Stocks to Buy as Rates Rise

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Over the past few months, we’ve resurrected and rebranded Trading Opportunities.

And now that we’re well into the new year, we’d like to introduce another facet of your e-letter: our YouTube channel.

A screenshot of the Learning Markets YouTube channel banner.

Source: YouTube.com

We’ve talked about it before in a few issues, but moving forward, we’d like to include details of our livestreams (Mondays and Thursdays at 7:00 p.m. EST) on a weekly basis.

So, from now on, each week, you can expect to hear about…

  • What we talked about on Monday…
  • What we talked about last night…
  • And a teaser of what we talked about during our exclusive Wednesday weekly update in our elite trading service, Strategic Trader.

Let’s dig in.

Monday: Can Stocks Go Up While Treasury Yields Are Climbing?

Treasury yields shot higher on Friday after the jobs report. The 10-year Treasury yield (TNX) is now challenging 2%. The question is… can the stock market move up while Treasury yields are rising? After all, isn’t a strong jobs report good for the S&P 500 too?

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The market is showing activity that it’s beginning to brace itself for more interest-rate hikes — attempting to move into a “risk-off” environment. Traders have been selling small-cap stocks, high-yield bonds, tech stocks and anything that can be considered a riskier position and bracing for a potential swing lower.

Could the market come back from this? Well, if we see the CPI number coming in lower or inflationary rates dropping a bit, then yes.

Check out the recording of Monday’s livestream here.

Wednesday’s Strategic Trader Weekly Update: A True Bear Market Is Unlikely Right Now

In last week’s update, we discussed the concept of a “dead-cat bounce” — a morbid yet pointed image that means just because you see something bouncing doesn’t mean it’s active and going to keep moving in the future. After all, even a dead cat will bounce if it drops hard enough.

There’s always a risk that the major indexes will fall again after a short-lived bounce, and many traders were convinced that this was one of those times. From a technical perspective, expecting a drop after the market rose so quickly back to resistance isn’t unreasonable on the surface. After the S&P 500 dropped back from 4,570 last Thursday, the worst-case scenario seemed more likely.

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However, as we explained in the update, a true bear market is very unlikely while the underlying fundamentals, jobs, wages, and earnings growth were all positive. So far, it looks like our more optimistic outlook has been justified.

The biggest potential snag for the market remains the rate of change of interest rates. Rising rates themselves aren’t an issue for stocks; a slow rise in interest rates and stock prices actually have a strong positive correlation. However, when rates rise very quickly, it can drag on stock returns in the short-term…

We also reviewed the wins our readers had the chance to take home over the last week:

  • 8.41% (186.54% annualized) on Constellation Brands (NYSE:STZ) Puts in 28 days…
  • 0.73% (15.78% annualized) on Target (NYSE:TGT) Calls in 18 days…
  • 0.85% (115.80% annualized) on United Parcel Service (NYSE:UPS) Calls in four days…
  • And 1.17% (103.39% annualized) on Ford Motor (NYSE:F) Calls in six days.

Click here to learn how to get the full update — and how you, too, can have the chance to see gains like the ones above.

Last Night: Stocks to Buy as Rates Rise

The 10-year yield crossed the dreaded 2% again on Thursday; the rate of change is increasing and that is a threat to stock prices. However, not all sectors are at risk. In fact, some stocks do very well when rates are rising — even if they are rising quickly.

Click here to see which ones are on our watchlist.

We’ll be back with you next week.

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