Editor's note: Wall Street is preparing for a big market shift... When uncertainty enters the markets, the top investment firms see the cracks forming and move their money to protect their wealth. According to Joel Litman – the chief investment officer at our corporate affiliate Altimetry – that kind of disruption is forming today. In today's Masters Series, adapted from the July 30 issue of the free Altimetry Daily Authority e-letter, Joel explains how to pivot when Wall Street is about to undergo a sector rotation...
Follow Mr. Market Into EnergyBy Joel Litman, chief investment officer, Altimetry Everyone celebrated "Vaccine Monday." Everyone except Wall Street, that is... Biotechnology leaders Pfizer (PFE) and BioNTech (BNTX) shocked the world by unveiling their new, 90%-effective COVID-19 vaccine on November 9, 2020. It normally takes 10 to 15 years to produce an effective vaccine... Pfizer and BioNTech accomplished that feat in a matter of months. But as people around the world rejoiced, Wall Street faced a big problem... figuring out the market's next move. In any economic cycle, investors favor certain parts of the market and shun others. The start of the pandemic kicked off what we called the "At-Home Revolution"... Global travel had ground to a halt in early 2020. And travel stocks like Expedia (EXPE) fell more than 50% between January and April of that year. Meanwhile, investors put their cash toward companies best positioned to profit from the quarantine. Wall Street caught on. And it's ready to profit from another move that's playing out today... in a completely different corner of the market. During the pandemic, capital flowed away from travel and into areas geared toward the At-Home Revolution... Fitness-equipment provider Peloton Interactive (PTON), for example, soared more than 550% from March 2020 through October of that year. Video-conferencing leader Zoom Communications (ZM) jumped more than 400% in that period. This is an example of sector rotation. The At-Home Revolution trade lasted for about eight months. But everything changed on Vaccine Monday...
Investors who had ditched travel stocks when the world shut down quickly reversed their stance when things started to open back up. Expedia jumped 25% on November 9, 2020... American Airlines (AAL) rose 15%... and Pfizer climbed 8%. Meanwhile, Peloton fell 20% and Zoom dropped 17%. These days, Zoom trades for around $92. That's a long way off from its $559 peak in October 2020. Since Vaccine Monday, the company's stock is down more than 80%. Zoom isn't a good buy today. But back in early 2020, it was one of the best investments you could have made. The key is knowing the right time to buy into stocks. And it all comes down to sector rotation... If you can pinpoint the sectors pulling in the most investment in the coming months, you can identify the best companies to buy in that space. We're seeing another powerful sector rotation today... It's no secret that AI is dominating the markets. New developments from companies like Anthropic and OpenAI are revolutionizing this technology. Complex code can be written in minutes... tedious tasks are now automated... and cutting-edge AI models are displaying humanlike reasoning. Despite these impressive capabilities, the AI industry is facing one significant bottleneck... power. AI models need data centers to run. And a single data center commands enough energy to power a small city. As we continue building more of these facilities, we'll need more energy to sustain them. This translates into more oil and gas production. Investors are starting to recognize this trend and rotate into energy... The State Street Energy Select Sector SPDR Fund (XLE) tracks some of the biggest names in energy. And it's up more than 30% in the past year... about double the S&P 500 Index's performance. That's the same setup we saw in travel stocks once the COVID-19 vaccine came out... Money moved first. The individual winners came later. Today, Wall Street is preparing to cash into the energy sector. And I don't want you to miss the best opportunities in this space. The AI build-out may seem like an unstoppable force... but it needs continuous, reliable energy to keep going. Now's the time to get in... before things really start to take off. Regards, Joel Litman
Editor's note: During Joel's 30-year career on Wall Street, he called the 2020 and 2022 crashes. And right now, he's predicting that Wall Street's most powerful players are all about to bail out of a specific group of stocks you likely own. But you don't have to be left in the dark... Joel is revealing exactly which stocks you need to sell before August 12. And he'll also share where the big investment firms see the next big opportunities. Click here to learn more. |
No comments:
Post a Comment