Markets Rebound & Inflation Spikes

Dec 12, 2021 | What is the best way to make money in an inflationary market

Weekly Newsletter Week of 12.12.2021

Stocks Push Higher Despite Inflation

This week stocks pushed higher, despite recent volatility and the rising threat of inflation. We witnessed a strong rally from Wall Street even though inflationary numbers are pushing to levels not seen in over 40 years. The S&P, Dow, and Nasdaq all saw gains of over 3% this week, with the S&P nearly touching all-time highs. All major indexes took home their largest gains since March and February of 2021 respectively.

Inflation Keeps Soaring

Despite the gains, inflation soared in November, with a year-over-year increase of 6.8%. The Labor Department noted this week, this was the highest percentage of change since 1982! The CPI or Consumer Price Index jumped nearly 1% this month while core energy and food prices rose 0.5% in November. Core CPI, which excludes food and energy has seen a year-over-year increase of nearly 5%. Many analysts were predicting even higher inflationary numbers than we got this week. Despite hitting numbers not seen in decades, many on Wall Street viewed this week’s new inflation data as a positive, which helped fuel the overall market rally. With the recent selloff, many sectors of Wall Street had already priced in inflation, so many viewed this week as both a win and a relief.

Increased Tapering

We've heard the Fed speak extensively about tapering as of late. Tapering refers to the gradual decrease of purchases by the Fed, for Treasury-backed mortgages and securities. The Fed had been buying $120B worth of bonds each month, but that number was trimmed by $15B in November. Increased tapering has become a major talking point as inflation continues to rise and supply chain issues also remain. Chairman Powell continues to stress interest-rate increases would not be considered until tapering was complete. The Fed has helped flush a lot of money into the markets over the last year in response to the pandemic. We’re monitoring closely for any policy changes that will drastically drive market sentiment as we head into 2022.

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.

Crypto on the Hill

This week, multiple leaders within the crypto space appeared at Capitol Hill for a hearing titled “Digital Assets and the Future of Finance.” The narrative is becoming clear, cryptocurrency and the idea of Decentralized Finance are not going anywhere as the entire crypto market continues to gain mainstream acceptance. With that said, further discussions are clearly needed regarding how the government will be involved regarding industry-wide oversight.

Shifting Sentiment

The consensus coming out of those hearings has been a surprisingly positive outlook for the cryptocurrency industry. This marks a drastic change in crypto sentiment from the Hill. As the crypto market continues to evolve, numerous discussions took place regarding the United States’ position within the entire crypto landscape. Fears are growing that the United States may be falling behind other nations such as China, in launching a sovereign digital currency. The common takeaway from these hearings surrounded greater regulatory clarity, especially regarding how tokens and lending projects are currently regulated by the SEC. Crypto enthusiasts pleaded for regulators like the SEC to quit taking antiquated approaches to new technologies. Many leaders in the crypto industry cited the SEC's current approach to regulating crypto as a hindrance to the entire ecosystem.

Bottom Line: These discussions will be ongoing for quite some time. Cryptocurrency is still in its infancy and the industry will continue to grow and advance as will the technology. New regulatory approaches will continue to be discussed for the foreseeable future.

Musk Vetoes EV Tax Breaks

One of President Biden’s current initiatives is called the Build Back Better bill. This bill looks to provide aid for Covid relief, social services, infrastructure, and climate change. This proposed bill also calls for numerous incentives for the sale and purchase of electric vehicles. The bill, which is currently awaiting a final vote within the senate, "should be scrapped altogether" Elon Musk proclaimed this week. "We don't need a $7,500 tax credit and I would cancel the whole bill. Don't pass, that's my recommendation" he went on to acclaim. Musk also went on to announce that this bill could increase the national debt by 24%! Regulators fired back stating the Federal government needs these incentives to help “quickly meet our climate challenges”. The proposed bill also announces plans to build out the infrastructure for EV charging, as car sales continue to increase annually. The current bill proposes to raise the EV subsidy per car from $7,500 to $12,500. Although, $4,500 would be only for U.S.-built cars, while an additional $500 could be available if the vehicle has an America built battery.

Upcoming Economic Reports

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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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