Get Ready To Identify Stocks That Do Well With Lowering Rates

seekingalpha07-15

Last week's trading was interesting, with a rally on Monday and Wednesday, followed by a sharp sell-off on Thursday, despite positive news.Lower rates coming sooner cheered owners of cyclical assets, ...

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With lower rates comes a lower dollar, not only will that help gold and si","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE000W1ABFV2.USD":"PIMCO BALANCED INCOME AND GROWTH \"R\" (USD) INC","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)","GDX":"黄金矿业ETF-VanEck","BK4525":"远程办公概念","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU1852331112.SGD":"Blackrock World Technology Fund A2 SGD-H","BK4524":"宅经济概念","NVDA":"英伟达","GLD":"SPDR黄金ETF","BK4527":"明星科技股","NCLH":"挪威邮轮","IE0003U64NQ7.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG) ACC","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","IE0002270589.USD":"LEGG MASON CLEARBRIDGE VALUE \"A\" (USD) INC","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","IE000KEQY171.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG) INC","META":"Meta Platforms","IE0034235303.USD":"PINEBRIDGE US RESEARCH ENHANCED CORE EQUITY \"A\" (USD) ACC","TVIX":"二倍做多VIX波动率指数短期期权ETN","LU0069063385.USD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (USD) ACC","LU0077335932.USD":"FIDELITY AMERICAN GROWTH \"A\" INC","LU2286300806.USD":"Allianz Cyber Security AT Acc USD","MSFT":"微软","AAPL":"苹果","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","SOXL":"三倍做多半导体ETF-Direxion Daily","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","SVXY":"0.5倍做空波动率指数短期期货ETF","LU0109391861.USD":"富兰克林美国机遇基金A Acc","LU0068578508.USD":"First Eagle Amundi International Cl AU-C USD","MU":"美光科技","BK4170":"电脑硬件、储存设备及电脑周边","LU0792757196.USD":"TEMPLETON SHARIAH GLOBAL EQUITY FUND \"A\" (USD) ACC","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","RBRK":"Rubrik Inc.","LU0208291251.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) INC","FFR":"First Trust FTSE EPRA/NAREIT Dev","IE00BZ199S13.USD":"BNY MELLON MOBILITY INNOVATION \"B\" (USD) ACC","VXX":"短期VIX期货ETN","UVXY":"1.5倍做多恐慌指数短期期货ETF","BK4532":"文艺复兴科技持仓","VIXY":"波动率短期期货指数ETF","LU0061474960.USD":"天利环球焦点基金AU Acc","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","IE00BDRTCR15.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"ADC\" (USD) INC A","PSTG":"Pure Storage Inc"},"translate_title":"准备好识别在降息中表现良好的股票","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MU":1,"NCLH":1,"PSTG":1,"RBRK":1,"GLD":1,"FFR":1,"SOXL":1,"GDX":1,"VXX":0.9,"TVIX":0.9,"AAPL":0.8,"NVDA":0.7,"META":0.7,"SVXY":0.6,"MSFT":0.6,"VIXY":0.6,"UVXY":0.6,"VIXmain":0.6},"content_text":"Last week's trading was interesting, with a rally on Monday and Wednesday, followed by a sharp sell-off on Thursday, despite positive news.Lower rates coming sooner cheered owners of cyclical assets, leading to potential shifts in trading patterns and stock performance.Volatility may increase as suppressed VIX levels are unsustainable, with potential impacts on tech stocks and the overall market.Learn to pick out stocks that could do well in an economic environment of lower rates.   Richard Drury Interesting Week! Last week’s trading was interesting, Monday started with a rally as expected, and it extended to Wednesday. Then Thursday morning we were treated with a CPI confirming disinflation. Instead of market participants celebrating this news, the market sold off sharply. We should always remember that correlation is not always causation, and connecting the two events tightly might not be the whole story or even part. Since the start of the summer season, we’ve had some weeks that inexplicably sold off on Thursday afternoon, and then rallied the following day, or certainly by Monday. Just 2 weeks ago on Thursday, June 27, the market sold off, and then on June 28 we had a solid recovery. It doesn’t happen every week, but it has happened with some regularity. I attribute the previous selling on Thursday as nothing more than weekenders leaving early to beat the traffic. Simply put, the senior traders trimmed the biggest positions and instructed the juniors not to make any sudden moves without conferring with them. Even if that wasn’t the case, we know that Thursday wasn’t a pivotal day because we had a very nice rally on Friday. This Thursday, the tech titans got sold because they were the most overbought, or most fully invested. The smart thing to do would be to trim those names, traders who had the available cash picked up those trades and came out pretty, pretty good. If you read last week's article and followed my suggestions – Earning Season Starts This Friday With High Expectations, Traders Build Cash, so would you. The prospect of lower rates coming sooner cheered owners of cyclical assets I won’t deny that the prospect of lower rates coming sooner helped the cyclical stocks on Thursday and on Friday, but also on Friday, everything went up. Does that mean that when the “big guys” come back, they’ll sell Magnificent Seven stocks again? It remains to be seen, but I would be inclined to trade on that sell-off if they base at significant support levels. Over the medium term, we could see these tech titans settle down to a lower trading range. Then the more cyclical stocks begin to rise to support the indexes. I believe that once again, stock picking ability will be very valuable. I would stick with consumer discretionary stocks. Additionally, as interest rates continue to move lower, the home builders could also outperform, and lower rates also favor the precious metals. With lower rates comes a lower dollar, not only will that help gold and silver, but it should also help oil exports. The fall in the dollar index, the DXY, has been steep. Check out this 1-month chart of the DXY, courtesy of cnbc.com.   CNBC.comIn about 2 weeks, we have nearly a 200 basis point drop in the dollar index. That is a fairly steep drop, not that I am a super currency trader, but I do feel I understand how the Fed works. I believe Fedspeak will begin to prepare the ground for a September cut, which means more dovish communications. So my thesis is the cyclical sectors should work, but also long-duration assets like biotechs, and younger fast-growing tech stocks should start to attract funds. A lower Fed Funds Rate (FFR), which is what we are talking about, would mean lower money market rates. I suspect that once savers lose that 5% some of that cash will find its way into stocks. So far, I am being quite bullish, what’s the catch? More Volatility My exhortation last week to build cash was due to my concern that volatility has been suppressed and that can’t go on forever. The easy trade in the past year was to short the VIX, at some point, those short sellers are going to get burned. Oddly on Thursday, the S&P 500 fell about 1%, and the Nasdaq fell 1.95%, yet the VIX hardly moved it, went to 13.30 very briefly before falling the next under 12.5, where it has been most of the summer. This suppression of the VIX is not sustainable. I think earnings season will allow us to see that VIX come alive once again. I don’t think the big tech names will be down for very long because, in a slower growth economy, the Big Cap Tech will still make oodles of money. Just maybe we now have seen the tops in these names for now. We’ve seen Meta Platforms (META) down even during Friday’s recovery, and while NVIDIA (NVDA) didn’t fall back to test the 114 to 117 range, it hasn’t moved new highs above 140 either. Mighty Microsoft (MSFT) reached a new high on July 5 at 468.50, but all this week it just traded at a lower level, closing at 453. Of all the Magnificent 7, Apple Inc. (AAPL) made new highs. This week should be fine, and next week as well, but the tech titans look like they are starting to report around the end of this month. The other negative to watch out for is more evidence of a slowing economy. That’s right, “Bad News Could be Bad News.” Also, any sign of the economy growing faster could be bad because that pushes out when Powell will cut, so “Good News Could Be Bad News.” So once again we are threading a needle. PCE for June will be released on July 26, this past Friday, we had the PPI, which was a bit hot, PPI does feed into PCE, but rents have started to subside, so I am not expecting a bad PCE, just be aware of it. So again this week should be good, and it probably will be a good time to think about stocks that do well with a lower dollar. Home builders have already moved up, still, I think they could go higher, I tend to invest in the home builders, not trade them. The greatest demand is for starter homes, so that is where I’d look. If the 10-year rate continues to fall, then the 30-year fixed mortgage rate could move to the mid-6s in interest. I think that could start existing home sales to start up again as well. I think Gold and Silver should do very well with a falling dollar Here is the physical gold ETF (GLD) 6-month chart   TradingViewThat formation that I am calling a “rounding bottom” in this chart here is also called a “bearish to bullish” formation. This is extremely bullish, and I think GLD is on its way to new highs. I would prefer to trade in via the Miners ETF (GDX) here is the 6-month chart   TradingViewThis is the most attractive chart I have seen in a while. You have a long-standing uptrend, albeit in a wide channel (blue lines). I haven’t marked it out, but there is a similar sideways consolidation as with GLD. Then we see a bearish to bullish reversal marked out in the black line. Finally, we see a strong breakout (black curve). GLD will reinforce the uptrend in GDX when it breaks out as well. My Trades On Monday morning, I reconsidered holding my hedges this week. This is why writing what my analysis is every Sunday night is so helpful, is so helpful. I was sure the market would rally, so why keep the hedge? I closed it out immediately at the market open. Throughout the week I trimmed positions, closing out my Norwegian Cruise Line (NCLH) Call Options, Pure Storage (PSTG), and Rubrik (RBRK) Calls profitably, and banked the cash. When we had that sharp sell-off on Thursday, I put some of that cash back to work, I went long 3X Chip ETF (SOXL) Calls which I sold on Friday up nicely, and I held on to Micron (MU) to sell this week. At the end of the week, I had 22% cash, and I put back some hedges Friday afternoon in case there was any kind of surprise to start the week. I rolled out my VIX Calls to September. I believe that at some point this Fall, the VIX will be double where it is now – sub-12.5.  Ok folks, good luck trading!","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.26.3","shortVersion":"4.26.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2451211665"}