Stocks are taking a breather after a big, post-election run. But behind the broad market action are plenty of interesting moves. NEW leaders are emerging, while OLD leaders are starting to lag. Find out how to profit from these emerging trends from several top MoneyShow expert contributors.
Mike Larson MoneyShow
Remember what I wrote last week about “Trump Trades?” How Wall Street investors were snapping up select asset classes, sectors, and stocks that a new Trump Administration would likely help?
Well as you might expect, his election win fueled an EPIC follow-up move in those investments! That’s why I want to revisit the trend and short-term trading action for the MoneyShow Chart of the Week. This new chart shows the performance of Bitcoin, the SPDR S&P Regional Banking ETF (KRE), Tesla Inc. (TSLA), the Invesco DB US Dollar Index Bullish Fund (UUP), and the United States Oil Fund (USO).
You can see that Bitcoin, regional bank stocks, and Tesla shares have all surged in the last week. The dollar has also risen by a fairly large amount (for a currency, anyway), while crude oil prices have dropped.
Again, the fundamental catalyst is shifting policy priorities under a Trump Administration. The president-elect has pledged to take a lighter regulatory approach to cryptocurrencies and crypto-related firms. He has also spoken about the creation of a national Bitcoin reserve (similar to the Strategic Petroleum Reserve that began storing oil in 1977).
Investors also think Trump will dial back restrictions and regulations that apply to traditional banks and financial firms. Tax reform and growth-friendly policies could pad profits and lead to lower loan losses going forward, too – a pair of additional positives for bank stocks.
As for Tesla? CEO Elon Musk and his super PAC spent more than $175 million to help get Trump in office…and investors expect he’ll get benefits in return. That could include less regulation of the company’s self-driving car technology. Plus, Musk’s other businesses – like SpaceX – will surely see more federal contracts and dollars thrown their way.
When it comes to the dollar, Trump’s affinity for tariffs is driving the rally. Slapping tariffs on foreign trading partners could weaken their economies relative to ours. That could also drive up inflation, preventing the Federal Reserve from cutting interest rates as much as was previously expected. Relative interest rates are a key driver of relative currency valuations.
Finally, “drill, baby, drill” has long been one of Trump’s rallying cries. Easier regulatory policy and the opening up of more federal land to drilling will give domestic oil explorers and producers an operational boost. But it will also increase global oil supply, putting downward pressure on prices. Hence, the move in USO.
As I said before, big-picture economic trends are more important than politics when it comes to market moves over the longer term. But it’s clear that traders aren’t worried about that for now. Which means profits can be had if you’re nimble, and you understand what’s driving the action you see on your screen!
Steve Strazza AllStarCharts
In February 2022, Durable Capital filed a Form 4 with the SEC, disclosing a significant purchase of $22 million of Warby Parker Inc. (WRBY). We now have an opportunity to join a brand-new uptrend at a significant discount from what insiders paid.
Warby Parker is an eyewear brand known for its trendy and affordable prescription glasses, contact lenses, and sunglasses. Durable Capital owns 6.8 million shares, roughly a 7% interest. The stake is worth about $140 million based on Monday’s closing price.
Founded in 2019, the fund has quickly gained a strong reputation, with assets under management (AUM) estimated at around $7 billion. Durable Capital’s investment approach often targets innovative companies with high growth potential, particularly in the tech and consumer sectors.
The hedge fund began building its position as soon as WRBY came public back in 2021. As such, it paid far higher prices and dealt with significant opportunity cost, as the stock has been trending lower or sideways since the IPO.
But that’s all changing. These rounding-bottom formations can be frustrating, as a stock needs time to repair the existing damage before reversing its trend higher. For this reason, we look for a clear and decisive breakout of these bases before getting involved.
Still, it looks like WRBY is starting to set up well for us.
Recommended Action: Buy WRBY.
Thomas Hayes HedgeFundTips
I see continued strength into year end, led by small caps in December. That should be followed by a sideways grind/consolidation in the front half of next year as policy and Trump Administration appointments crystallize. Generac Holdings Inc. (GNRC) is one favorite small cap in this environment.
I expect resumed strength in the second half next year as earnings growth is confirmed and policy fears are digested. Ultimately, pro-growth policies will confirm a continuing “Roaring 20s” theme, driven by increased productivity and Phase 2 of the Generative AI boom as regular companies’ productivity and profitability increase.
(Editor’s Note: Tom Hayes is speaking at the 2024 MoneyShow Masters Symposium Sarasota, which runs Dec. 5-7. Click HERE to register)
Meanwhile, margin debt levels are not yet extreme, which supports continued flows from Treasury bills, cash, and money markets into equity markets as FOMO continues. Plus: 74% of major central banks are easing now, versus only 9% in July 2023.
As for GNRC, it is up around 40% in the last three months. It should push beyond $200 in the short term and higher over time. Generac has a 70% share in the home standby generator market. With hurricane activity rising and power grid strain showing, single-digit home penetration will go up.
Recommended Action: Buy GNRC.
Mike Larson MoneyShow
Yes, you should believe in the bull market…even if no one ELSE does! That’s the take Brian Belski, chief investment strategist at BMO Capital Markets, shared with me in this week’s MoneyShow MoneyMasters Podcast, which you can watch here.
If there’s anyone whose track record speaks for itself, it’s Brian’s. Already one of Wall Street’s most ardent bulls, he raised his 2024 year-end S&P 500 target to 6,100 in September (from 5,600 before). Some scoffed. But earlier this week, the S&P closed above 6,000 for the first time.
Brian begins our conversation by discussing why he made that move – and how things have panned out since. His key point? The “stock market is a market of stocks.” By being “resolute” (rather than stubborn) and utilizing a consistent process and discipline, he and his firm have been able to get things right.
We then discuss how we’ve shifted from a “Mag 7 Market” to one where “Own a little bit of everything” is working well. Brian also talks about the election, and how a lot of what you hear is “nothing but noise” you need to tune out as an investor. That said, he notes that if the Trump Administration does one thing in particular, investors will be thrilled.
We then touch briefly on the Fed, the monetary policy outlook, and what interest rate futures markets may be getting wrong. Finally, Brian rattles off several promising sectors, investing styles, and stocks that investors should consider here – and he previews what he’ll cover at the 2024 MoneyShow Masters Symposium Sarasota, scheduled for Dec. 5-7 at the Hyatt Regency Sarasota. Click here to register.
Read the full article here
