Optimistic Wall Street Ignores Washington Woes

The markets have already priced in the sequester

   

Considering the fears that both the federal government and hundreds of contractors might have to lay off tens of thousands of workers, the market has taken the obtuse politics in stride for now. Most investors felt as if sequestration would be avoided but we now know that will not be the case.

Still, markets have been discounting the bad news with incredible speed of late, and combined with stalwart support from central banks — especially Federal Reserve Chief Ben Bernanke — it is a little hard to conceive of reasons for setbacks any more substantial than what we saw on Monday.

With that said, in order to take advantage of this market trend, I’ve divided some promising stocks into a few different categories:

Addictive Stocks, such as AmBev (NYSE:ABV), Starbucks (NASDAQ:SBUX), online retailers Amazon.com (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) that provide highly addictive products and services.

Money Men, companies that are helping other firms obtain credit or merge amid record low interest rates and low growth such as private equity firms like Blackstone (NYSE:BX), Oaktree (NYSE:OAK), KK&R (NYSE:KKR), Carlyle Group (NASDAQ:CG) and also larger managers like Blackrock (NYSE:BLK) and Waddell Reed (NYSE:WDR).

Hotshots like Guidewire (NYSE:GWRE), Elli Mae (NYSE:ELLI), Home Loan Servicing Solutions (NASDAQ:HLSS) and WorkDay (NYSE:WDAY) are also promising because no matter what the environment, young companies will emerge out of nowhere.

However, the main threat that still lies on the horizon is companies’ weak guidance during the past earnings season. It’s very rare to see companies so bearish on their own prospects with share prices near multiyear highs. Companies may have grown addicted to the idea of setting the bar really, really low — and then seeing their shares vault higher when the bar is cleared during earnings season. We will just have to wait and see.

InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage which aims to capture profits of 15% to 40% and often as much at 100% to 200% in less than 90 days. 

Professional traders and hedge funds make huge profits off volatility.  Now, Jon’s service CounterPoint Options levels the playing field with the first service geared towards helping individual traders make steady, consistent profits with the VIX.  Get more information on Trader’s Advantage and CounterPoint Options today.


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