With earnings and the Fed behind us, we expect investors to return to fretting about inflation.
Without getting into the nitty-gritty details of it, after the Consumer Price Index (CPI) was released on Wednesday, it cast more doubt on the potential for another month of uninterrupted gains in the S&P 500.
Essentially, the month-over-month inflation number was 0.9%, which translates to an annual inflation rate of more than 11%… ouch!
It was about this high when the report was released in July, just before the market started consolidating, and while we don’t think inflation is a trend-killer yet, it does mean we should lower our expectations a little that the recent trend will continue without any interruptions.
To be clear, we aren’t forecasting a big correction in the market, but there are signs that volatility may increase again, and we plan to be prepared for it.
Trading Opportunity No. 1: The Holiday Rush
The holiday shopping season always offers great trading opportunities. This year, with the global supply chain disruptions we’re experiencing, the holiday shopping season is being pulled forward as consumers worry they won’t be able to find the items on their wish lists if they wait.
This has set up a fantastic trading opportunity on Stock A.
The company beat revenue expectations by $630 million and earnings expectations by $0.10 per share. Management also expects consumer demand to remain strong during Q4.
With the added bonus of the company confirming it will continue paying a hefty quarterly dividend, we expect the stock to remain strong.
We made our move on this trade on Wednesday, and the trade is already up 1.94% as of market open today.
Trading Opportunity No. 2: Back to Oil
On Thursday, because it was Veterans Day, the bond market was effectively closed, which usually results in a quiet stock market as well.
This was a good time to add Stock B, an oil exploration company, to the portfolio again.
The company benefits directly from increases in the value of crude oil. The more expensive oil becomes, the more money they make for every barrel they pull out of the ground. They also make money on natural gas, which has increased in value during the past few months as well.
The company recently announced plans to increase its dividend payment by 7%, which is great news for shareholders who are looking for the company not only to increase its earnings, but also pass those earnings back to shareholders.
We entered this trade yesterday, and while it is breaking even currently, we expect it to increase in value over the coming weeks.
Profits From This Week
In Strategic Trader on Monday, we closed out a trade on healthcare giant Pfizer (NYSE:PFE) for 7.77% – and that’s only after four days!
Then, earlier this morning, we closed out a trade on Coca-Cola (NYSE:KO) for 2.25% after just two weeks.
These income-generating trades are our meat and potatoes at Strategic Trader, and we drop new recommendations two to three times a week.
Click here to see how you can hop on the next one.
We’ll be back with you Monday.
John Jagerson & Wade Hansen
Editors, Trading Opportunities