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Interest Rates Say the Market Is Changing. We Must Trade Accordingly

by | Sep 27, 2021

Markets can change on a dime — right at the moment you least expect it.

I noted last week that China’s crypto crackdown and Evergrande collapse were driving the headlines.

But I probably should have made a much bigger deal about rising interest rate stocks in last week’s watchlist.

Because even though our free trade on the Consumer Discretionary Select Sector SPDR ETF (NYSEArca: XLY) is up 3%, it’s the Financial Sector SPDR ETF (NYSEArca: XLF) that’s been crushing it.

Source: Bloomberg

And the reason behind that move — again, rising interest rates — is what’s driving headlines on Monday.

The yield on the 10-year Treasury has shot up 20 basis points over the past week, which is a lot for fixed income.

And more importantly, it crested the 1.5% mark on Monday morning for the first time since June — when it was on its way down.

Source: Bloomberg

This means inflation is likely a much larger issue than we may have thought.

But it also may mean that the economy is growing faster than most are giving it credit for.

Rising Interest Rate Stocks and the Economy

That brings us to the three data points we need to pay the most attention to this week: inventories, gross domestic product and Personal Consumption Expenditure.

Source: Bloomberg

If inventories disappoint, we know prices will rise.

If GDP comes in line or outperforms, we will know the economy has picked up.

And, finally, if PCE comes in above expectations, we’ll know that inflation is just torching the middle class.

All three of those things mean everything on our current watchlist can be bought with impunity on any down days — like ProShares UltraPro QQQ (Nasdaq: TQQQ) and Direxion Daily S&P 500 Bull 3X SHares (NYSEArca: SPXL), our past picks.

And if you followed directions and picked up a little Grayscale Ethereum Trust (OTC: ETHE) this morning, good job… Because crypto will skyrocket alongside commodities if both growth and inflation are accelerating.

Source: Bloomberg

We’ll put out a new watchlist Tuesday with some rising interest rate stocks, so keep your eyes on that inbox…

I have a feeling the shopping list is about to get a lot bigger.

All the best,

Matt Warder

Fortune Research

WRITTEN BY<br>Matt Warder

Matt Warder

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