The Federal Reserve has made its ruling: No tapering.
At least not yet. For now, the Fed’s $85 billion-per-month long-term bond buying stimulus will continue.
That decision set off another rip-roaring, liquidity-fueled, melt-up in the stock market Wednesday as investors climbed over themselves to buy up positions in Fed-sensitive, interest-rate dependent assets. Gold and silver. Treasury bonds. Mortgage REITs. Homebuilder stocks. Steelmakers. Stuff like that.
Here’s a look at five stocks to buy that are zooming higher in response, breaking out of multimonth downtrends in the process:
Invesco Mortgage Capital
Click to Enlarge Long-term interest rates dropped hard in the wake of the Fed decision, sending mortgage REITs on the move on both a play for yield as well as hopes that some rate relief will bolster the housing market. The housing market had suffered as the yield on 10-year Treasury bonds had climbed from 1.7% in May to near 3% recently.
As a result, Invesco Mortgage Capital (IVR) looks ready for a push to at least its 200-day moving average.
Two Harbors Investment Corp.
Click to Enlarge Two Harbors Investment Corp. (TWO) is another mortgage REIT that focuses an residential mortgage-based securities — securities that are suddenly poised to become more valuable in the wake of Wednesday’s decision.
A return to the March highs would be worth a 20% move from here for the Best Stocks of 2013 entrant.
Click to Enlarge Just as mortgage stocks are getting relief, homebuilder stocks are also perking up. D.R. Horton (DHI) is surging through its upper Bollinger Band for the first time since April.
Click to Enlarge It wasn’t just the bond market that benefited from the no-taper decision; commodities did, too, on a combination of higher economic growth expectations and the rising specter of inflation as the cheap money continues to close.
That’s helping Southern Copper (SCCO) — a copper miner based in South America — exit a big downtrend pattern that started in January.
Click to Enlarge Steelmakers have been down and out since the global economy hit a speed bump back in 2011. But now, with signs of economic re-acceleration mixing with a continuation of the Fed’s monetary policy stimulus, the entire industry group is coming back to life.
Mechel Steel (MTL) is moving up and out of a tight four-month consolidation pattern that took the stock all the way back to its 2009 bear-market low near $3 a share.
I’ve added a number of these positions, and a few others I didn’t mention, to my Edge Letter Sample Portfolio.
As of this writing, Anthony Mirhaydari has recommended MTL, SCCO, DHI, TWO and IVR to his clients.