The markets were handed a holiday gift today after the Commerce Department reported that underlying inflation pressures are continuing to slow down. This has left more income at the disposal of households with increased spending that will help the overall economy. News of declining inflation sets the stage for interest rates to continue to decline, with rate cuts by the Fed anticipated as early as March. This is great news for the broader markets as well as for individual areas, several of which can benefit the most from this backdrop.
Daily Chart of S&P 500 Index ($SPX)
Among areas that will benefit most from a rising stock market amid a continued drop in interest rates, the Financial sector has several areas already seeing growth. Brokerage firm Charles Schwab (SCWB), which recently reported that total client assets were up 12% year-over-year for the month of November, is a prime example. The increase comes as investor confidence in the markets expands and individuals put money to work.
Daily Chart of Charles Schwab Corp. (SCHW)
The stock gapped up into a base breakout on heavy volume following the news of an increase in clients. Since then, SCHW has pulled back to its upward trending 10-day moving average, where its found support. With both the RSI and MACD in positive territory, the stock is poised to trade higher.
Asset management firms are also benefiting due to increased AUM amid a rise in portfolio values as the markets hit year-to-date highs. Blackrock (BLK), among the largest asset managers, is poised to break out of a flag formation following a 5-month base breakout which took place earlier this month. The company is moving closer to the approval of their new Bitcoin ETF, which has attracted positive attention to this 2.5%-yielder. A move above $820 on volume would be quite bullish for BLK.
Daily Chart of Blackrock (BLK)
Other financial stocks are on the move as well, such as bank stocks that continue to trend higher. Subscribers to my MEM Edge Report were alerted to the new uptrend in mid-November, when we added two Regional Banks to our suggested holdings list. Both stocks have posted double digit returns however, they’ve pulled back to key support this week as the stocks prepare for another leg higher. Use this link here to access these stocks, as well as other names poised to trade higher in the currently bullish environement. Your 4-week trial to my twice weekly report also provides broader market insights not found elsewhere as well as detailed sector and stock selection ideas. Intra-week shifts in sentiment regarding stocks, as well as the markets, will also be delivered directly to your email.
May you have a fantastic holiday weekend!
Warmly,
Mary Ellen McGonagle
MEM Investment Research