Why higher rates have been GOOD for stocks

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Wall Street is gearing up for the new week of trading, where traders originally expected at least six rate cuts this year (back in January) but that number plummeted to just one now. Why? Inflation was stickier than traders expected. Higher rates are more restrictive than lower rates, of course. So, Wall Street had to determine whether higher-for-longer rates could tip the economy into a recession or not. (So far, there are little signs of that risk.) And we have geopolitical conflicts that could cause oil prices to jump. All in all, corporate earnings have been resilient. The economy is healthy. That may be enough to resume the rally in the stock market. - “You have to assess why you could be in a scenario where there’s fewer rate cuts this year,” said Zehrid Osmani, a Martin Currie fund manager. - “If it’s related to an economy being healthier than expected, that could support the rally in equity markets after the typical volatile knee-jerk reactions.” Zehrid Osmani, a Martin Currie fund manager (Photo: Martin Currie) Notably, BMO Capital Markets said S&P 500 returns have been solid with higher yields in the past. Since 1990, the index posted average annualized returns of nearly 15% when the 10-year Treasury yield was above 6% versus 7.7% when the yield was under 4%. The reason is simple — yields are usually higher when the economy is running strong. The central bank would be incentivized to raise rates to slow down the heated economy. - “This makes sense to us, since lower rates can be reflective of sluggish economic growth, and vice versa,” Brian Belski, BMO’s chief investment strategist, wrote in a note to clients. Right now, 10-year Treasury yields are hovering around 4.7%. This week, we will get earnings results from McDonald’s. Coca-Cola, Apple and Amazon. The Federal Reserve will also meet this week and announce its interest rate decision on Wednesday. Fed officials are expected to leave rates unchanged, but investors will watch Fed Chair Jerome Powell’s comments during his press conference. April’s nonfarm payrolls report will be out this Friday. Good luck with trading this week! An Unique Way To Bet On Carbon Neutral Era Today’s Stock Pick: Interface, Inc ([TILE]( You may have walked on Interface’s products without realizing it. The company invented the modular carpet tile, which is popular in offices. What makes carpet tiles unique? Carpets are divided into tiles, rather than a roll of carpet that covers the entire floor. What if you spilled coffee on the floor? The stain may make the work environment feel sloppier. The solution is easy. You only need to replace that specific tile. No need to remove the entire floor. Technicians can also lift tiles if they need access to underfloor cables. Lastly, carpet tiles offer greater design flexibility at lower costs. With a full-floor carpet, you must create a perfect design on one sheet of carpet. One mistake means doing it all over with a new roll of carpets. With modular tiles, you can refine the design tile by tile. Interface owns this segment in the global commercial flooring industry. Carbon-negative carpet tiles: Global companies are serious about achieving carbon-neutral, so they’re specifically looking for environmentally-friendly products. Interface is the only manufacturer that offers carbon-negative carpet tiles, measured cradle-to-gate without relying on any offsets. That will bring an important competitive advantage for Interface to win orders from corporate clients. (Source: Interface) Growth plans: Interface is considered the undisputed market leader in modular carpet tiles, and it is still in the early innings of becoming a leader in the tile market. Its current niche in carpet tile is worth $5 billion. It entered the high-growth, $3.3 billion LVT segment in 2017. LVT is the fastest-growing and offers the highest margin in the commercial flooring industry. So, the segment is a massive growth opportunity for Interface. Interface is also getting into the rubber flooring business (worth $1 billion) by acquiring the segment leader nora. In the graph below, you will see Interface’s new segments (in red colors) which offers the greatest growth and margin opportunities: (Source: Interface) All in all, the company’s served market doubled from ~$4.2 billion to over $9 billion today… in just a couple of years. New market segments: With a more diversified product portfolio, Interface can enter new, lucrative segments that expand outside the office market and into healthcare, education, multifamily, and transportation. Bottom line: Interface is a high-margin business that has plenty of growth space. It operates in only three categories of the commercial flooring industry. As soon as it hits market saturation, it can enter a new category. So, you can truly buy and keep this stock for decades. [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](