*Performance since 7/1/2022. For more details on the performance calculation and methodology of Alpha Picks, click here. |
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*Performance since 7/1/2022. For more details on the performance calculation and methodology of Alpha Picks, click here. |
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► Gold prices rallied, approaching $2,800. Global bonds continued to fall as investors speculated about how far and how quickly central banks will cut interest rates.
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► Treasury yields rose above 4.2%, impacting the market's liquidity. Rising yields suggest caution among investors as the Federal Reserve hints at a more moderate pace, likely to include a 25-basis-point cut.
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► Geopolitical tensions continue to create uncertainty. Macroeconomic indicators reveal a troubling landscape in the housing market, with existing home sales hitting a 14-year low, underscoring the challenges of elevated mortgage rates and persistently high home prices.
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► Big Tech earnings are in full swing, and major developments unfolded in the sector, with Qualcomm facing disruption as Arm Holdings cancels a critical chip design license.
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► Bitcoin continued its uptrend amid high market volatility as traders sought alternative investments. Meanwhile, Robinhood's acquisition of Bitstamp for $200 million underscores the growth trajectory and potential consolidation within the crypto industry.
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Treasury Yield Tops 4.25%; Gold Surges above $2,700
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The 10-year Treasury yield reached its highest level since July and sent ripples across financial markets. The 4.25% surge signifies waning confidence in aggressive Fed rate cuts, pushing investors to realign portfolios. Economic data reflecting strong fundamentals contradicts the anticipated lower rate path, creating market discomfort. The rise also places pressure on sectors reliant on lower borrowing costs, chiefly impacting housing and equity investments. Gold reached unprecedented heights this week, closing above $2,700 per ounce for the first time. The upward trend has been partly propelled by strong demand from central banks, especially in emerging Asian economies, and continued investor interest despite moderate ETF inflows. Additionally, the rally in gold has positively impacted mining stocks, with companies like Agnico Eagle Mines (AEM) and IAMGOLD Corporation (IAG) hitting a new 52-week high. Primarily, gold's surge can be attributed to the persisting geopolitical tensions in the Middle East, which have driven investors towards the traditional safe-haven asset. As geopolitical uncertainty remains high, analysts from major banks like Citi and J.P. Morgan anticipate further bullish momentum in gold prices, with some forecasts pushing future prices to as high as $3,000 per ounce. |
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Markets are constantly influenced by global economic and geopolitical events. If you're looking for a tool that simplifies stock picking by analyzing financial data to highlight stocks with the strongest investment fundamentals, Alpha Picks offers a more efficient approach to smarter investing. This service leverages Seeking Alpha's powerful quantitative stock-picking system, delivering two data-driven stock picks each month, helping investors save time and focus on high-quality opportunities. |
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Heightened geopolitical tensions, particularly in the Middle East, continue to stir volatility in commodities markets. The ongoing conflict has driven investors to safe-haven assets, notably pushing gold to a record high. The political landscape adds to the uncertainty amid the U.S. presidential election, further compounding investor anxiety. Global equity markets demonstrate varied responses to these tensions. In Japan, a notable 1.4% drop in the Nikkei 225 reflects broader concerns over geopolitical spillover affecting Asian markets. European markets have similarly mirrored this skepticism, indicating a cautious outlook amid fluctuating energy prices.
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Consumer Discretionary stocks finished as the top-performing sector for the week despite an E. coli scare that spurred McDonald's (MCD) stock to lag significantly behind the market. Utilities continued to climb as AI-related power demand continued to outpace energy infrastructure, further buoying the sector. Earlier in the month, Google (GOOG) entered into an agreement with privately held Kairos Power to purchase energy from a fleet of soon-to-be developed nuclear reactors, yet another example of the increasing synergies between the Tech and Utilities sector. |
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Financial Services is the best-performing sector over the last month |
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Conversely, Industrials and Materials finished lower for the week, suffering from ongoing concerns around economic weakness and lingering effects of inflation impacting Q3 earnings for some companies within the sectors. |
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Growth stocks took a hit this week under the pressures of rising yields and disappointing earnings, with the Nasdaq witnessing a notable decline. In contrast, value stocks held relatively steady, driven by investor shifts toward less volatile and more stable earning profiles amid economic uncertainty.
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Over the last month, Growth outperformed Value across all segments |
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Large-cap growth (IWF) continues to outperform Large-Cap Value (IWD) over the last month, but small-cap value (IWN) has slightly outperformed small-cap growth (IWO) over the last week as traders consider the potential shift from growth to value stocks. Declining interest rates have enhanced value stocks' relative appeal versus growth stocks, which possess elevated P/E ratios. This has prompted value stocks to become more attractive as they offer dividends and stability and a potential shift to support a rotation toward value equities. |
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Cryptocurrencies experienced an uptrend characterized by Bitcoin's (BTC-USD) continued climb fueled by $560 million in ETF inflows. This growth comes despite regulatory hurdles, as evidenced by Coinbase's cautious outlook tied to the upcoming U.S. election, a factor steering investor sentiment. Analyst Hal Goetsch from B. Riley Securities noted that political outcomes could significantly impact regulatory clarity for crypto assets, with a Trump administration potentially fostering a more crypto-supportive environment. This political uncertainty keeps Coinbase stock range-bound, yet the industry's efforts to influence crypto-friendly legislation underscore the sector's strategic long-term vision. |
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Cryptocurrencies Update: Bitcoin Potential Weighed Down by Rising Bond Yields
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Amid the ongoing volatility and regulatory scrutiny in the cryptocurrency sector, noteworthy developments this week included Robinhood's strategic acquisition of Bitstamp for $200 million, signaling a deeper commitment to expanding its crypto capabilities. Despite the Securities and Exchange Commission's looming potential lawsuit against Robinhood over its crypto unit, the firm remains undeterred. This acquisition will enable Robinhood to broaden its crypto offerings internationally, especially in staking and lending services, which it previously avoided due to regulatory concerns in the U.S. Robinhood's focus in the domestic market will remain on facilitating crypto-for-crypto trading among institutional clients, highlighting a shift towards servicing a more professional investor base. This move positions Robinhood as a significant competitor in the crypto exchange arena, leveraging Bitstamp's expansive global licenses and registrations. |
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The U.S. dollar gained this week against major currencies and hit a three-month high against the yen, benefiting from elevated Treasury yields and stronger economic data. Conversely, the Canadian Loonie retreated to its lowest level since August 5, 2024, following the Bank of Canada's accelerated rate cuts, which slashed rates by 50 basis points to 3.75%. |
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The yen's decline, nearing a three-month low, prompts renewed concerns as heightened yields on U.S. Treasuries make the dollar a more attractive safe haven. |
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Chart of the Week - Don't Forget About U.S. Fiscal Policy After the Election
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You might have noticed that credit conditions have been cautiously tightening since the Federal Reserve cut interest rates by 50 basis points in September. Bond yields, mortgage rates, the U.S. Dollar, and even gold prices have all rallied. What gives?
Financial markets are naturally forward-looking. When the central bank released forward guidance last month, the median outlook was for 8 rate cuts by the end of 2025 - a value close to what was broadly anticipated. Since then, the U.S. election has been nearing, and we are less than 2 weeks away. Simultaneously, Donald Trump has been pulling ahead of Kamala Harris in betting markets, with the spread turning increasingly positive towards Trump. This is according to PredictIt, a New Zealand-based online betting market. According to central estimates from the Committee for a Responsible Federal Budget, Trump and Kamala are seen increasing government debt by $7.5 and $3.5 trillion, respectively. If Trump wins the election, relatively more fiscal stimulus could result in a less-dovish Federal Reserve as it continues its mission to bring the inflation rate down to target. |
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What is Alpha Picks? In the complex landscape of global financial markets, fluctuating sentiment, macroeconomic and geopolitical events can impact stock prices and short-term market movements. Alpha Picks is a rigorous, data-driven model that offers Strong Buy-rated stocks believed to have the highest probability of capital appreciation based on a proprietary quantitative model. Two 'Strong Buy' rated stocks are selected monthly on the first trading day of the month and the 15th or the closest trading day thereafter. Alpha Picks' portfolio has delivered an incredible total return of 151% vs. the S&P 500's 53% since its launch on July 1, 2022. Nine out of 37 Alpha Picks have returned over 100% to the portfolio.
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5 out of 6 Alpha Picks Beat Analyst Earnings Estimates… So Far
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With the Q3 earnings season underway, five out of six Alpha Picks have exceeded earnings expectations so far, with four beating revenue estimates. Analysts are optimistic about many of the stocks in the Alpha Picks portfolio, as showcased by strong earnings revisions grades. Last quarter, 33 out of 36 Alpha Picks met or beat recent EPS earnings expectations. Historically, Alpha Picks has maintained both revenue and earnings growth rates that are far superior to the S&P 500.
What has Alpha Picks done lately? Alpha Picks' total portfolio return has bested the S&P 500 over one-month, three-month, and YTD performance. |
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| Alpha Picks' quantitative, data-driven approach has resulted in the selection of stocks like Modine Manufacturing Company (MOD), which at the time of its pick in 2022 was trading for $20.30 per share, while MOD currently trades for over $125 per share!
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► FOMC - Market forecasts continue to heavily price in a 25 bps cut for the upcoming November 8th meeting.
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► Inflation - Forecasts suggest that while inflation is expected to rise slightly, it remains subdued compared to previous highs, indicating a continuation of the disinflation trend observed in recent months.
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► The Fed's Beige Book - The Fed's Beige Book is a report published eight times a year that summarizes economic conditions across the 12 Federal Reserve districts based on anecdotal information from business contacts, economists, and other sources. The most recent report indicated that economic activity was largely flat across most of the U.S. since early September, with only slight increases in employment levels and limited layoffs reported in many districts.
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| Waste Management (WM)
Ford Motor Company (F) |
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| Microsoft Corporation (MSFT) Meta Platforms (META) |
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| Exxon Mobil Corporation (XOM) Chevron Corporation (CVX) |
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*Performance is as of October 25, 2024. Alpha Picks adds two stocks per month - on the closest business day to the 1st & 15th. Alpha Picks removes stocks based on rating thresholds (i.e., when a rating changes to a sell). Performance is calculated and reported daily using time-weighted returns. For more details on the performance calculation and methodology of Alpha Picks, click here.
Past performance is no guarantee of future results. Alpha Picks does not take account of your objectives or your financial situation and does not offer any personalized investment advice. Any content and tools on the platform are offered for information purposes only. Any views or opinions expressed may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank. |
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