I have a confession to make...

I never got through the entire movie "As Good As It Gets" starring Jack Nicholson. I guess I just didn't find the insults or awkward moments entertaining.

But this week I'm thinking about that movie, Jack Nicholson's grumpy character and the themes of the film as we wrap up the third quarter of 2021.

It's been a good year for investors. No, actually it's been a great year for investors!

The market has been on a tear as the global economy reopens. If you invested in stocks — just about any stocks — you probably made money.

But just like the seasons outside are changing, the temperature of the stock market is shifting.

Now investors are starting to ask, "Is this as good as it gets?" Today, I'd like to answer that question and talk about how you can protect your profits.

High Hurdles After Exceptional Strength

Every week or two, I like to take a step back and look at the big picture for investors and see where things stand.

Considering the economy, the broad market and the way investors are positioned, I've got some good news... and bad news.

The good news is that the economy really is recovering!

Businesses are growing profits... employers are hiring… consumers are shopping and eating out and going on trips. And all of this strength has helped to drive stock prices higher with big profits for investors.

The bad news is basically the flip side of the same coin.

Things have been so good that you have to wonder if the economy, the market and the current situation overall are “as good as it gets.”

It's an important question to ask, especially as we get ready for earnings season in a couple of weeks.

Investors will be poring over quarterly economic reports in early October.

And I'm concerned that these reports could show that the summer of 2021 was excellent but ultimately represented a peak rate of growth for our recovery.

You see, the high rate of growth over the past year now creates a bit of a hurdle for companies about to report earnings.

In the last few quarters, these companies have reported amazing growth rates.

It hasn't been uncommon to see sales surge by 100 percent or more (compared to the year before). And profit increases have hit similar levels.

But what happens when these same companies report profits that are "only" up 30%? In any other historical period, a 30% increase in profits would be a huge win!

However, since investors are already conditioned to expect big numbers, it's going to be very difficult for companies to keep meeting (not to mention exceeding) investor expectations.

The same scenario is true for economic reports like the country's Gross Domestic Product (or GDP), the number of new jobs added for September, or reports on retail sales, manufacturing and other important areas of the economy.

It's a Stock Picker's Market — So Be Selective!

As the seasons change on Wall Street and the potential for disappointment sets in, I don't think we're going to see the same kind of gains in the market that you've been used to.

But that doesn't mean you can't grow your wealth!

It just means investors can't cover their eyes and buy any old stock. That strategy just won't work anymore.

Earnings growth is slowing, so speculative stocks of companies with grand growth plans are much more vulnerable.

Investors will soon move capital out of these speculative stocks and into shares of companies with actual profits, dividends and reasonable stock prices.

Ironically, the safest stocks on Wall Street may soon be the ones with the biggest returns.

This typically happens during periods when investors become more concerned and move capital into stable areas and away from speculative growth areas.

By investing in these solid companies before the market temperature changes, you'll protect the profits you've accumulated over the past year.

And you'll also grow those profits as investors scramble to buy shares of the solid companies that you already own.

So as we head into the last few days of September, you need to make some necessary adjustments.

Consider selling some of the stocks that have given you exceptional gains this year; even taking partial profits off the table is a step in the right direction.

And then, use the cash you freed up from these sell orders to invest in more stable companies.

Focus on stocks that pay reliable dividends... companies that sell products and services that people buy no matter what... and be sure to invest in firms that have a strong financial position with enough cash and not too much debt.

We'll keep profiling those stocks here at Rich Retirement Letter so you can make the most of this dynamic period.

It's not a time to be fearful. But it is a time to be proactive with the wealth you've worked so hard to build.

Here's to living a Rich Retirement!

Zach Scheidt
Editor, Rich Retirement Letter
RichRetirementFeedback@StPaulResearch.com