How You Can Profit from the Russell Reconstitution Dear Reader, I’d like to thank everyone again for joining me for my Prediction 2024 event on Tuesday. Thousands joined, and I had a fantastic time talking to all of you. During that event, I explained that another artificial intelligence mania is coming: next-generation AI. (If you missed the event, or would like to watch a replay, click here.) This is the Real AI Boom. The reality is the rest of Wall Street is still focused on the old story of first-generation AI (the chipmakers and AI apps released by Big Tech). But just like during the dot-com era, that’s not where the real big money will be made. Instead, the winners will be the companies that use AI to reinvent or automate some of our oldest business models. In other words, the next-gen AI companies. Small-cap stocks should be the first big benefactors of this Real AI Boom, but that’s not the only catalyst that should drive them higher. In fact, there’s catalyst that could send certain small-cap stocks soaring on Monday: the Russell Reconstitution. The Russell Reconstitution is important because it’s the yearly maintenance of the Russell indices to ensure that they still properly represent the current market environment. And I want you to prepare for it. More importantly, I want you to know how to profit from the Russell Reconstitution. So, in today’s Market 360, I’ll explain what the Russell Reconstitution is, how it could impact the stock market… And where you can find the companies that should benefit from both the realignment and the Real AI Boom. What Is the Russell Reconstitution? Every June, the Russell indices are rebalanced, with the underperforming stocks removed and new stocks added. The Russell determines if a stock is still eligible for inclusion based on company size, structure, share type, exchange and several other factors. Those companies that meet the grade for the Russell 3000 are ranked, with the largest 1,000 becoming members of the Russell 1,000, and the next 2,000 members of the Russell 2000. The preliminary add/delete lists are unveiled on Fridays throughout the month of June, with the finalized list set to be released tomorrow, June 28. The newly rebalanced Russell indices will then begin trading on Monday, July 1 – so we can expect forced buying pressure in the stocks that will be added to the Russell 1000 and Russell 2000. In fact, one of my next-gen AI stocks is set to be added to the Russell indices during the annual realignment. It jumped 2% in the wake of the announcement, but I expect it to soar even higher on Monday when the market opens.
I should also add that we’re in the midst of the quarter-end window dressing and the 90-day ETF realignment. Both of these events occur at the end of every quarter when institutional investors shore up their clients’ portfolios to make them “pretty” before the quarter ends. These efforts also create forced buying pressure under stocks with superior fundamentals, i.e., those companies with stunning second-quarter forecasted earnings and sales growth. Stocks have been known to move anywhere from 10% to 20% due to the Russell Reconstitution alone. Couple this catalyst with quarter-end window dressing and the 90-day ETF realignment and select small-cap stocks could soar next Monday. My Quantitative System I say “select” small caps because not every stock will rally on Monday. However, thanks to my quantitative system, I can find the ones that are most likely to. I shared exactly how my system works during my Prediction 2024 event – including how it alerts me to bull markets and manias and market crashes… well before they happen. I also gave away a free stock recommendation, as well as reveal where you can find six next-gen AI companies that I believe will be the next big winners during the Real AI Boom. You can watch my Prediction 2024 event here. Sincerely, | .png)
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