It’s All About The Labor Market Now

Join TradeAlgo's Free Live Trading Session ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, It’s All About The Labor Market Now Yesterday’s phenomenal inflation reading failed to spark enthusiasm on Wall Street. Notably, investors re-positioned their money after Joe Biden’s poor showing at the presidential debate. Money went to stocks that were seen to benefit if Donald Trump secured a second term in the White House. These were private prisons, credit-cards companies and health insurance firms. Renewable energy and cannabis stocks declined. However, the biggest concern was about the economy. Analysts are starting to lower earnings forecasts. Recent economic data indicated slowing growth in many different areas. The stock market surged despite these headwinds. Marko Kolanovic at JPMorgan Chase believes that the S&P 500 is poised to see a major correction in the next few months. “There is a clear disconnect in the huge run-up in US equity valuations and the business cycle,” he wrote. Marko Kolanovic at JPMorgan Chase (Photo: The CEO Publication) Inflation data: The core personal consumption expenditures price index rose just 0.1% last month. Headline PCE (which includes food and energy) was flat on the month. It was just what the Fed wanted to see. Cooler inflation makes it more likely for the central bank to start cutting interest rates this year. - “From the market’s perspective, today’s PCE report was near perfect,” said David Donabedian at CIBC Private Wealth US. - “The Fed’s favorite inflation indicator not only showed inflation was moving towards the Fed’s inflation target, but that the economy is resilient. Consumer spending was on the rise and take-home pay was also up after a couple of sluggish months.” Investors are confident that inflation will keep cooling. The question is whether the economy can avoid a recession. Consumers spend more when they feel good about their chances to keep and find jobs. So, Wall Street will pay attention to next week’s nonfarm payroll data to gauge the health of the labor market. - “The soft inflation data will build the case that the Fed can start cutting rates in the coming months,” said Jeffrey Roach at LPL Financial. - “As long as incomes grow at a healthy clip, consumers will keep spending. The key is the labor market and so now, we should shift our attention to next week’s nonfarm payroll release for a fresh look into the job market.” A Rock-Solid Play for Lower Interest Rates Today’s Stock Pick: PennyMac Mortgage Investment Trust (PMT) Surely, many investors are thinking to themselves — How can I make money when the Federal Reserve starts to cut interest rates? Yes, there are some ideas like betting on certain sectors to prosper. But we want to find those that could grow earnings rapidly. Why? Fast-growing earnings often lead to fast-rising stock prices. I am going to share one possible investment thesis to take advantage of rate cuts. Pay attention to those companies that are paying variable rates on their debts. The reason is simple. Their earnings were crushed by higher rates. Interest payments were higher when the rates went higher. However, when rates are lower, their interest payments also become smaller. Meaning? Bigger earnings. PennyMac Mortgage Investment Trust is one of them. It invests in mortgages, and its business had several tough quarters due to higher mortgage rates. They own many mortgages that were originated when rates were rock-bottom. These rates don’t change. However, PennyMac’s cost of financing to invest in these mortgages were floating rates. So, the company lost money on some of these mortgages in the last few quarters. But things are poised to get better once the central bank starts cutting rates. As a bonus, the mortgage origination market is forecasted to turn around in the next two years: (Source: PennyMac Mortgage Investment Trust) PennyMac’s stock is currently trading at $13.75 per share. Its book value per share is $16.11. So, the stock is actually trading below its book value which makes it a fantastic value play. (Source: PennyMac Mortgage Investment Trust) The company also offers a 11.64% dividend yield. That’s right — you’ve got a stock that could enjoy a significant earnings growth once the Fed cuts rates… and… offers a double-digit dividend yield. Bottom line: PennyMac isn’t a “sexy” play, but it has lots of fantastic attributes. It trades below the book value while offers a 11%+ dividend yield. As a bonus, its earnings are poised to grow once rates are lowered. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](