Wall Street Awaits the Next Ultimate Catalyst

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JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Wall Street Awaits the Next Ultimate Catalyst The market brushed off a hotter-than-expected inflation reading, as the tech-heavy Nasdaq rose 1% yesterday. Swap traders still expected the Federal Reserve to go for a 25 basis-point cut next week and a total cut of 100 basis points this year. The central bank is poised to start the rate-cutting cycle as the economy remains robust. It is a big difference from the last two rate-cutting cycles where the Fed had to cut in response to recessions. Indeed, the Fed is in a good position. The producer price index rose 0.2% from July, slightly higher than the 0.1% estimate. Initial jobless claims climbed at a pace that paints a picture of a gradual slowdown. (Source: Bloomberg) So, the Fed gets to cut rates before the labor market collapses. It is a luxury that the previous rate-cutting cycles didn’t have. JPMorgan Chase CEO argued that inflation might be stickier than the Fed thinks, so it might not be easy to put the final dagger in inflation (by bringing it to the 2% level). At the same time, the Fed knows that the current level is already restrictive. It becomes more restrictive when inflation comes down, so keeping the status quo actually raises the risk of a recession. A 25 basis-point looks sensible for now. It gets the rate-cutting cycle going while buying some time to see incoming data to determine if inflation keeps falling. - “The economy isn’t falling apart, so the Fed has time to get rates down,” said Brian Henderson at BOK Financial. “They’re probably going to start off fast with cuts of 25 basis points each in September, November and December, and then may slow to one rate cut per quarter in the new year.” Brian Henderson at BOK Financial (Photo: BOK Financial) What about stocks? As of right now, there are relatively few catalysts beyond the red-hot demand for Nvidia’s AI chips. The economy is slowing. Companies are tightening their purses. Can an interest rate cut spark activity in the economy? That’s what traders will pay attention to. - “While there’s been some continuation to the upside, any hint of fading momentum could put the bulls back on shaky ground,” said Fawad Razaqzada at City Index and [Forex.com](. “After all, clear bullish catalysts seem few and far between at the moment.” Today, we will get the latest reading for the University of Michigan’s consumer sentiment. Will it be a market-moving event? Unlikely. The next major catalyst will likely be the Federal Reserve’s FOMC meeting next week. Top Disruptive Company to Own Right Now Today’s Stock Pick: Robinhood (HOOD) One of the best signs of a monster winner in the stock market is a company that is continuously disrupting the industry it operates in. And there’s only one way to disrupt. A disruption happens when the company is fanatically obsessed with offering irresistible products to the end users. Robinhood is one of them. The company uses clever ways to create irresistible offers to attract users to its platform. Robinhood made its mark by making trades commission-free. Eventually, all other brokerages followed. Robinhood didn’t stop there. If you go to its homepage, you will see the irresistible offer: “UNLIMITED DEPOSIT BOOST” The offer is amazing. New eligible deposits will get a 1% boost. That’s right — Robinhood will add 1% to any deposit made to the platform. (Source: Robinhood) Is that all? Nope. Robinhood created the Robinhood Gold Card where members can get 3% cash back across all categories. It popularized the concept of getting a free fractional share for signing up or referring to other friends. Its margin rate is easily the lowest in the industry. Robinhood is clever to build its Robinhood Gold business because it offers the company a way to generate recurring revenue. All in all, Robinhood is a massive disruptor in the stock brokerage space. Just look at the upcoming product roadmap… In the first quarter, Robinhood redesigned its app, announced unlimited deposit boost, added the Gold Card, introduced Robinhood Retirement for Independent Workers, and so on. (Source: Robinhood) Its quarterly presentation lists three key targets — (1) Winning the Active Trader market, (2) Increasing Wallet Share, and (3) Expanding Internationally. (Source: Robinhood) So far, it is winning. Funded customers increased steadily since the third quarter of 2022. Assets Under Custody jumped 57% year over year to $140 billion in Q2. How? Through higher net deposits and equity/crypto valuations. (Source: Robinhood) Remember Robinhood Gold? The value proposition is strong. Just for $5 per month, the customer receives insane value. One highlight is a whopping 3% IRA match! (Source: Robinhood) Sure enough, consumers are eating it up. About 8.2% of Robinhood’s customer is also a Gold subscriber. It is a big jump from just 5.3% in the second quarter of 2023. This business can turn out to be a massive one for Robinhood. Why? Gold subscribers have ~7x more assets under custody, ~2x higher for net deposit growth rate, and ~5x higher for retirement adoption rate. (Source: Robinhood) In fact, Robinhood is attracting bigger customers. In 2024 alone, customers already have higher cumulative net deposits than those who joined in 2020. What a growth! (Source: Robinhood) Its Retirement business is growing rapidly. Accounts nearly tripled in just one year! Assets under custody grew by ~11x from the second quarter of 2023. Once you have these customers, there are virtually endless of products to offer. (Source: Robinhood) Lastly, its economics are attractive. Net revenues grew 40% year over year. At the same time, adjusted operating expenses grew just 14% in the same period. (Source: Robinhood) Yep, that’s right… Robinhood holds a powerful operating leverage that allows its earnings to grow much faster than revenue. (Source: Robinhood) Bottom line: Robinhood is one of the best tech companies right now. It constantly comes up with disruptive products with irresistible offers. Its P/E ratio of 67 actually looks cheap since it is growing earnings rapidly. This is a gem. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](