Fed Goes For A Pause

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Fed Goes For A Pause The final answer is... a pause. The Federal Reserve concluded its two-day meeting yesterday, and it chose to leave rates unchanged. But updated quarterly projections revealed that 12 of 19 officials are in favor of another rate hike this year. Moreover, they also took two 25 basis-point rate cuts for next year off the table, bringing the new total to just two cuts. As a result, Treasury two-year yields jumped to the highest level since 2006. Fed Chair Jerome Powell said there is progress in the central bank’s fight against inflation, but he wants to see “convincing evidence.” - “We want to see convincing evidence really that we have reached the appropriate level, and we’re seeing progress and we welcome that. But, you know, we need to see more progress before we’ll be willing to reach that conclusion,” he said. Fed Reserve Chair Jerome Powell (Photo: Liu Jie/Xinhua via Getty Images) So, he said that Fed officials are “prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our objective.” The core CPI rose 4.2% in the 12 months through July, and officials project inflation to fall below 3% next year and to hit 2% in 2026. Moreover, they expect economic growth to slow in 2024 to 1.5%. (Source: Bloomberg) There are multiple factors that could complicate the central bank’s monetary policy. Student-loan payments will resume next month, taking more discretionary spending power out of consumers’ hands. Oil prices, of course, skyrocketed by about 30% since June. Will the economy remain resilient with these factors that could reduce spending power? That’s something that the central bank will pay attention. Hence the importance of being data-dependent from now on. Richard Carter at Quilter Cheviot believes that Wall Street will watch incoming data closely for any clues on the Fed’s potential rate decision. Will inflation keep coming down? Can the economy stay resilient? These are just a few question marks that investors will try to answer with new economic data. - “With today’s pause, we are now in the waiting game with the Fed to see if their action to date is enough to achieve the coveted ‘soft landing’ in the US. Each and every data point released from now on will be scrutinized and pored over with a fine toothcomb to get any indication of if the Fed will raise rates again, or when in fact it is time to start cutting rates,” said Richard Carter, head of fixed interest research at Quilter Cheviot.  Top Stock To Buy Below Its Book Value Today’s Stock Pick: AerCap Holdings N.V. ([AER]() The stars are aligned for AerCap to deliver phenomenal quarters for many months to come. Here’s why. You’ve heard about supply chain problems. This slowed down the production of new planes. That alone is a big problem. Longer lead times for components, engines and shop visits led to an extremely low supply available for planes. In the graphic below, you’ll see that storage rates for popular Boeing and Airbnb planes are all below 10%: (Source: AerCap) What does this mean? Airlines cannot buy as many planes as they’d like to. Therefore, they’re forced to lease it from AerCap – the world’s largest engine and aircraft company. This is same as if you are leasing a car, rather than buying it. In fact, AerCap is the largest customer of Boeing and Airbus. At the same time, the demand for flying boomed. There is a massive imbalance of demand and supply. Total daily flights as a % of 2018 hit about 90% for most regions in June 2023. That’s good, right? However, airline deliveries are only about 73% of 2018 levels. In other words, demand has outpaced deliveres which leads to an imbalance in supply/demand. Book value: Here’s the best thing about AerCap – you don’t need to speculate on this stock. Its book value is $71 from its fleet of planes, helicopters, and cargo. The stock price is now at about $63. That’s right. You can own this stock below book value while enjoying a potential boom in demand for leasing. AerCap was able to sell their assets (planes) for about 1.94x above the book value while repurchasing their shares at ~0.82x below its book value. (Source: AerCap) As a bonus, AerCap has a total share buyback authorization of $1.5 billion this year which adds up to over 10% of its market cap. - “I'm also pleased to announce another $500 million share repurchase program. This takes total authorizations so far this year to $1.5 billion, over 10% of our market cap at the beginning of the year,” said CEO Aengus Kelly. Good debt structure: AerCap has a secured debt-to-total-assets ratio of just ~14%. The average cost of debt is incredibly low at 3.4%, as of the recent quarter. That’s a good position to be in. AerCap isn’t too leveraged and its cost of debt is rock-bottom. Raised guidance: Believe it or not, AerCap jacked up its adjusted EPS guidance from $7 to $7.5 to $8.5 to $9. That’s a 21% increase in guidance! This is perhaps the most convincing evidence of management’s confidence in the future of the leasing business. (Source: AerCap) Bottom line: AerCap will enjoy massive momentum in the leasing business for planes, due to supply chain and labor challenges. And yet, you can own this stock below its book value. Your risk is low, but the upside is attractive. This is the stock to own for many years to come.   [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.