If you had never looked at a chart of any of the major stock market indices — the Dow Jones Industrial Average, the S&P 500 or even the Nasdaq Composite Index — before and you saw one from last week, you would likely say, “What happened?”
You and I know we saw a sell-off in the stock market that was started by talk of an Argentinean default and then continued with the sharp rise in the Employment Cost Index, which climbed 0.7% in Q2 2014, up from a 0.3% increase in the first quarter, and the initial 2Q 2014 GDP reading of 4%. It was those second and third events that got chins wagging about the timing of interest rate hikes by the Fed. As you know, rising interest rates can create opportunities in several areas, but they could cause problems in others, like housing, for instance. Even thought the Goldilocks July Employment Report took the heat off all the Fed talk, renewed tension in Russia regarding what may or may not happen with Ukraine weighed once again on the market this week.
Not quite what one would expect during the dog days of summer, but it goes to show that even though the majority of economic data points to a better second half, you still need to be on prepared. While I still have concerns about higher interest rate prospects given higher prices hitting consumers from the likes of The Hershey Company (HSY), Mars, Kraft Foods (KRFT), Chipotle Mexican Grill (CMG), Starbucks (SBUX), J.M. Smucker (SJM), Ford (F), PepsiCo (PEP), Nike (NKE), Netflix (NFLX) and more, the current quarter is shaping up, and it looks like the second half of the year will be a far better one than the first half. Truck tonnage data, as well as rail traffic data, points to this, as do auto and truck sales and favorable manufacturing data from both ISM and Markit Economics.
So you’re probably wondering what we’ve been doing over atmy investment newsletter PowerTrend Profits.
For those of you unfamiliar with PowerTrend Profits, its strategy is to use the intersection of the shifting economic, demographic and psychographic landscapes to ferret out and invest in companies for the coming 12-24 months. Against that backdrop, I won’t say the recent sell-off was no big deal, but, rather, it allowed us to revisit certain positions and improve our cost basis in the process.
Chris Versace is the editor of PowerTrend Brief — a FREE, weekly electronic newsletter. He also writes PowerTrend Profits, a paid monthly newsletter that helps individual investors profit through buying shares of companies poised to win big in the 8 PowerTrends, as well as writes the PowerTrader trading service that seeks to deliver short-term gains using stocks, ETFs and options. Chris has been ranked an All Star Analyst by Zacks Investment Research.