Inflation Hits Record High

Nov 14, 2021 | Should swing traders make a trade on inflation?

Weekly Newsletter- Week of 11.14.2021 

Inflation Hits Record Highs 

The U.S. inflation rate hit levels not seen in over 30 years! Prices for everyday items have continued to soar throughout the pandemic. Couple that with a labor market that can’t meet demand, growing supply chain issues, and the wide range of supply shortages, and you have an economy ripe for inflation. Though many critics continue to claim all of the generous stimulus packages that have been rolled out over the last couple of years are the real catalyst for the rising prices. This week’s inflation news comes after the inflation rate hit 6.2% this week, making it the highest rise in over three decades. We've all been experiencing sky-high gas prices, but other items like your groceries are also seeing a huge price increase compared to a year ago. Energy prices also continue to soar as the cost to heat your house is now as high as it's ever been with winter looming. 

Market Reactions 

After the consumer-price index posted its record high on Wednesday, investors frantically looked for safety. Commodity hedges like gold and cryptocurrencies soared in the aftermath of the inflationary data. Wednesday also saw a substantial selloff of Treasuries, the asset class hit the hardest by inflation. This helped send the 10-year and 30-year yields to their highest one-day gains in months. As the Fed continues to preach the 'transitory inflation' narrative, concerns are mounting that the Consumer Price Index could hit 7% and possibly ascend even further in the coming months. Unfortunately, price spikes don’t appear to be going away anytime soon. As the pandemic has continued, inflation has moved well beyond pandemic-plagued categories like used cars or lumber. Pricing pressure has continued to be felt throughout all areas of the economy.

Biden Under Pressure 

All this inflationary data has continued to depress overall market sentiment. As Biden’s approval rate has now dropped below 40%, a recent survey showed people feel are as low on the economy as they have been in a decade. The Biden Administration has been focusing on reassuring Americans. Biden stated this week “reversing inflation” would be his top priority going forward. As “everything from a gallon of gas to a load or bread costs more”. Despite the overall rising in American wages, inflation seems poised to be a key market driver for the foreseeable future. Investors should be keenly aware of inflationary data as the success for many of our favorite high-flying growth stocks will be directly tied to inflation data. 

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

Rivian’s Goes Public 

This week EV startup Rivian made its highly anticipated IPO as it joined the public markets. With most of the world's top car manufacturers rolling out plans to focus on an electric vehicle going forward, any new EV company has quickly gained notoriety. We saw it when Lucid Motors and their luxury EV vehicles recently went public, and we saw it again this week as Rivian exploded onto the scene. 

Biggest IPO 

In our 10/31 newsletter, we highlighted how Rivian had already inked partnerships with both Amazon and Ford. The Amazon deal, in particular, had investors eager to hit the cash register. Amazon has spoken at length about their desire to battle global emissions as they begin transitioning all of their delivery vehicles to electric vehicles by 2030. This only added to the bullish case for Rivian. Rivian shares exploded by 53% on the first day of trading. Rivian now has a $100B evaluation, making it larger than both legacy carmakers GM and Ford. Shares closed over $100 a share on Wednesday after immediately jumping 30% after its IPO. This now makes Rivian the second-largest U.S automaker, after only Tesla. The EV market has been one of the hottest sectors throughout the stock market as of late. And Rivan’s IPO was able to raise over $12B to help fund future growth. Rivian now holds the title for largest U.S. IPO since Alibaba went public in 2014. 

Rivian is largely backed by institutional investors as traders look to identify the next great Tesla. Rivian's public offering is also a timely one as Washington continues to focus on climate change, gas emissions, and the future of our planet. Electric vehicles are viewed as one key ingredient to battle future climate changes. It's estimated that EVs currently make up less than 10% of the world's total car fleet. 


Mickey Mouse Supports Sports Betting 

This week the house of mouse reported earnings. We’ve reported extensively about the impact of the pandemic on Disney. Disney has so many different revenue streams, and many such as theme parks, movies, restaurants, and cruises were all hammered during the lockdown. The lone bright spot propping up Disney’s stock has been the rise of Disney+, the companies growing streaming platform. Fueled by robust growth during the pandemic, the platform has been growing at a staggering rate. This week, the other shoe dropped for Disney as they unsurprisingly reported slowing growth due to the economic reopening. 

This week, the CEO of Disney noted they will be expanding operations with ESPN. (Another Intellectual Property currently owned by the House of Mouse) Disney is planning to join the increasingly crowded sports betting sector. The sports betting industry is expected to inflate into a massive market opportunity as additional states approve the move over the coming years. Given Disney / ESPN’s massive presence in sports already, they believe “there are substantial opportunities to partner with a third-party platform in a very meaningful way”.  Disney views gambling as a new revenue stream for the conglomerate going forward. Disney also believes this additional venture may help attract younger audiences as well. The moves from Disney don’t come as a complete surprise, as ESPN notably cut ties with both Caesars and DraftKings in 2021. The sports betting industry is still considered to be in its infancy. We'll keep watching and reporting as the sector continues to advance. 

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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