Powell Signals Potential Rate Hikes Ahead If Needed

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Powell Signals Potential Rate Hikes Ahead If Needed Fed Chair Jerome Powell made his highly-anticipated speech yesterday and said that the central bank’s battle against inflation “still has a long way to go.” He signaled that the Fed is willing to hike rates if necessary but “will proceed carefully.” Most importantly, he insisted that rates will hold at their current level (or go higher) for a while. Meaning? No rate cuts sometime soon. - “Powell, as has been the case for some time, didn’t offer markets anything revelatory today — which was likely the goal,” said Tom Garretson, senior portfolio strategist at RBC Wealth Management. - “The market reaction looks consistent with the idea that the Fed is likely done raising rates over the near term, but still stands more than ready to do more if economic data dictates it.” (Photo: Ann Saphir/Reuters) His speech did not do much to move the markets. The S&P 500 climbed modestly for a 0.65% gain. This may indicate that Wall Street wasn’t surprised to hear whatever Powell said yesterday. The “hold” seems to be the sentiment for the next meeting – unless the next inflation data comes in higher than expected. - “No alarms and no surprises. After these remarks we still think the Fed is on extended hold, though with a risk they hike next month if the data between now and Sept. 20 come in hot,” said Michael Feroli at JPMorgan Chase. Powell pointed out that the economy showed no signs of cooling. Despite rates being in the 5% territory, the GDP growth rate is above the long-term trend. Consumer spending is strong. Real estate is picking up. - “The economy may not be cooling as expected. So far this year, GDP (gross domestic product) growth has come in above expectations and above its longer-run trend, and recent readings on consumer spending have been especially robust,” Powell said. - “In addition, after decelerating sharply over the past 18 months, the housing sector is showing signs of picking back up.” This could mean many things. It gives the central bank a wiggling room and may pull off a soft landing (or even no landing). Or it can also mean inflation could pick up down the road, leading to extra tightening. Nobody knows what will happen. Hence the reason why Powell insisted that it will be a meeting-to-meeting decision. What’s more, some analysts wonder if the Fed would be willing to inflict pain on the economy just to bring inflation down to 2% from its current pace of 3%. “We’re getting the data that we need to see as inflation moves from those 9% levels down to 3%. And I think at this point, the question really just revolves around how much pain is the Fed willing to further inflict on the economy to get inflation from 3% to 2%,” said Timothy Chubb, CIO of Girard. (Source: Bloomberg)  A Pick And Shovel Play On The Fiber Optics Boom Today’s Stock Pick: Dycom Industries, Inc. ([DY]() Have you heard of a “pick and shovel” play? That term originated during the 1849 California Gold Rush. As people flocked to San Francisco, with dreams of getting rich, the odds of finding gold were extremely slim. Most people failed to find any gold. However, those who sold picks and shovels to those dreamers became fabulously wealthy. An immigrant from Bavaria, Levi Strauss, opened a dry goods company during the Gold Rush. He saw the demand for clothes built to endure anything. And he built a fortune selling blue jeans to gold miners. Today’s pick is a “pick and shovel” play on the boom of fiber optics and 5G. Dycom Industries offers engineering, construction, maintenance, and installation services for cable and telephone companies. In other words, companies like Verizon need Dycom to design, engineer and hook up fiber optics to households and businesses. It also builds towers, installs lines and antenna, and constructs all other key equipment to make wireless connectivity possible. Massive growth potential: The demand for network bandwidth and mobile broadband is taking off. With streaming devices and hybrid work, consumers expect fast internet at a high volume. In just two years, the average upload consumption per subscriber soared by more than two times. Just look at this comment from Frontier’s CFO: - “If you look in the last few years, data consumption has risen about 30% to 40% per year. And as that happens, demand for faster speeds, better service will continue to rise. Our current customer on fiber consumes almost 1 terabyte of data per month. That's up about 30% from pre-pandemic levels. And many of our customers, the top quartile are using 2-plus terabytes a month,” said Scott Beasley, CFO at Frontier Communications. Moreover, the Infrastructure Investment and Jobs Act will invest more than $40 billion in the construction of rural communications networks in unserved and underserved areas across the country. The outlook for fiber optics passings -- basically the number of homes/businesses that are hooked up – forecasts continuous growth over the next four years: (Source: Dycom Industries) Dycom is poised to make money from all of these trends. It offers a complete lifecycle services that go from the beginning (planning) all the way to the end (maintenance and program management): (Source: Dycom Industries) Strong competitive advantage: It is difficult to compete with Dycom’s scale. It has locations all over the country that would require massive capital expenditure for a competitor to match Dycom’s capacity to serve big corporations’ needs. (Source: Dycom Industries) Bottom line: Dycom’s growth looks rock-solid for the next decade. Billions of dollars are pouring into this industry to rapidly build out the infrastructure to serve the next-gen technology. Dycom stands to directly benefit from this. It is an excellent stock to own for the next two to three years.   [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](     © All Rights Reserved, Trade Alliance If you no longer want to receive these messages, you may [click here]( to unsubscribe.