Secure Your Future: Why Reits Matter Now
A few years ago, I had the privilege of attending a yoga retreat in Costa Rica—a peaceful escape where the hum of daily life faded away, replaced by the sound of waves, deep breathing, and reflection. The restorative experience left me centered, recharged, and with a clearer mind for the challenges ahead. After an eventful year filled with highs and lows, my friends and I collectively decided it was time for another retreat—this time on the island of Mykonos. With its breathtaking views, three daily yoga sessions, and moments of meditation, it’s the perfect environment to reflect, recharge, and reconnect, all while being mostly offline. Stepping away from the hustle and grind of everyday life can offer us the clarity we need to return stronger.
Recharging like this can be transformative, not just in terms of our personal well-being but also in how we approach our professional lives. When we’re caught in the whirlwind of constant demands, our decision-making can suffer, and we might start shaping the wrong kind of sentiment—both internally and externally. But with a fresh perspective, we return more focused, deliberate, and capable of handling challenges with a clear mind. It’s the same in business; without the mental space to reassess, we risk reacting emotionally instead of strategically.
This past week, the markets themselves went through a bit of a recalibration after the Federal Reserve’s half-point rate cut. Seeing the market react to this shift was a stark reminder of how unpredictable things can be. The sudden swings in sentiment—from optimism to caution—reflect the delicate balance we all walk when we’re shaping the narrative around economic and financial outlooks - as well as personal. If we aren’t fully recharged, it’s easy to let that sentiment drift in the wrong direction.
Just like after a retreat, where you emerge with a sense of peace and purpose, the market now seems to be finding its new footing. Investors are digesting the Fed’s decision and recalculating their strategies, setting the tone for what the rest of 2024 could look like. Sentiment is a powerful driver, and just as we need personal clarity to lead effectively, market participants require clear, data-driven insight to navigate uncertain times. This week’s FOMC decision is helping the market take that deep breath and reorient itself for the months ahead, much like we do when we return from a retreat.
Recent Trade Review
Last week, we zeroed in on Tesla, Inc. ($TSLA), a prime candidate identified by our Profit Accelerator Trader (PAT) model. The model flagged an extreme demand for call buying, coupled with high gamma levels, signaling a prime short opportunity. If you were part of our PAT services, you would have seen this trade executed in real time during last Tuesday’s live trading room session. To catch the full breakdown and watch the trade in action, check out the recording here: Live Trading Room Recording.
One of the major advantages of our paid services, like PAT, is the timely SMS alerts we send, guiding you on when to enter and exit trades with precision. This real-time guidance is essential for capitalizing on fast-moving opportunities like the one we identified with $TSLA. Unlike our free services, which provide general market insights, the paid services offer actionable trade alerts that ensure you’re always aligned with market movements, helping you stay ahead in today’s dynamic trading environment.
CURRENT TRADING LANDSCAPE
This week marked a pivotal moment for financial markets, driven largely by the Federal Reserve’s decision to cut interest rates by half a percentage point. After a rollercoaster of volatility, Thursday saw a sharp reversal in investor sentiment, with all three major indices—Dow Jones, S&P 500, and Nasdaq—closing the day in the green. The S&P 500 now appears to have found a rally cap in the $560-$575 range, with short-term support anticipated between $480-$510 over the coming months. However, while the long-term trend remains intact, caution is warranted as the market is likely to trade sideways in the short to medium term. Holding off on deploying additional capital during rebounds may be a prudent strategy until there’s more clarity on the broader economic picture. For reference, the SPY Seasonal Chart is shown below:
The week kicked off on a high note, with the Dow Jones Industrial Average reaching record levels on Monday, buoyed by declining bond yields. These lower yields, often associated with reduced borrowing costs, ignited optimism that the Federal Reserve might adopt a more dovish stance. While the S&P 500 benefited from this, the tech-heavy Nasdaq lagged slightly, as investors awaited the Fed's critical decision.
A surprise uptick in New York’s manufacturing sector—the first since November—fueled economic optimism earlier in the week, contributing to growing expectations of a rate cut. Meanwhile, the U.S. Census Bureau reported moderate growth in retail sales, with a 0.1% increase in August. Year-over-year, sales were up 2.1%, but once adjusted for inflation, real retail sales actually showed a slight decline, underscoring the challenges facing consumer demand.
The Federal Open Market Committee (FOMC) delivered a somewhat surprising half-point rate cut, exceeding the expectations of many market participants. While some anticipated a more moderate reduction, the Fed’s aggressive stance highlights growing concerns about slowing economic growth. This decision came at a time when the market was already trading near all-time highs, amplifying the volatility that followed the announcement. After the initial rate cut news, the bears regained some control, as the high expectations for deeper cuts introduced uncertainty about a potential hard landing. Despite the dovish action, I believe the correction is not over, and chasing rebounds with additional capital remains risky.
Beyond the Fed, the Bank of Japan's decision to maintain its ultra-loose monetary policy has added another layer of complexity to the global financial picture. The Japanese yen neared multi-year highs this week, reflecting the pressure on Japan's central bank to reassess its strategy. Simultaneously, the Nikkei has been selling off, approaching recent lows, signaling investor unease. With both the yen and Japan’s market under stress, global markets are absorbing the effects, particularly with the yen's strength contributing to volatility in currency markets and across asset classes.
Thursday brought more encouraging news, with U.S. jobless claims falling to 219,000, signaling a relatively stable labor market. This decline, coupled with moderating inflation, gave the Fed more room to focus on economic growth. However, the rally in equities was tempered by the ongoing volatility in bond and currency markets. As of Friday, short-term U.S. Treasury yields fell after dovish comments from Federal Reserve Governor Christopher Waller, who suggested that the Fed could respond to softer economic data with quicker rate cuts, should inflation settle below the 2% target.
One of the most notable developments this week was the "triple witching" event, where stock options, stock index futures, and stock index options all expired simultaneously. These quarterly occurrences often lead to heightened volatility, as traders reposition their portfolios, and this week was no exception. As expiration day approached, we saw major swings across the board, driven by both the Fed decision and broader economic concerns. The VIX, often referred to as the "fear gauge," spiked back to 18, signaling that market anxiety has risen in response to worse-than-expected economic data. With the bears holding the upper hand after the Fed decision, the next few days will be critical in determining whether bulls or bears control the short-term market outlook.
Gold has also been a standout this week, breaking out to new all-time highs as investors flocked to safe-haven assets amidst a weakening U.S. dollar and rising concerns about the Fed’s ability to manage the economic slowdown. Bond markets are flashing recession signals, with the yield on the 10-year Treasury note continuing to trade in a volatile range between 3.6% and 4.4%. This volatility suggests that investors are still recalibrating their expectations around future rate cuts, and the bond market's distress is a clear sign that concerns about a hard landing are intensifying. As yields approach their year-to-date lows, and the U.S. dollar weakens further, all eyes will be on how the bond market evolves in the coming weeks.
Looking ahead, the market will likely remain volatile as traders assess the fallout from the Fed's decision and the triple witching expiration. With the correction still unfolding, I expect market sentiment to remain cautious. The upside in FXY (the yen ETF) is contributing to ongoing market volatility, and with the 10-year yield continuing its erratic movement, it's clear that bond markets are pricing in a slowing economy. Next week’s economic reports, including flash PMI data, consumer confidence, and retail earnings from key companies like Costco and Micron, will play a critical role in determining the market’s direction. For now, I maintain a market-neutral stance, as the risks of a deeper correction remain front and center.
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SECTOR SPOTLIGHT
As market participants sift through the aftershocks of the Federal Reserve’s recent rate cut, a handful of sectors are catching the attention of savvy investors. Amid the backdrop of fluctuating bond yields and elevated volatility, one sector in particular is making waves as a bastion of stability and long-term growth. With the uncertainty surrounding economic conditions, smart money is turning to assets that not only offer income but also have the potential to weather market storms.
This week, the spotlight shifts toward a sector that's increasingly becoming a go-to for those seeking resilience and steady returns. Real Estate Investment Trusts (REITs) stand out in the current trading landscape, benefiting from the Fed’s dovish stance. As yields continue to fluctuate, investors are looking for alternatives to traditional bonds, and REITs like Vanguard Real Estate ETF (VNQ) are emerging as strong candidates. VNQ offers exposure to a diversified portfolio of real estate assets, including commercial, retail, and industrial properties.
What makes VNQ compelling this week is its ability to generate consistent income while providing potential upside in a market where capital preservation is key. With bond yields stuck in a volatile range, VNQ offers an appealing risk-reward proposition for those looking to add stability to their portfolios. As the REIT sector strengthens amid lower borrowing costs and inflationary pressures easing, VNQ is well-positioned to capture that momentum.
TRADE OF THE WEEK
For this week’s Trade of the Week, we turn our focus to Vornado Realty Trust (VNO), a standout symbol in the real estate sector poised for a potential breakout. Given the current market environment, which is characterized by uncertainty following the Federal Reserve’s bold rate cut and the heightened volatility from options expirations, VNO presents a timely opportunity. The stock benefits from a lower interest rate environment, which directly reduces financing costs for real estate projects—a critical advantage for a company like Vornado, known for its premium urban properties in areas like New York City.
According to my A.I. models, VNO is flagged as a strong buy this week due to a combination of favorable macroeconomic conditions and technical indicators. Vornado’s ability to maintain its income stream, even during times of economic distress, makes it a solid choice for those seeking income resilience in a market where the hard-landing narrative is reemerging. The Fed’s rate cut acts as a tailwind, lowering the cost of debt and positioning Vornado to unlock value in its portfolio of high-demand properties.
With the VIX rebounding to 18 and fear once again making its presence felt in the market, it's clear that volatility is picking up. The recent FOMC decision to cut interest rates by 50 basis points has injected uncertainty into the market, with investors grappling to interpret the long-term implications. In this environment, having exposure to stable, income-generating assets becomes crucial. Real estate investments, like Vornado Realty Trust (VNO), offer a blend of both safety and potential for growth.
VNO’s strong portfolio of premium real estate assets, combined with the Fed’s dovish stance, creates a favorable backdrop where real estate could outperform other sectors, especially as market participants seek stability amidst fluctuating market levels. As the S&P 500 and Nasdaq hover near key support levels, VNO offers a compelling opportunity to navigate the ongoing volatility while capitalizing on income resilience.
Given its current valuation and strong support levels, VNO offers a balanced play for both income and capital appreciation. My A.I. models have identified extreme demand for call buying, signaling heightened interest in VNO from institutional players. The stock’s potential to capitalize on lower interest rates, combined with the strength of its dividend, makes Vornado Realty Trust a compelling buy this week, particularly for investors looking to mitigate risks while still seeking growth opportunities.
This week, I’ll be adding Vornado Realty Trust (VNO) to my portfolio!
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Wishing you a week filled with resilience, growth, and prosperous opportunities!