Financials – Conspicuously Underperforming

Underperforming Despite Tailwinds

The financial cohort has conspicuously underperformed the broader market for the majority of 2018. The group didn’t participate in the broader market performance in Q3 where the S&P 500 had its best quarter since 2013. Banks have had domestic and global economic expansion tailwinds at its back while posting accelerating revenue growth, increasing dividend payouts, engaging in a record number of share buybacks and benefiting from tax reform. Augmenting this economic backdrop is a record number of IPOs, a record number of global merger and acquisitions, rising interest rates, deregulation, and tax reform. Banks are benefiting in unique ways due to the consulting fees regarding mergers and acquisitions and trading around market volatility. All of these elements provide an ideal confluence that bodes well for the financial sector. JP Morgan (JPM), Citi (C), Wells Fargo (WFC), Goldman Sachs (GS) and Bank of America (BAC) seemed to be poised to continue to benefit from the favorable economic backdrop. Thus far in 2018 the financials have performed terribly considering the broader market performance and the aforementioned economic tailwinds. There’s negative sentiment that’s placed the financials in a holding pattern for much of 2018 over concerns of rapid interest rate increases and an inverted yield curve.

The Federal Reserve, Rising Interest Rates and Economic Strength

The Federal Reserve expects the economy to continue to strengthen and inflation to rise shortly. The economic strength coupled with the threat of inflation provides an environment that’s ripe for rising interest rates. The Federal Reserve has been very bullish on the domestic front and signaled that rate hikes will continue and may even accelerate its pace of rate hikes contingent on inflation and economic strength. There’s no question that the financials benefit from rising interest rates, and Bank of America(BAC) has one of the largest deposit bases among all banks and serves as a pure play on rising interest rates. Goldman Sachs (GS) has even branched out into consumer banking with its Marcus product so needless to say all big banks will benefit from their deposit bases.

Federal Reserve Chairman Jerome Powell stated that the unemployment rate currently stands at 3.9%, near a 50-year low while core inflation is right around 2%. Powell said that these two metrics are part of a “very good” economy that boasts “a remarkably positive outlook” from forecasters. The central bank approved a quarter point hike rate in the funds rate that now stands at 2.25%, and the committee indicated that another rate hike would happen before the end of the year. 2019 will likely see three more rate hikes and 2020 will see one rate hike before pausing to assess the delicate balance of rising rates in the midst of a strong economy while taming inflation. Continue reading "Financials – Conspicuously Underperforming"

SKF, the banks, Fibonacci trading, and why the markets crashed

Last night on MarketClub TV, Susan and I discussed what we and the “Triangles” saw in the markets in the days to come and well, it didn’t even take days. In a little more than 12 hours, the markets showed us that we were dead on.

SKF discussed in the above video recorded on Wednesday is up + 9.8% today!

Of course, even we know that we can’t be right all the time, but more often than not MarketClub has put us on the right side of many markets. Want to see for yourself? For the first time ever, we’re offering you a MarketClub membership at a price you’d be crazy to refuse. Click here to find out more.

All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub

Penny Stock Investing

Steve Zelin from Zantrio has provided some great guidelines for trading penny stocks and finding the right broker for you without putting your investment at risk. The goal at Zantrio Trading is to bring the world wide group of financially oriented individuals together, to share their valuable financial ideologies. We hope you will enjoy his article and comment below.

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With the massive undertaking of the cleanup for the BP Gulf Oil Spill heating up, investors are looking intensely, although with extreme caution, into penny stocks that provide specialized services to clean up chemicals, such as oil. Savvy investors as well as small, even first time investors seem to be willing to fork over a small amount of disposable cash, to take a chance at that potential, big shot with these penny stocks. With so many websites on the Internet that provide penny stock tips, investors should give serious consideration before utilizing these frequently ruthless, pump and dump schemes however, we are not implying that all of these sites provide bogus or misleading information. Before taking any recommendation from these penny stock tip websites, investors should investigate as to whether the website is being reimbursed for promoting any particular penny stock. Frequently, potential investors will find that these websites are in fact being compensated for promoting a particular penny stock thus; investors should do their own extensive research prior to risking any amount of money on even the most appealing, penny stock tip. Continue reading "Penny Stock Investing"