Strategist: Fed Doesn't Matter Anymore

Join TradeAlgo's Free Live Trading Session ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!]( Hello investor, Going into a correction? After rallying by 10% in the first quarter, the S&P 500 has fallen by more than 4% from its all-time high. Investors feel uncertain about the stock market — even though the economy keeps posting phenomenal numbers. Two main culprits were sticky inflation and geopolitical conflicts. The geopolitical conflict raised the concern about oil prices. Higher prices will have inflationary effects on the economy. For example, retail sales data skyrocketed in the recent reading partly due to consumers spending more on gas. - “The combination of geopolitical uncertainty, rising interest rates, Fed hawkishness, and inflation frustration have combined to put bears temporarily in charge,” said Mark Hackett at Nationwide. Mark Hackett at Nationwide (Photo: Nationwide) Moreover, Fed Chair Jerome Powell said inflation looked strong, so rate cuts may not happen anytime soon. Officials previously expected three rate cuts, but Wall Street is now pricing in just one to two this year. - “Fed Chair Powell was downright hawkish,” said Win Thin and Elias Haddad at Brown Brothers Harriman. - “The Fed wants the market to do the tightening for them. Financial conditions remain too loose and so some combination of higher yields, wider spreads, stronger dollar, and lower equities is needed to tighten conditions.” However, some analysts are buying on the dip. The economy is simply too strong in their eyes. It may lead to strong corporate earnings. Morgan Stanley strategists said earnings are poised for a “healthier runway” for the rest of this year. So far, more than 3 out of every 4 companies reporting results have beaten expectations. Yesterday, United Airlines soared by ~13% after better-than-expected results, while J.B. Hunt Transport Services plummeted ~7% after missing expectations. We will receive more results throughout the week — including Netflix. Stocks may get more volatile once Big Tech companies start reporting results, considering the fact that they lead the markets. - “This is a more cautionary market,” said Larry Tentarelli, chief technical strategist at the Blue Chip Daily Trend Report. “I’m more cautious right now than I have been over the past five months.” A Steady, Growth Software Stock That We Love Right Now Today’s Stock Pick: Paylocity Holding ([PCTY]( Paylocity competes in a lucrative market with virtually unlimited market opportunities. First, what does Paylocity do? Its software focuses on human resource functions – such as payroll, scheduling, time tracking, and benefits management. That’s a good business to be in. Once you integrate software into an organization, it’s difficult to untangle it and use a competitor’s software. But the competition is fierce. ADP and Paychex operate in this market, and they’re “big dogs” in this industry. However, Paylocity is a younger company with solutions that is more aligned with modern workplaces. One of its products, Community, became an instant hit and drove an accelerated growth in Paylocity. Community is a “social media” of an organization, but that would be an apple to an orange. But let me give you an example. You can recognize other employees for random acts. Sandra The Saleswoman might pass along a lead to Adam, and it led to the sale. So, Adam can show her appreciation by recognizing Sandra The Saleswoman in the Community. Why is this important? John Wooden, a legendary basketball coach of UCLA who won 10 national championships in a 12-year period, taught his players to do this every time he scores a point. He should point his finger at the person who assisted him. Basketball is a team sport, and every player should be recognized for their contributions. One player asked John Wooden, “What if he wasn’t looking at me?” John Wooden replied, “He’s always watching.” Every human craves recognition and appreciation. In the past, there was no clear way for an organization to recognize another employee. Paylocity offers a unique way for employees to do it. Plus, human resources can even turn it into a game where employees can collect rewards. (Source: Paylocity) Plus, an HR team would send out a weekly or monthly newsletter in the past. Maybe it would do it through emails. But it feels less engaging. With Community, HRs are now doing videos and posts and reacting to comments from employees. CEOs are sharing their messages through Community, as well. It also comes with analytics – the HR team would know how many people have interacted with it. And of course, you can do a bunch of things with the app outside Community. Need to call in to request time off? You can do it in the app. Same with submitting expense reports, viewing your paychecks, reviewing your benefits, and so on. Sure enough, these products became an instant hit. Paylocity’s growing like weeds. Revenues grew consistently in the last four years. The most recent year saw a 38% YoY growth: (Source: Paylocity) Attractive business model: Of course, Paylocity is a SaaS company with ridiculously-high margins and recurring revenues. More than 98% of total sales are recurring, and its retention rate is 92%. Virtually unlimited growth potential: Four decades ago, McDonald’s made the exploration of opportunity for new McDonald’s locations the principal theme in the 1985 annual report. Namely, it said that expansion options were endless. And it will not rule out making Big Macs in any place, including airplanes, department stores, and even space stations. In their words: - “The company currently is investigating the possibility of operating restaurants in several national and state parks. And we will continue to dream, to pursue opportunity wherever it leads us. Maybe—someday—McDonald’s will be found on aircraft carriers and commercial airliners. In sports stadiums and fine department stores. The sky’s the limit. And even that may not be true. Those folks doing a tour of duty on a space station a decade or two from now may want a taste of home. And, who knows, it might just be the familiar taste of a Big Mac.” The same thing is true with Paylocity. There are over 1.3 million businesses in its sweet spot of 10-5,000 employees segment in the market. Paylocity only penetrated less than 3% of this addressable market. So, the future expansion is endless. (Source: Paylocity) Plus, the largest percentage of its new clients came from ADP and Paychex. Its offerings are clearly superior and clients are willing to go through pains to make the change. This is good news. We don’t need to worry whether ADP and Paychex already dominated the market. Paylocity has proven its ability to take clients from them. (Source: Paylocity) Bottom line: Paylocity operates in one of the best software markets – human resources. ADP and Paychex generated sensational share returns in this market, but this is similar to Shopify taking certain merchants away from Amazon. Paylocity’s modernized products are taking clients from these legacy companies, and you saw the revenue growth. Yes, the stock is pricey at 53 trailing P/E. But its market cap ($8.9 billion) is four times smaller than Paychex ($43 billion). I believe wholeheartedly that this stock could be a winner, thanks to its small size and fast growth. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](