into the market and buying pressure pushes up a select group of stocks. Namely, the stocks with the best fundamentals!

I'm not saying the wild ride is over just yet. But remember that the height of earnings season is just around the corner. Once and the dust settles, investors will begin a flight to quality.

Don't miss out on this tremendous buying opportunity! Now more than ever is the time to reposition your portfolio to profit from the pending earnings run-up. Need help getting started? Sign up for my Blue Chip Growth service and together, we will profit!