If you had never looked at a chart of any of the major stock market indices — the Dow Jones Industrial Average, the S&P 500 or even the Nasdaq Composite Index — before and you saw one from last week, you would likely say, “What happened?”
You and I know we saw a sell-off in the stock market that was started by talk of an Argentinean default and then continued with the sharp rise in the Employment Cost Index, which climbed 0.7% in Q2 2014, up from a 0.3% increase in the first quarter, and the initial 2Q 2014 GDP reading of 4%. It was those second and third events that got chins wagging about the timing of interest rate hikes by the Fed. As you know, rising interest rates can create opportunities in several areas, but they could cause problems in others, like housing, for instance. Even thought the Goldilocks July Employment Report took the heat off all the Fed talk, renewed tension in Russia regarding what may or may not happen with Ukraine weighed once again on the market this week.
Not quite what one would expect during the dog days of summer, but it goes to show that even though the majority of economic data points to a better second half, you still need to be on prepared. While I still have concerns about higher interest rate prospects given higher prices hitting consumers from the likes of The Hershey Company (HSY), Mars, Kraft Foods (KRFT), Chipotle Mexican Grill (CMG), Starbucks (SBUX), J.M. Smucker (SJM), Ford (F), PepsiCo (PEP), Nike (NKE), Netflix (NFLX) and more, the current quarter is shaping up, and it looks like the second half of the year will be a far better one than the first half. Truck tonnage data, as well as rail traffic data, points to this, as do auto and truck sales and favorable manufacturing data from both ISM and Markit Economics.
So you’re probably wondering what we’ve been doing over at my investment newsletter PowerTrend Profits.
For those of you unfamiliar with PowerTrend Profits, its strategy is to use the intersection of the shifting economic, demographic and psychographic landscapes to ferret out and invest in companies for the coming 12-24 months. Against that backdrop, I won’t say the recent sell-off was no big deal, but, rather, it allowed us to revisit certain positions and improve our cost basis in the process.
The pullback also allowed me to recommend a new position to my subscribers, one that will benefit from a sleeper product being deployed by Apple (AAPL). That’s right, while most of the talking heads are focused on when the new iPhone will hit shelves, they are missing an earth-shattering shift that Apple is quietly bringing to retailers like Macy’s (M), Walgreens (WAG) and Wal-Mart (WMT). In fact, half of the top 100 retailers in the United States are testing this technology this year, and they are expected to have this new technology installed in one-third of their store locations by the end of 2015.
I think you’d agree that offers opportunity for those investors, like those that subscribe to PowerTrend Profits, that are investing with an eye toward what’s coming rather than simply following the herd or reacting to stale and regurgitated commentary from the talking heads.
In case you missed it, I encourage you to read my e-letter column from last week about why you should trust in the investment process. I also invite you to comment in the space provided below.