The Fed Is Almost 'There'

What the Fed said today... An update on small caps... War in the Middle East escalates – again... The global risk to understand... Don't miss Porter Stansberry's new presentation... 'Every stupid idea... has been tried before'... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] What the Fed said today... An update on small caps... War in the Middle East escalates – again... The global risk to understand... Don't miss Porter Stansberry's new presentation... 'Every stupid idea... has been tried before'... --------------------------------------------------------------- The Fed is getting closer to a rate cut... That's the story coming out of the Federal Reserve's two-day policy meeting, which wrapped up today... and Fed Chair Jerome Powell's post-meeting press conference. As widely expected, the Fed kept its benchmark federal-funds rate range right where it's been for a year: between 5.25% and 5.5%. It's keeping "restrictive policy" in place, Powell said. But, as usual, investors are more concerned about the future... And the central bank seems like it's close to making a rate cut during its next policy meeting in September. As Powell said... We have made no decisions about future meetings, and that includes the September meeting. The broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. We will be data-dependent but not data-point-dependent. It will not be a question of responding specifically to one or two data releases. The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, the reduction of the policy rate could be on the table as soon as the next meeting in September. In other words, the Fed isn't "there" yet, but investors should prepare for the return of some economic juice from the monetary powers that be... the kind we haven't seen since the early days of the COVID-19 pandemic through late 2021. Powell wants to stick the 'soft landing'... Powell said the central bank is more concerned with the unemployment rate, which has been moving higher over the past few months (to 4.1%) rather than inflation (with its headline measure at 2.5%) now. It sounds like he wants to stick the "soft landing." As he said during today's press conference... We've had a really significant decline in inflation. Unemployment has remained low. This is a historically unusual and such a welcome outcome... What we're thinking about all the time is, "How do we keep this going?" He also said he thinks the bank's policy has been restrictive and that "lags" in monetary policy have yet to hit the economy. Reading the signals... The Fed also sent some subtle signals about the future of rate cuts in its formal written policy announcement. Fed officials believe inflation is now "somewhat" elevated, compared to just plain "elevated" before. The bank also said there has been "some" further progress on getting inflation to a 2% annual rate. It didn't say that earlier in the year. In one passage of its policy press release, the Fed also eliminated the word "inflation" from its previous statements in favor of "both sides of its dual mandate" – meaning maximum employment and stable prices – when referring to what features of the economy it's considering most. And during his press conference opening statement, Powell said... As the labor market has cooled and inflation has declined... [They] continue to move into better balance. Before this afternoon's Fed policy announcement and Powell presser, all of the major U.S. indexes were higher. After things went mostly according to expectations in Fed-land – and maybe better – the indexes moved even higher into today's close. The Nasdaq Composite Index closed 3% higher, the benchmark S&P 500 Index was up more than 1.5%, the small-cap Russell 2000 Index was up roughly 0.5%, and the Dow Jones Industrial Average was up slightly. Going into the meeting, futures traders put a near 100% probability on the Fed cutting rates at its next meeting in September. After the release of the Fed's decisions and Powell's commentary, expectations remained there. The sector we keep watching... Over the past couple of weeks, we've been keeping tabs on the "[Great Rotation](... the idea that investors are moving into small-cap stocks and away from everything else. The increased odds of a Fed rate cut over the past month appear to be a catalyst. Many investors think a cheaper cost of borrowing will help out capital-intensive, speculative small-cap businesses. After only a few weeks of the "divergence" between small-cap stocks and the rest of the markets, the Russell 2000 Index had nearly the same year-to-date return as the tech-heavy Nasdaq 100 Index, as of yesterday's close. Jay Woods – a nearly three-decade veteran of the New York Stock Exchange trading floor who is now an independent analyst and writer – noted the trend yesterday on social media platform X. The post was featured in yesterday's edition of the Chart Report... The Nasdaq's performance today re-widened this gap, but the last month of performance is notable. [Last week]( we outlined the short-term and long-term "buy" signals our colleagues Chris Igou and Brett Eversole were seeing from the spike in the Russell 2000 Index earlier this month. In short, Chris and Brett found that small caps would probably be due for a very short-term breather... followed by a continued rally over the next year. This week, Brett again looked at small caps – specifically, what history suggests about the "multiday rally" we saw in the sector earlier this month. As Brett [wrote to DailyWealth readers yesterday]( the Russell 2000 Index jumped 1% or more for five consecutive trading days. The run ended on July 16. Overall, the Russell 2000 Index soared nearly 12% during those days. Brett found that there have only been four similar setups since 1979. That's not a large number to work with, so he added the instances of the Russell 2000 rising 1% or more for four straight days. As Brett said, this was "still rare." But it led to substantially above-average returns for the Russell 2000 in the next six and 12 months. As Brett wrote... It has happened 13 other times, or about once every three years. But when it occurs, big gains tend to follow. Take a look... Similar setups led to 12.3% gains in six months and 22.8% gains over the next year. Plus, small-cap stocks were higher 85% of the time a year later, making our odds of success today darn high. Lots of folks are continuing to ignore small caps despite this recent move higher. A decade of underperformance has conditioned them not to care. But history says that's a mistake... Brett told readers that "small caps are moving in a way we haven't seen in a long time. And the wild nature of the recent rally tells us this is only the beginning." Potential rate cuts ahead could also help make a bullish case for smaller stocks. Now, let's switch gears... War in the Middle East escalates – again... We awoke this morning to reports that Hamas leader Ismail Haniyeh had been assassinated in Iran in an overnight missile attack at a residence north of Tehran, Iran's capital. Many reporters quickly linked Israel to the attack, though it didn't claim responsibility, and Iran put some of the blame on the U.S. As global news service Reuters reported... The Palestinian Islamist militant group and Iran's Revolutionary Guards confirmed Haniyeh's death. The Guards said it took place hours after he attended a swearing-in ceremony for Iran's new president... Haniyeh, normally based in Qatar, had been the face of Hamas's international diplomacy as the war set off by the Hamas-led attack on Israel on Oct. 7 has raged in Gaza. He had been taking part in internationally-brokered indirect talks on reaching a ceasefire in the Palestinian enclave... Hamas' armed wing said in a statement Haniyeh's killing would "take the battle to new dimensions and have major repercussions". Vowing to retaliate, Iran declared three days of national mourning and said the U.S. bore responsibility because of its support for Israel. An attack on Iranian soil has a high potential to escalate the ongoing war in the Middle East to several new levels. You may remember back in April when Iran launched more than 200 drones and missiles at Israel, almost all of which were shot down by defense systems – which were aided by the U.S. and some European nations. Those drone and missile attacks were in response to an Israeli strike on Iran's consulate in Syria that killed seven Iranian military officers. At the time, Iran told the United Nations, "should the Israeli regime make another mistake, Iran's response will be considerably more severe." Now, Iranian leaders are vowing revenge again. A reminder about war... War is inherently inflationary. And while this war in the Middle East isn't new, one of the more significant risks to the global economy is that critical oil and gas infrastructure in the region could become more directly involved in the crossfire... to the point where global energy supplies take a hit. Israel doesn't supply much oil and gas, but Iran does. Iran holds the world's third-largest proven oil reserves, the second-most natural gas reserves, and is one of the top 10 oil-producing countries in the world and one of the biggest in the Middle East. Sanctions have limited the amount of Iranian oil that makes up the global supply, but if the scale of attacks ratchets up on either side, inflationary pressure could hit the global economy very quickly. This happened with the escalation [in the Red Sea]( at the end of last year and earlier this year. The Houthi attacks disrupted a significant supply chain, elevating oil and freight prices. [Oil prices rose 20% in a few months]( which influenced inflation data in the U.S... and put the idea of Fed rate cuts on "pause" for longer. In the last 24 hours, prices of Brent Crude oil – the international benchmark – are up more than 3% to $81 per barrel, and West Texas Intermediate – the U.S. standard – has risen more than 4% to almost $78 per barrel. Those numbers are below recent highs from April, but keep watch. Bigger war impacts could upend the current narratives about "disinflation." But you don't have to just take my word for it... Dan Ferris and I just discussed these points with the great macroeconomic analyst Bob Elliott, who was formerly Ray Dalio's right-hand man at Bridgewater, in a Stansberry Investor Hour interview we recorded yesterday. Bob named war – along with decreased globalization in general – as part of a compelling case for an inflationary era ahead in the decades to come. That was just part of our discussion. Bob also shared his thoughts on how individual investors should be thinking about stocks, bonds, commodities, and gold today. Stay tuned for that episode soon. In the meantime, don't miss this... Yesterday, Stansberry Research founder Porter Stansberry debuted a brand-new presentation about the "[two very different Americas]( he sees today. As we wrote yesterday, Porter discussed the root cause of the divide and how he sees things playing out in the economy, markets, and the country. He also has suggestions for how to protect and grow your wealth during a time when the constant devaluation of the U.S. dollar (thanks to inflation) is inevitable. There's really "only one game in town," he says, and you need to know how to play it best. Porter also shares what he thinks is the "most dangerous investment in America today" that folks should avoid, given all the challenges facing the U.S. economy today. You can watch a free replay (or read a transcript) at your convenience now. We suggest you do. [Click here for all the details](. Quote of the week... This week's quote reflects how I feel about history... It's from the economist, philosopher, and commentator Thomas Sowell, who, at 94 years old and with decades of a distinguished career behind him, is still a senior fellow at the Hoover Institution think tank. Sowell once said... One of the most important reasons for studying history is that virtually every stupid idea that is in vogue today has been tried before and proved disastrous before, time and again. For those who wonder why we may look to the past for clues about what might happen in the future – be it with the Fed, small-cap stocks, war, debt, the devaluation of the U.S. dollar, or anything else – it's because history so often rhymes with the present. Others might try, but we won't pretend that much about human nature is "new." --------------------------------------------------------------- Recommended Links: [Here's What You Missed Yesterday]( Porter Stansberry is the CEO of the largest independent financial research firm in the world. More than 5 million people have seen his work. Yesterday, he stepped forward with an important message about this year's manic market... and shared step-by-step details of what he's doing with his own money to prepare. [Stream Porter's replay here](. --------------------------------------------------------------- [Urgent Alert: 'This Could Be Worth 20 Times More Than Nvidia']( Whitney Tilson has nailed many of the most famous stocks of the past 25 years – including Netflix, Amazon, and Apple. Now he's pounding the table on a new technology rolling out across America, which early estimates say could create more wealth than AI, the personal computer, and the smartphone combined. [Click here to see how it could become the No. 1 investment of the next decade](. --------------------------------------------------------------- New 52-week highs (as of 7/30/24): AbbVie (ABBV), Automatic Data Processing (ADP), American Express (AXP), Alpha Architect 1-3 Month Box Fund (BOXX), Brown & Brown (BRO), Coca-Cola Consolidated (COKE), Commvault Systems (CVLT), Danaher (DHR), Electronic Arts (EA), Equity Commonwealth (EQC), Fidelity National Financial (FNF), Hologic (HOLX), Intercontinental Exchange (ICE), iShares U.S. Aerospace & Defense Fund (ITA), Coca-Cola (KO), Lockheed Martin (LMT), Grand Canyon Education (LOPE), Altria (MO), VanEck Morningstar Wide Moat Fund (MOAT), NVR (NVR), Novartis (NVS), Pembina Pipeline (PBA), Invesco High Yield Equity Dividend Achievers Fund (PEY), Ryder System (R), Revvity (RVTY), Sprouts Farmers Market (SFM), Thermo Fisher Scientific (TMO), Texas Pacific Land (TPL), Veralto (VLTO), Verisk Analytics (VRSK), and Zebra Technologies (ZBRA). In today's mailbag, feedback on [yesterday's edition]( – which highlighted Porter's [new presentation]( about the U.S. economy and his market outlook – and another note on [Dan Ferris' latest Friday essay](... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "We are already toast. There is no way possible to correct that $35 trillion debt except to default on it. It will be paid for with worthless currency... "We cannot and will not address our number one issue. Stupidity. "You understand our national debt problem. Many of us do also. But the vast portion of our population cannot, will not, even if you slapped them across the face with it. They prefer to instead believe political... central bank bull***t... "Our national debt cannot ever be paid, only defaulted on. Our Congress and... central bank will not stop contributing to the debt like it does not exist. We cannot even pay the interest without borrowing more currency unit dollars into existence, which always, continually devalues every dollar-currency-unit already in existence. "Our [central bank], in control of nothing, even declares they have a 2% inflation target. Let's get honest and say it as it really is. Our privately-owned fake Fed really has a 2% currency devaluation target. "When, not if, our currency experiment – all designed to fail by design – fails, we all suffer; rich, poor, in between. Good luck getting items needed to live then. "Somehow, no one is thinking about the multiple trillions of rapidly devaluing currency unit dollars overseas. Eurodollars, that will come flooding back to America to be spent before becoming worthless, doing just that. Our hyper-inflation journey to s*** hole country..." – Subscriber Bernard B. "Good timing on the QXO/Brad Jacobs article [on Friday]. QXO just dropped to around $12 post-market Monday." – Subscriber Gary S. All the best, Corey McLaughlin Baltimore, Maryland July 31, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation. Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,378.4% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,346.4% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 935.8% Extreme Value Ferris WRB W.R. Berkley 03/16/12 765.3% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 682.4% Retirement Millionaire Doc HSY Hershey 12/07/07 479.5% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 456.8% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 426.5% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 367.4% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 355.1% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,661.9% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,147.2% Crypto Capital Wade MATIC/USD Polygon 02/25/21 755.1% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 307.5% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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