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 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.