Powell sets the table for a Sept. rate cut

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JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Powell sets the table for a Sept. rate cut Fed Chair Jerome Powell confirmed what the market expected — the first interest rate could come as soon as this September. Powell wants inflation to keep cooling to the 2% target level while maintaining a “solid” labor market if the central bank were to cut rates this September. - “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,” Powell told reporters Wednesday. “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.” Notably, the central bank hinted at some anxiety about the labor market. In its official statements, the central bank noted that job gains had moderated and the unemployment rate has moved up (but is still low). Powell said the risks to the labor market “are real now.” For example, the number of job openings relative to unemployed workers is now at 2019 levels, and hiring has slowed. All in all, Powell said he “can imagine a scenario in which there would be everywhere from zero cuts to several cuts” for this year, “depending on the way the economy evolves.” While Powell tried to keep his options open, Wall Street viewed his comments as a confirmation that a rate cut during its Sept. 17-18 meeting is very likely. Could it be a 50 basis-point rate cut during the September meeting? Not likely, said Powell. - “I don’t want to be really specific about what we’re going to do, but that’s not something we’re thinking about right now,” he said. (Photo: The Hill) So, a 25 basis-point cut looks like the likely scenario. Ronald Temple at Lazard thought that the current economic conditions would have justified a rate cut during yesterday’s meeting. Regardless, he anticipates that the incoming data will make it a no-brainer to cut rates in September. - “While I believe a July rate cut could have been justified by slowing inflation, easing labor market tightness, and moderating growth, I think the case will be even more compelling in seven weeks,” he noted After all, consumers are starting to pull back. Of the consumer discretionary companies that have reported earnings so far, 39% of them missed estimates. That was more than double the 16% average miss rate from previous quarters. McDonald’s is known for its affordable meals, but the company said during the earnings call that prices were too high. Its same-store sales declined in the recent quarter. Two key economic data will be coming up — jobs data (this Friday) and CPI (next week). Barring any surprises, Wall Street isn’t too worried about the inflation data. Investors are watching the labor market closely for any signs of cracking. - “The data has moved in Powell’s direction and now he’s getting ready to follow,” said David Russell at TradeStation. “Jobs data on Friday and CPI in two weeks are the next big items. If those go well, we could get clearer messaging from Powell at Jackson Hole in late August.” Top Dividend Stock To Buy During The Wartime Today’s Stock Pick: Huntington Ingalls Industries, Inc. (HII) What is the first lesson of wealth-building that the Rockefellers, Gettys, and Vanderbilts teach their sons and daughters? Never lose principal! To make the strongest possible impression on the young mind, the words were spoken by a grandparent or family elder with the utmost gravity. And they would be repeated so often at family functions that in time, the youngster could be shaken from a sound sleep and, if asked the most important rule governing family finances, would automatically blurt out, “Never lose principal!” The reason is simple. When an investor loses principal, he has committed financial genocide upon entire generations of future dollars. For example, a loss of $10,000 may look modest but it will cost hundreds of thousands of dollars that you would have accumulated effortlessly if that principal sum had only been allowed to grow and multiply unperturbed over the years. And precisely, that’s what Huntington Ingalls Industries offer you. It is a stock with an entrenched competitive moat and offers astonishing dividends growth that will multiply your principal with miminal risk. First, dividends. Huntington paid out a $0.51 dividend per share (TTM) at the beginning of 2014. That’s about eight years ago. And guess what? Their current dividend per share is $5.40 – a whopping growth of 958%. So, what is this company? Huntington is the shipbuilder that is indispensable for the Navy. It designs and builds non-nuclear ships including amphibious assault ships, surface combat ships, aircraft carriers, and Coast Guard ships. It also builds nuclear-powered aircraft carriers, submarines, and support ships. All in all, the military shipbuilder builds about half the U.S. submarine fleet and all of its aircraft carriers. All about free cash flow: Huntington Ingalls isn’t a growth stock, and you will not see any 20-30% earnings growth. Rather, it is a cash cow that returns a tremendous amount of cash to the shareholders. Now, I am going to share several numbers, and you will see why this company offers incredible value. The management reiterated its goal of generating a total of $3.6 billion in free cash flow during the five-year period from FY24 to FY28. Now, hold on to that $3.6 billion number. Huntington Ingalls reported these FCF numbers in the last three years: - 2021: $449 million - 2022: $494 million - 2023 : $629 million Okay, now. This year will be a modest one for the company. And let’s do the math here. The last three years added up to $1.51 billion. Do you remember the guidance that Huntington reiterated by 2024? It would generate a total of $3.2 billion, which means the company is $1.69 billion away from the goal... with only two years remaining. That would be more free cash flow than the last three years combined. In the graph below, you will see that Huntington expects its FCF to double from FY 2022 next year. As for 2024, it would still be on the elevated level. Do you think Wall Street would notice these massive FCF jumps? Certainly so! Revenue growth: Management at Huntington Ingalls revealed guidance for a 13.7% YOY growth in annual revenues this year to over $10.8 billion. And its dividend yield is now at 1.85% annually. In the last three years, the annual dividend increased by 15.3%. Everything points to business as usual for Huntington to keep growing its dividends. 11.7 $62 million Bottom line: Hate to lose your principal? Huntington Ingalls is your stock because its fundamentals are iron-clad. It is difficult for any competitor to enter the military shipbuilding business and its dominance in aircraft fleets allows the company to virtually guarantee its future cash flow. And the projected growth in FCF will bring even more profits to the shareholders. Wall Street may notice, and the stock price can spike. Regardless, buy and hold this stock, and you’ll enjoy its long track record of increasing dividends per share.   [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](     © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](