Wall Street Anticipates The End of the Tightening Cycle

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Wall Street Anticipates The End of the Tightening Cycle Stocks had another positive day while the benchmark 10-year Treasury yield fell nearly 13 basis points to about 4.65% yesterday. The “knee-jerk” reaction to the Hamas-Israel conflict seemed to ease in the last few days. Mona Mahajan of Edward Jones believes stocks rose because investors feel that yields have reached the top of its recent rally. - · “I think that move lower in yields has supported equity markets broadly. It may also be bringing relief to markets that perhaps there is some sort of peak in this rapidly upward moving yield in the last few weeks,” said Mona Mahajan, Edward Jones senior investment strategist. - “There’s the kind of hope building that perhaps we are at the end of the Fed tightening cycle, as well as the rising rates.” (Source: Andrew Brenner at NatAlliance Securities) We are about to kick off the next earnings season. PepsiCo reported yesterday, and it posted better-than-expected earnings and raised its earnings outlook. Big banks (such as JPMorgan Chase, Citigroup and Wells Fargo) will report on Friday. Federal Reserve Governor Christopher Waller said spoke yesterday but didn’t expand much on the rate outlook. But he reaffirmed the central bank’s 2% inflation target and will not stop until it is achieved. - · “We have reaffirmed this numerical goal repeatedly since 2012, and, in tightening monetary policy since early last year, we’ve made clear that we’re determined to bring inflation down to 2%,” Waller. - · “This is why we have taken forceful steps aimed at reducing inflation — and why we will stay on the job to achieve our objective.” Fed Vice Chair Philip Jefferson said on Monday Monday that he would “remain cognizant of the tightening in financial conditions through higher bond yields” in assessing “the future path of policy.” Sure enough, futures markets assign a less than 20% chance of another rate hike when the Fed meets Oct. 31 – Nov 1. We will receive the first of two inflation data, the PPI, this morning. Tomorrow, we will get the CPI reading. These may play a big role in determining the short-term direction of the markets.  The Must-Own Stock To Profit From Rising Interest Rates Today’s Stock Pick: Wintrust Financial Corp ([WTFC]() Rissing interest rates have been the talk of the markets. But you can seize the opportunity. Every change presents a chance to buy mispriced assets because Wall Street hasn’t factored in the new conditions that would deliver new profits. Sam Zell, a real estate mogul and the founder of one of the largest REIT companies, wrote in his book “Am I Being Too Subtle?”: - · “I am a professional opportunist.” Sam Zell (Photo: Brian Sorg for Barron’s) And you can also be an opportunist by buying Wintrust Financial. The #1 thesis: Wintrust is seeing a windfall from rising interest rates. The reason is simple. Wintrust would take customers’ funds in an interest-bearing deposit and invest them elsewhere to earn interest. At the end of 2021, Wintrust’s interest-bearing deposit was below the Fed’s benchmark rate (0.24% vs. 0.25%). But now in October 2023? The fed fund rates jacked up to 5.33%. At the same time, Wintrust’s deposit costs only rose to 2.71% -- as of June 2023. There is a massive difference (or “spread”) between the benchmark rate and its deposit costs. Meaning? Higher net interest income for Wintrust. Wintrust Financial (Photo: Open House Chicago) Wintrust can simply earn more on these deposits (by earning higher rate of return) without paying higher costs. You can see it in the graphic below: (Source: Wintrust Financial) Some Wall Street experts like JPMorgan Chase CEO JPMorgan Chase and Former Treasury of the Secretary Larry Summers believe rates could go above 6%. For Wintrust, a 100 basis-point hike can boost the NII by 1.8% over a one-year period. (Source: Wintrust Financial) Yes, the real-life scenario may be lower. For example, the bank could see lower loan activity. Maybe it will need to be set aside for credit provisions. And so on. But there’s no doubt about it – a 100 basis-point hike will have a positive impact on Wintrust’s earnings. As a bonus, you would enjoy a 2.12% yield in dividends. Bottom line: Wintrust Financial may be the greatest play on the rising interest rates. Its business model is virtually tailored made for this environment. Stop worrying about rates, and start taking advantage of them. How? By buying shares in Wintrust Financial.   [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.