Has A Rally In The Nasdaq Begun?
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Market On Open, Wednesday 25 March
by Alex King, CEO, Cestrian Capital Research, Inc.
It’s clear from how price is reacting to news at present that risk assets are likely to move up on any suspension or cessation of hostilities in the Gulf.
It’s also clear - to me at least, which means this pronouncement has to carry the “PROBABLY WRONG” or “INTERESTING IF TRUE” riders, or indeed my preferred “WILL DELETE IF WRONG” label - that the impact on real-world assets is not yet factored into some securities pricing. This isn’t because price-setters don’t know about the difference between real-world assets and securities, it’s just that they haven’t turned their mind to this yet.
Let’s think ahead a little. Let’s assume that at some point we get a break in the war or even a full end to it. And let’s think about what may happen then and how we might try to benefit from it.
Three points I have in mind:
- Physical oil supply chain
- Food supply chain
- Gulf states reconstruction.
Supply Chain Hit To Physical Oil
I think being long the ETFs $USO and $XLE can continue to do well; and if for some reason normal conditions return, both names are liquid enough that stop-losses should work well enough.
The most reliable of these is probably $XLE, since $USO varies with oil futures, but XLE varies with the earnings of the energy majors it owns; whatever pain energy users may feel you can bet that energy providers will be enjoying bumper earnings.
Disclosure: I am long $USO and $XLE.
Supply Chain Hit To Fertilizer
Less urea coming through means less fertilizer which means lower crop yields which means higher food prices. Thinking again of ETFs, two ideas are $WEAT and $CORN which as the name suggests are focused on, er, wheat and corn. These aren’t a slam dunk even if commodity prices moon, because they again track the futures of these commodities and so are subject to all manner of movements unrelated to the actual prices of the stuff but instead related to the effect of having to constantly roll contracts.
You may also care to look at grain traders such as Archer Daniels Midland.
Disclosure: I am long $WEAT and long $CORN
Gulf States Reconstruction
It seems that any such spending may originate with and/or be routed through the Kingdom of Saudi Arabia. Its top holdings are KSA banks, miners, materials and telecom companies - all the things needed to rebuild broken infrastructure. Our SignalFlow AI Global algorithm moved to “Risk On” in this name recently, and I’m long the ETF as a result.
Want to invest in global markets? Get SignalFlow AI Global.
Disclosure: I am long $KSA.
Are Stocks Set To Soar Now?
Bright green started flashing after the New York close yesterday. Will we see a follow-through today? Let’s get to it.