The Old Market 'Code' Is New Again
What's driving the market?... The old market 'code' is new again... Looking past COVID-19... 'Don't fight the Fed'... The case for cautious optimism... Don't miss Eric Wade's 'Beyond Bitcoin' event on Wednesday...
'What's driving the market right now?'...
Our Director of Research Austin Root asked this question at the start of the latest Stansberry Alliance Town Hall event, which we released to Alliance Partners earlier today. (Alliance Partners, you can click the screenshot below to watch the full discussion.)
It's always critical to ponder what's driving the market – and to go beneath the headlines that you see on a daily basis from the mainstream media. But it seems like a particularly relevant question to address today, nearly one full quarter into 2021...
That's because, on the surface, we've seen conflicting signals from the major U.S. stock indexes so far this year. For instance, things haven't been as straightforward as "everything is going up" – which happened during the final three quarters of 2020.
Recently, whether you've seen reds or greens on a daily basis has depended on what you're looking at. Most notably, a few weeks ago, the tech-heavy Nasdaq Composite Index sunk into negative territory for the year. And it's now back up 3% for 2021.
Meanwhile, since New Year's Day, the benchmark S&P 500 Index is up 7%... And it continues to consistently hit new all-time highs as it has for the past five months. Finally, the Dow Jones Industrial Average is outperforming both of those indexes. It's up roughly 10% in 2021.
So with that in mind, Austin's big question is worth spending some time on today...
As he put it in the Alliance Town Hall event, if COVID-19 rewrote the standard "investor code"... today, we're seeing another adjustment – a return to "normal," if you will. More from Austin...
Twenty years ago, you only looked at what the company was doing and what the economy was doing. Then post-2009 Great Recession, you needed to see what the [Federal Reserve] was doing. It was Fed, company, economy.
Then in the thick of the pandemic, COVID was front and center. That was the top focus for the market and asset prices of any risk. I think COVID has taken a backseat [now].
The Fed is still taking the top spot in the pecking order.
Austin then asked Stansberry NewsWire editor C. Scott Garliss, seated next to him in our Baltimore studios, if he disagreed. That wouldn't be a problem, of course... Longtime subscribers know we've built a foundation at Stansberry Research that includes many different views.
But Scott did agree. And he said...
'The market is really trying to fight the Fed right now'...
Anyone who has observed the markets for any length of time knows that it's often fruitless to fight the Fed, no matter if you agree with the central bank's policies or not.
"Don't fight the Fed" is a tired saying for good reason.
In this recent case, we chronicled earlier this month how Wall Street investors powered the tech sell-off earlier this year... They expected Fed governors to prematurely hike interest rates in response to growing inflation concerns, signaled by the more market-driven 10-year U.S. Treasury yield.
If you're a believer in the conventional wisdom that stock market valuations are rooted in the "present value of future expected cash flow"... in very general terms, a rising rate and inflationary environment would mean growth stocks aren't as valuable as they would be on another day with lower rates and less inflation.
In the March 1 Digest, we called this dynamic "the game within the game."
In response, coming out of its last policy meeting, the Fed then doubled and tripled down on "easy money"... with Chair Jerome Powell telling anyone who would listen that he's not worried about inflation in the long run – and certainly not enough now to hike its benchmark interest rate and "cool" the economy.
As Scott said in the Town Hall event, and similar to what we've reported here in the Digest in recent weeks...
[The market's] case for inflation is the Fed needs to tighten rates, but [Powell] keeps saying that's not going to happen for a couple of years...
If we really want to talk about inflation, we need to look at the Fed's preferred inflation gauge, which is Personal Consumption Expenditures ("PCE"). The most recent reading was 1.4%... that's well below the Fed's 2% goal. But the Fed doesn't just want to get to 2%, they want to get above for a sustained period of time.
Scott was talking about the departure in policy from the 2% inflation goal set out by former Fed Chair Ben Bernanke coming out of the financial crisis. Remember, today's Fed has gone away from that stated goal... saying it will let inflation rise above 2% (using its preferred metric).
So in one big way, with the COVID-19 uncertainty more out of the way than ever before, the old market "code" is new again... except with even looser policy from the central bank backstopping the economy and U.S. stock market.
Again, if you're an Alliance Partner, be sure to check out the latest Town Hall here...
It's a special benefit for you, at no extra charge. I (Corey McLaughlin) watched the video earlier today, and it's well worth the time for anyone with money at work in the markets.
Austin and Scott were also joined by analyst Alan Gula of our flagship Stansberry's Investment Advisory team and Stansberry Venture Technology editor Dave Lashmet.
In the wide-ranging, roughly 90-minute video discussion, the quartet batted around all the hot investing topics of the day – like how COVID-19 vaccinations can impact the economy... and how inflation, interest rates, and Fed policy intersect.
They covered a lot of ground, including Dave's thoughts on why everyone should get a COVID-19 vaccine if they want to be protected from the virus and protect others... and broadly speaking, the case for being "cautiously optimistic" in today's market.
As Scott said near the end of the discussion – in part referencing the trillions of dollars being pumped into the economy today – forgetting about the long-term consequences for a second, it can be useful to take a deep breath and think about what these decisions really mean for your portfolio. From Scott...
People get overly emotional about what Congress is doing with fiscal stimulus and what the Fed has done with monetary stimulus... People need to remember to take a step back from all that...
If we really want to be pure investors, we need to look at it and say how are we going to profit from that? What is it going to do for our investments? Stocks? Gold? Bitcoin?
Today, for example, the case for assets that can be considered "stores of value" – like bitcoin, gold, or other hard assets – is only getting stronger, as the same old Fed policy becomes new (and bigger) again.
Alan, who is also a key contributor "behind the scenes" for the Stansberry's Forever Portfolio that we unveiled about a year ago, took Scott's thoughts another step further with some more practical advice. As he said...
For investors, you should never be reckless. Optimistic doesn't mean we're recklessly bullish. Optimistic should be your sort of neutral state. You should think about "What could go right?"
Instead of always being pessimistic about what the Fed is doing or if the bond market is in a bubble... stick to your strategy. You can be cautious, but I think optimism should be your default state. When there are pullbacks, that helps you not panic [and] sell stocks... and it helps you buy the dip.
Like I said, this video is a real treat for all of our Alliance Partners. We're only scratching the surface in today's Digest...
Austin, Scott, Alan, and Dave get into much more detail about what they're seeing in the markets today... share their takes on the "Melt Up"... and give viewers and listeners a few of their favorite stock recommendations right now.
If you're an Alliance Partner, we hope you'll check it out. And if you have a question that you want to see answered in a future Town Hall event or just want to give feedback on the discussion, please don't hesitate to drop us a line at feedback@stansberryresearch.com.
Moving on to another hot topic – cryptocurrencies...
By now, you've hopefully heard that Crypto Capital editor Eric Wade is going live with his latest free event at 9:30 a.m. Eastern time on Wednesday. (And if you haven't heard it yet, consider this your invitation to join... You can reserve your spot right here.)
Eric plans to talk about the world of cryptocurrencies "beyond bitcoin."
Based on a lot of feedback from subscribers, we know that many of you have already bought bitcoin and have enjoyed its price appreciation over the past year or so...
But you should also know that this less-traveled corner of the investing universe doesn't stop there. A deep and wide area of opportunities for making money and "use cases" exists in this space well beyond the world's first and most popular cryptocurrency.
We talked a little bit about these opportunities in Friday's Digest... And we'll share some more details throughout the rest of this week – including a recent chat that Eric had with the developer of a blockchain-based stock exchange. It's in the making as we speak.
As I noted on Friday, you can see examples of the tremendous opportunities I'm talking about in our daily Top 10 Open Recommendations list at the bottom of the Digest e-mails... This gives you an idea of some of the eye-popping gains that Eric's subscribers are sitting on today.
While bitcoin grabs the mainstream headlines, Eric's subscribers are sitting on gains in all kinds of smaller cryptos that most people will never hear about until their biggest upside has already been reached.
That's why it's critical to get up to speed on the world 'beyond bitcoin' today – before it's too late...
Of course, Eric believes the bitcoin story definitely has much more room to run... But other parts of the cryptocurrency revolution are just getting started, like bitcoin did 10 years ago.
Register for Eric's must-watch event right here. Again, it won't cost you a single penny to attend. We just ask that you sign up in advance to make sure you don't miss a minute.
(Existing Crypto Capital subscribers and Alliance Partners, keep watching your inbox for details on how you can get instant access to this exciting research in the coming days.)
Bitcoin Spending Is on the Rise
As many cryptos make higher highs, a common line of thinking is that people are "holding on for dear life" to their cryptocurrencies instead of spending them. But new data from leading crypto payment processor CoinPayments showed that may no longer be the case...
Since the first quarter of 2019, the company said it has measured a 300% increase in payment transactions using crypto. Our colleague Daniela Cambone spoke with Frank Holmes, U.S. Global Investors CEO and Hive Blockchain chairman, about the findings...
Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.
New 52-week highs (as of 3/26/21): ABB (ABB), Automatic Data Processing (ADP), American Homes 4 Rent (AMH), AutoZone (AZO), Corteva (CTVA), Expeditors International of Washington (EXPD), Comfort Systems USA (FIX), Home Depot (HD), Hershey (HSY), Invitation Homes (INVH), iShares U.S. Home Construction Fund (ITB), Lennar (LEN), LGI Homes (LGIH), 3M (MMM), Altria (MO), Motorola Solutions (MSI), Annaly Capital (NLY), Invesco S&P 500 BuyWrite Fund (PBP), Trane Technologies (TT), Waste Management (WM), and Consumer Staples Select Sector SPDR Fund (XLP).
In today's mailbag, kudos for Crypto Capital editor Eric Wade. What say you? As always, e-mail us at feedback@stansberryresearch.com.
"Crypto Capital close to a perfect score on the 'Top 10 Open Recommendations' list! Way to go Eric Wade!!" – Paid-up subscriber Beau E.
All the best,
Corey McLaughlin
Baltimore, Maryland
March 29, 2021