(Justin Vaughn, Editor, Options Trading Report)
After three weeks of mixed to negative markets, Monday began and ended on a somewhat positive note, led by the ever aggressive tech-minded Nasdaq Composite, up 206 points. The 10-year Treasury stayed strong, reaching 4.34%, up from Friday’s close of 4.25%. As investors and traders look for higher yields, shunning stocks, markets struggle to stay above water. The University of Michigan Consumer Sentiment Survey, also Friday, is expected to mirror July’s report, showing a steadying level of shopper confidence. As the earnings parade comes to a close, 81% of companies reporting have bested profits, year over year of the 2nd quarter. And according to ‘Fundstrat,’ “95% of the S&P 500 companies have reported beating earnings estimates by a median of 7%.” Those numbers would normally signify to the market great optimism for a continuing building of the ‘Bull’ market, however, with inflation numbers ‘clogging investors and traders’ we are experiencing markets with little projection, a ‘roller-coaster’ environment. Federal Reserve Chairman Jerome Powell will speak Friday, after meeting in Jackson Hole for the better part of the week, discussing the inflation situation, the continuing strong jobs reports, and the status of the economy. Recession concerns have been brushed aside, as Mr. Powell has reiterated many times, ‘the equation is lacking.’ Remarks from a couple of attendees at the Fed’s meeting have signaled “that interest rates will need to remain elevated for a long period of time to bring inflation down.” Those remarks set the tone the rest of the day Thursday, as the sell-off pushed the Dow Jones Industrial Average down a significant 373 points, while the S&P 500 and Nasdaq Composite retreated 1.35% and 1.9% respectively.
India has grown into the most populous nation in the world, overtaking China. With an economy clearly on an uptrend, and a workforce not yet tapped (only 24% female now employed), India is ‘coming-alive,’ ready for major development. Massive manufacturing growth awaits, as the country ‘gears-up’ with major investments from the largest corporations in the world. After years of political instability, shades of democracy are taking hold. Prime Minister Narendra Modi, the first ‘western’ head, is leading his country out of decades of little economic growth. Recently Prime Minister Modi visited the U.S. and Mr. Biden said, “Democracy is in our veins.” While in the U.S., Modi outlined future growth plans, economic changes and a “gearing-up” of all production to capitalize on China’s economic woes. Also, according to Prime Minister Modi, India wants to establish a military buying program, eliminating Russia, their prime supplier presently. Some economists have predicted “the next 10 years are going to ‘look like China,’ from 1991, with much more broad-based growth.” A sleeping giant is awakening, entering the world of…competition. Watch-out China!!
Germany, the leading producer in all of Europe…The International Monetary Fund recently predicted that Germany could be the only major European economy to downsize this year. Europe’s powerful industrial giant is struggling to maintain, staggered by high interest rates and massive debt. The loss of Russia’s natural gas, plus a general slowdown in demand for new automobiles, (electric autos are in fierce demand in all of Europe) has strapped the country financially. Germany is in dire need of digital technology, and methods of renewable energy. One area of increased production is that of producing LeopardTanks, as many have been sent to Ukraine. A major restructuring of basic industries, including energy, would help to stave off contraction.
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RUMBLINGS ON THE STREET
Josh Zumbrum, Writer of: ‘THE NUMBERS’ in the Wall Street Journal, “We are used to thinking of knowledge as mastering one problem, then building upon it. As a side effect of its incredible complexity, AI might not work that way. Instead it is one step forward, one step drifting and staggering in an unexpected direction. Over time, AI probably will continue forward, but it is far from a straight line.”
Bruce Kasmar, chief economist at J.P.Morgan, Barron’s notes that “crises emanating from the euro area and China historically have had less impact on the global economy than U.S.-centered crises. Still, the U.S. economy is strongest when the rest of the world is doing well.”
Lauren Goodwin, economist and director of portfolio strategy at N Y Life Investments, WSJ “It’s too early to expect a meaningful shift in market tenor until we see a definitive break in the economic environment, such as rising unemployment or falling corporate earnings” said Laura Goodwin.
Tony Roth, chief investment officer at Wilmington Trust, WSJ “We think economic growth is pretty robust and expect a soft landing,” he said. “But having said that, multiples are high and we have to evaluate the attractiveness of stocks relative to bonds.”