Secure Your Investments: Discover the Power of Consumer Staples
This past week, the financial world was buzzing as key inflation data grabbed everyone’s attention. All eyes were on the CPI and PPI figures, which will likely play a major role in shaping the Fed’s next move. The markets, as expected, reacted by pulling in multiple directions—an experience not unlike what I've been feeling in my own life lately.
As I mentioned in a previous newsletter, last month my wife and I moved both of our daughters into the University of Illinois. One is starting her journey as a freshman, while the other is returning as an upperclassman. Both were raised in the same home, with the same values and guidance, yet the older they get, the more we see how different their paths have become. It reminds me of a wise old saying: "When your kids are small, you have small problems. When they’re big, you have bigger problems." This week certainly reinforced that sentiment.
Our youngest recently went through the sorority rush process, exploring various sororities with an intensity that rivaled some of my own market research. After countless hours of interviews and pouring over her options, she made her choice. While our older daughter gravitated towards a group that reflected her values, culture, and interests, our freshman’s decision was—much to my dismay—based more on appearances and popularity. To add to the concern, I discovered some troubling reports about hazing and questionable values within her chosen sorority.
This brought up a familiar discussion with my wife—one we’ve had for years. How could two girls raised in the same family make such different choices? It’s the classic debate: nature versus nurture. I’ve always leaned toward nurture, believing that the environment and guidance we receive shape our decisions. Yet here we are, facing outcomes that challenge that view. Much like the markets, life doesn't always follow the patterns we expect.
As I continue to guide both of my daughters through this phase, I find myself in the same position with the markets—holding steady, watching the data, and staying neutral. Inflation came in within expectations, and earnings have surprised to the upside, yet risks remain. With recession fears creeping back and unemployment ticking higher, it’s a time to stay vigilant. I’m reminded that whether it’s with our kids or the markets, the dialogue never really ends. We continue to analyze, adjust, and hope for the best outcomes while staying neutral, knowing that the data will guide us forward.
As we move deeper into this next phase of market uncertainty, I’ll be sharing key insights to help you navigate through the volatility—whether we’re facing inflation or recession, the lessons we learn along the way are invaluable.
Recent Trade Review
In our latest spotlight, we focused on Walmart Inc. ($WMT), a standout pick flagged by our Aggressive Power Trader (APT) model due to the surge in call-buying activity, signaling a robust long opportunity. Those participating in our APT portfolio services executed this trade seamlessly, riding the momentum that our models had pinpointed. If you missed it, we broke down the entire $WMT trade in last Wednesday’s Live Trading Room session, and you can catch the full recording here.
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CURRENT TRADING LANDSCAPE
After a turbulent week filled with market-moving events, U.S. equities managed to close in the green on Friday, capping a volatile few days of trading. All three major indices posted gains as the S&P 500 traded within a range of $540 to $560, navigating a backdrop of mixed economic data, rising volatility, and speculation around the Federal Reserve’s next move. The VIX spiked above 20, reflecting heightened uncertainty, while critical support levels came into focus: the QQQ dipped below its 50-day moving average, the Yen hovered near multi-year highs, and both the Nikkei and Bitcoin edged toward recent lows. With concerns about a hard landing resurfacing, bearish sentiment gained traction, casting doubt on the sustainability of the week’s rally.
The real test lies ahead as investors remain fixated on the Federal Reserve’s upcoming decision, which could dictate the market’s next significant move. With inflation, unemployment, and other macroeconomic factors signaling continued uncertainty, it’s crucial to carefully assess incoming data before making further market decisions. The SPY rally appears capped at $560–$575 levels, with short-term support between $480–$510 over the coming months. I expect the market to trade sideways in the short to medium term, while the long-term trend remains intact. For reference, the SPY Seasonal Chart is shown below:
A Volatile Week in Finance
The week began with the markets grappling with uncertainty and heightened volatility as investors braced for key economic data. The release of the Consumer Price Index (CPI) and Producer Price Index (PPI) were set to play a pivotal role in shaping the Federal Reserve’s next move, and anticipation around the data drove erratic trading across major indices. Inflation remains the Fed’s key focus, as it seeks to balance the need to control price increases without stifling economic growth.
Wednesday’s CPI report marked the first major data release of the week, adding complexity to an already uncertain market. Headline CPI, which includes volatile components like food and energy, rose by 0.2% in August, in line with economists’ expectations. Year-over-year, consumer prices increased by 2.5%, slightly below the anticipated 2.6% rise, signaling some moderation in inflation. However, the real story lies in the core CPI data, which strips out food and energy prices. Core CPI grew by 0.3% month-over-month, surpassing the forecasted 0.2%, while year-over-year core inflation remained steady at 3.2%, in line with projections.
This uptick in core CPI revealed persistent inflationary pressures in sectors like housing and medical care—two areas the Federal Reserve monitors closely. The core CPI data complicated the outlook for a more aggressive rate cut, as it suggested that inflation may not be cooling as quickly as hoped. With inflation remaining sticky in critical areas, the Fed's decision to cut rates could be more measured than initially anticipated.
On Thursday, the Bureau of Labor Statistics released the Producer Price Index (PPI), providing further insight into inflation at the wholesale level. The PPI for August rose by 0.2%, matching expectations and slightly higher than July’s 0.1% increase. The year-over-year PPI growth rate slowed to 1.7%, down from 2.2% in July, signaling some easing of inflationary pressures at the wholesale level. However, much like the CPI, the core PPI, which excludes food and energy, increased by 0.3%, surpassing forecasts of 0.2%. This higher-than-expected rise in core PPI added to concerns that inflation remains entrenched in some sectors, suggesting that the Fed may proceed cautiously with rate cuts.
Labor market data also contributed to the week’s narrative of uncertainty. Initial jobless claims rose slightly by 2,000 last week to 230,000, while continuing claims increased to 1.85 million, both figures slightly above estimates. While the labor market remains relatively tight, these incremental increases in claims suggest that some slack may be developing. The nonfarm payrolls report released earlier in the month showed that the U.S. economy added 142,000 jobs in August, falling short of the expected 160,000. This cooling in the labor market could provide the Fed with additional flexibility, though it is unlikely to trigger a more aggressive rate cut given that core inflation remains above target.
As the week progressed, sentiment inched higher, despite the backdrop of mixed economic data. On Friday, consumer sentiment rose to its highest level since May, with the University of Michigan’s Consumer Sentiment Index coming in at 69, up from 67.9 in August. This marked the second consecutive month of gains in sentiment, fueled largely by improved price perception among consumers.
Fuel prices also played a role in shaping the week’s inflation narrative. According to the Labor Department, U.S. import prices fell by 0.3% in August, primarily driven by a 3% decline in fuel prices. This was the largest monthly drop in import prices this year, further contributing to the perception that inflationary pressures may be easing—at least in certain areas of the economy. However, year-over-year, import prices were still up by 0.8%, suggesting that inflation has not fully retreated.
Despite these signals of a potential easing in inflation, the market remains cautious. By the end of the week, the Dow Jones Industrial Average was up 4%. The rally narrowed the monthly decline in the broader market to just 0.4%, offering some relief after steep losses earlier in September.
The Fed’s Crucial Decision
Looking ahead, the Federal Reserve’s September meeting looms large, and its decision on interest rates will likely dictate the market’s next major move. With inflation cooling in some areas but remaining sticky in core sectors, the Fed faces a challenging decision: Should it proceed with a modest rate cut, or will inflationary pressures keep monetary policy tighter for longer? The market has tempered its earlier expectations for an aggressive rate cut, and current sentiment leans toward a 25-basis-point reduction, though some believe the Fed could still opt for a more substantial cut to stimulate growth.
As traders digest the week’s data, the market remains in a precarious position. While stocks have rebounded, the underlying risks—rising unemployment, persistent inflation, and slowing economic growth—suggest that this correction may not yet be over. For now, it is wise to remain cautious, avoid chasing short-term rebounds, and focus on the long-term picture as we await the Fed’s pivotal decision.
In summary, the current trading landscape remains volatile, with high expectations surrounding interest rate cuts and growing concerns about a potential hard landing. Investors should keep a close eye on the economic data and stay nimble, as the market’s next move will likely be dictated by the Fed’s actions in the coming days.
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SECTOR SPOTLIGHT
This week, consider positioning yourself in a sector that often provides stability amidst economic uncertainty. With recent market turbulence and inflationary pressures shaping investor sentiment, focusing on a sector known for its resilience could be particularly rewarding.
XLP (Consumer Staples Select Sector SPDR Fund) represents the consumer staples sector, encompassing companies that offer essential products such as food, beverages, and household items. This sector is known for its stability, especially during times of economic turbulence. Given the current market’s erratic behavior—with major indices trading within a range and the VIX remaining elevated—consumer staples provide a reliable investment choice. XLP benefits from the consistent demand for essential goods, which tends to remain stable even as broader economic conditions fluctuate.
TRADE OF THE WEEK
Procter & Gamble Co. (PG) is our Trade of the Week and presents a strong buying opportunity in the current market environment. Amid the recent market volatility, marked by SPY trading between $540–$552 and significant fluctuations, Procter & Gamble offers stability and growth potential.
Procter & Gamble is a leading name in the consumer staples sector, known for its wide range of essential products that see consistent consumer demand. In a market where inflationary pressures are persistent, and recent data shows core CPI and PPI rising more than anticipated, PG’s ability to pass on cost increases to consumers helps protect its profit margins. The market's current state, with VIX above 20 and major indices testing key support levels, underscores the value of investing in sectors that offer stability.
The consumer staples sector’s defensive nature becomes particularly appealing as the market navigates mixed economic signals. With the Federal Reserve’s decisions on interest rates looming and inflationary pressures creating uncertainty, consumer staples like Procter & Gamble are well-positioned to provide a buffer against market volatility. Our A.I. models have identified PG as a strong buy, reflecting its robust performance and resilience in these challenging times. Just take a look at the 10-day Predicted Data:
Given the current sideways trading pattern of major indices and the persistent economic uncertainties, Procter & Gamble stands out as a strategic addition to your portfolio, offering both defensive stability and potential upside.
This week, I’ll be adding Procter & Gamble Co. (PG) to my portfolio!
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The consistent performance of our services is just incredible. My historical stellar performance is made possible by being right on 84.03% of all trades that I made, with an average profit of 37.27% per trade on our collective trade recommendations. To my knowledge, this trading performance is one-of-a-kind and stands alone in the marketplace for superior trading advice where our numbers and results speak for themselves.
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Wishing you a week filled with resilience, growth, and prosperous opportunities!