Markets Await the Fed’s Decision

Global stock markets closed a positive week, with the Dow Jones up 0.35%, the S&P 500 gaining 0.60% and the NASDAQ jumping 1.67%. The MSCI Emerging Markets Index (EEM) rose 2.19%.

Big gainers in your Alpha Investor Letter portfolio included NVIDIA Corporation (NVDA), which rose 5.38%, Apple Inc. (AAPL), which jumped 5.21%, and Intuitive Surgical, Inc. (ISRG), which moved 3.96% higher.

In addition, Illumina Inc. (ILMN) added 3.32%, VanEck Vectors Biotech ETF (BBH) climbed 3.15% and Phillips 66 (PSX) gained 3.02%. The KraneShares CSI China Internet ETF (KWEB) hit a new 52-week high.

Intuitive Surgical, Inc. (ISRG) and First Trust US IPO ETF (FPX) moved back to a BUY.

The Vanguard Russell 2000 Index ETF (VTWO) fell below its 50-day moving average and moved to a HOLD.

Markets have settled somewhat since the sharp sell-off early last week, and there has been little follow through on the downside.

All eyes are on the Fed today, as it announces its decision on interest rates this afternoon. Despite some conviction in August that rates were set to rise in September, market odds on a hike today are fairly low at 18%.

Based on past experience, the Fed does not like to surprise the markets when it raises rates. In addition, it is unlikely to surprise on traders less than two months from the upcoming presidential election.

From a market action standpoint today, stocks tend to drift slowly upward until the Fed’s decision, then trade back and-forth in a volatile fashion into the close. In prior years, market reversals were common in the days following. That pattern, however, has not held over the past few years.

Portfolio Update

Cambria Global Value ETF (GVAL) added 0.47%. Your bet on the cheapest markets in the world has done quite well in 2016, rising 10.39% to-date. GVAL’s 2.28% yield sweetens the pot as well. Trading above its 50-day moving average (MA), GVAL is a BUY.

AdvisorShares Wilshire Buyback ETF (TTFS) gained 0.23% over the past five-day trading week. Firms that purchase their own stock generally do so because they believe their stock price represents a discount to where the price should be. This tactic also reduces the outstanding shares of a company, effectively increasing earnings per share. Your position in TTFS is the easiest way to invest in companies that are buying back shares. TTFS is a HOLD.

PayPal Holdings (PYPL) dipped 0.43%. The Federal Reserve will meet today and make a decision on interest rates — an event that potentially could put pressure on the financial sector. Although PayPal falls under the financials umbrella, it could be one of the more calm ports of call in a potential market storm — thanks to its unique business model and strong position. PYPL is a BUY.

Vanguard Global ex-US Real Estate ETF (VNQI) rose 0.82%. Although exchange-traded funds (ETFs) like VNQI are already diversified, global real estate-based funds go one step further by diversifying across the planet. VNQI is a BUY.

iShares MSCI Philippines (EPHE) added 2.53% last week. EPHE has had an excellent run year to date with two corrective pullbacks during this time. EPHE’s first pullback occurred in late April, bringing the fund down just below its 200-day MA, only to reach a new 52-week high shortly after. EPHE’s latest correction seems to have bottomed just last week — and directly on the 200-day MA once again. EPHE is technically a HOLD, but could be looking at higher days ahead.

Costco Wholesale Corporation (COST) gained 0.95%. Costco will report earnings on Sept. 29 after markets close. Consensus earnings per share (EPS) estimates are $1.73 on revenue of $36.70 billion. Based on Costco’s recent pullback, and an average recommendation of “Overweight” from over 16 analysts, a good earnings report could push Costco towards extended gains. COST is a HOLD.

Apple Inc. (AAPL) jumped 5.21% last week after posting similar gains the prior week. Investors took the news of Apple’s upcoming new iPhone 7 well, pushing AAPL stock on its best trading streak in more than two years. Trading volume also hit a record high, breaking the 100 million mark for only the third time this year. AAPL is a BUY.

Phillips 66 (PSX) climbed 3.02%. PSX is one of Warren Buffett’s favorite stocks and his recent purchases reflect this. Since Aug. 22, Berkshire Hathaway has acquired a staggering 1,889,982 shares of Phillips 66, with more than one million of those shares purchased just last Wednesday. PSX is a BUY.

iShares Exponential Technologies ETF (XT) remained flat over its first days in the portfolio, falling just 0.35%. This well-diversified play on groundbreaking technologies joined your portfolio last week. Although “slow and steady” growth is a mantra of many investors, XT adds “exponential” growth into the mix for your portfolio. XT is a BUY.

Sincerely,

Nicholas A. Vardy