Bond market moves are getting plenty of attention this week. 10-year Treasury yields dropped to levels not seen since the opening trading sessions of 2022 and German yields have dipped back into negative territory (and will again have to contend with resistance at zero). Credit has been slower to react. The Moody’s BAA Corporate yield is just a few basis points off its high and upside momentum remains intact. Except for a brief COVID related blip, the six month change in corporate yields is at its highest level since the financial crisis. This matters because all of the net gains in the S&P 500 over the past twenty years have come when corporate yields have been falling. It has been very difficult for the S&P 500 to make any upside progress when the path for yields has been higher. Even before the Fed has started to raise rates or drawdown its balance sheet, the liquidity backdrop has already deteriorated.
Today’s Hot List is not as sexy at the headline level as yesterday’s, when we reported Speaker of the House Nancy Pelosi’s latest stock transactions.
But there’s always good information below the surface.
Just to recap, Speaker Pelosi’s most recent Periodic Transaction Report filed with the Clerk of the U.S. House of Representatives, which dropped just this week, includes five moves completed on January 21 and January 27, 2022.
Speaker of the House Nancy Pelosi is one of the most powerful politicians in America.
She’s also one of the best individual investors in the world.
A now-suspended Twitter account that used to track her trades noted in October 2021 that she’d managed a 69% annualized return over the trailing 10 years.
In 2021, though she was the top Democrat and she outperformed the S&P 500 Index by a decent margin, Pelosi trailed five Republican Members of Congress.
Dan Crenshaw of Texas, John Curtis of Utah, French Hill of Arkansas, and Brian Mast of Florida occupied the four spots just ahead of her.
Topping the list of Congress’s best investors in 2021 was Austin Scott of Georgia.
The highest-ranking Senator for 2021 was Minority Leader Mitch McConnell of Kentucky, who ranked No. 19 overall of 35 total members of the House of Representatives and the Senate who beat the S&P.
That’s 35 solid investors out of a total of 635 Representatives and Senators.
Dividend Aristocrats are easily some of the most desirable investments on Wall Street.
These are the names that have increased dividends for at least 25 years, providing steadily increasing income to long-term-minded shareholders.
As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.
Here at All Star Charts, we like to stay ahead of the curve.
That's why we're turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we're curating a list of stocks that have raised their payouts every year for five to nine years.
We call them the Young Aristocrats, and the idea is that these are "stocks that pay you to make money."
Imagine if years of consistent dividend growth and high momentum and relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.
At the end of every month, we rejoice. Regardless of the market sentiment, we rejoice. When the market closes, we rejoice.
That's a lot of joy one would say. But here we hold monthly charts in high regard. The exercise of going through monthly charts is therapeutic in a way that it helps you zoom out and get out of short-term messes. This is that time of the month when trends become clear.
As the month of March begins, we're here to perform the same exercise.
Read on to know what the market is saying.
We are in a market environment that is drastically different from what we saw in 2020. Human tendency is to recall the most recent event and give progressively less value to the events prior to that. Similarly, the 2020 market recovery is viewed as the best time and 2021 became a 'difficult year' for market participants. But just as we do in our analysis, everything is relative. 2021 was only relatively bad. If you pick up stocks that performed well, your portfolio would've performed well in 2021 as well.
As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
We could sit back and speculate on what measures the Federal Reserve is likely to take to curb inflation. But it wouldn't change the fact that inflation is already here.
We’d rather focus on what market participants are doing now to position their portfolios for these inflationary pressures.
Since last year, inflation has gripped markets, and we don’t foresee it going away anytime soon. We think the best course of action is to get used to this environment and focus on assets that tend to perform well during periods of inflation.
One of our favorite ways to measure inflation expectations is by analyzing Treasury Inflation-Protected Securities (TIPS) versus Treasuries.
Relative strength from TIPS implies that investors are positioning themselves for a general increase in the prices of goods and services. That’s exactly what we’re seeing today.
Let’s take a look and discuss what we want to do about it.
Here’s an overlay chart of the $TIP/$IEF ratio and the US five-year breakeven inflation rate:
Over the last few weeks and months, the market has been messier than before. With so much going around, the most valuable thing we like to do is follow the price action.
The beginning of this week started with great strength coming through from the Metal stocks and we're here to highlight just that today.
Read on to know if your favourite stock made it to the list!
Metals, and here I mean base metals, have been doing the bulk of the lifting with Equity and Currencies moving sideways. Commodities have been showing a clear path of trend and have been the more profitable area to be invested in.
Take a look at our custom Equally weighted base metals chart below. Bottom left to top right. That's the signature of any good trend in a market. And this chart is doing just that.
I feel like this has been the lead for many blog posts recently, but the trend continues: options volatilities continue to remain elevated across the board with $VIX holding above 30, and this makes me want to continue favoring strategies that are net short options premium.
But with the trade today, we're going to leverage options premiums to help us finance a bullish bet on NASDAQ stocks.
It started out with JC and I wanting to simply sell premium, but when we looked into $QQQ options it became pretty clear that we could get paid handsomely if recent lows end up becoming a pivot to higher prices and we took some put premiums to buy out-of-the-money calls.
There's quite literally an infinite amount of strategies, systems, and indicators you can integrate into your process.
But, at the end of the day, mastering just a select few will likely generate alpha as opposed to creating inconsistency in your approach.
Think about it: If you go to the gym, you have a structured program. You don't go to the gym and aimlessly decide on random exercises. You have a rigid plan that you're going to build on top of the lifts you did the workout before.
Trading's the same.
You don't need to switch between every time frame, make every decision using a different indicator from the last, or follow someone else with different objectives from yourself into our trade.
You find repeatable setups where you can find your edge.
For instance, you may only trade in the aftermath of liquidity cascade events that take place a handful of times every year. Mastered well enough, a few well-calculated trades in similar conditions can make your entire year.
In day-to-day life, being a "Jack of all trades, master of none" might serve you well.
