TL;DR
- Higher interest rates are taking their toll on the housing market, with homebuilder sentiment hitting a five-month low
- For investors it’s not just about homebuilder stocks, with industries (and share prices) like realtors, mortgage companies and even home improvement all being hit
- At the same time, IPOs have started to pick up again after a major pullback in activity during 2022
- Top weekly and monthly trades
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Major events that could affect your portfolio
We’ve talked a lot about interest rates over the past year. For obvious reasons. There hasn’t been this much action from the Fed in years, and markets have been moving sometimes solely based on how Fed chairman Jerome Powell shuffles his papers at the rate announcements.
Well, maybe not quite.
But something that we haven’t covered quite as much is the detail on how this is impacting individual sectors. And when you talk about interest rates and debt in general, one of the first things that comes to mind is usually mortgages.
This is one market segment that really feels the brunt of changes in interest rates. With the current average 30 year fixed mortgage rate at a staggering 7.1%, it’s no surprise that homebuilder sentiment has fallen to a five month low. Remember, just last year that average rate was down around 3%.
But you’re an investor, why should you care about houses? Well the real estate sector has wide ranging impacts on many different investment assets. First, there’s Real Estate Investment Trusts (REIT’s) which provide investors exposure to diversified real estate assets. Obviously, a down market will impact investors holding these.
Outside of REITs, there are a huge number of public companies who rely heavily on property for their own revenue. Homebuilders are obviously a major segment, but so are banks offering mortgages, realtors selling the properties and even home improvement stocks like Home Depot and Lowes.
In short, a tough real estate market can impact investors, even if they don’t hold any direct property themselves.
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IPOs are back. Ok, we’re not talking a frenzy here, but after over a year of essentially no major initial offerings, we’re starting to see some trickle back into the market.
This week saw a successful IPO for marketing platform Klaviyo, which saw its stock grow from $30 at its initial float to finish up 23% by the end of their first trading day. It slid slightly throughout the rest of the week, but remains in positive territory at $33.72 as of Thursday’s close.
These figures are up substantially from the earlier IPO estimates which put the price range between $25 – $25, which is a positive sign for the health of the IPO landscape.
But Klaviyo is far from the biggest name in IPO news this year. Its market cap of around $9 billion is dwarfed by that of Arm, who listed last week to achieve a $65 billion valuation. The chip maker has big plans for expansion, but has a lot of ground to make up if it wants to challenge market leader Nvidia’s trillion dollar market cap. Especially considering the stock has slid substantially since the first trading day.
Instacart is another company who saw a major bump on IPO day only to fall back down to earth. The food delivery company’s stock jumped as much as 43% on opening day, before falling back to finish the day up 12%. It has since fallen further.
For investors, it shows that while IPOs are back on the cards, they’re far from guaranteed winners. Choose wisely.
Top trade ideas
Here are some of the best ideas our AI systems are recommending for the next week and month.
Zip Recruiter (ZIP) – The online recruitment company is our Top Buy for next week with our AI giving them an A rating in Quality Value and Technicals. Earnings per share is up 10.9% over the last 12 months.
Draft Kings (DKNG) – The sports betting company is our Top Short for next week with our AI giving it an F rating in Quality Value. Earnings per share was -$2.57 over the last 12 months.
Hudson Technologies (HDSN) – The green technology company is a Top Buy for next month with our AI rating them an A in Quality Value. Revenue is up 6.3% over the last 12 months.
Transmedics Group (TMDX) – The medical technology company is a Top Short for next month with our AI giving them an F rating in Quality Value. Earnings per share was -$0.56 over the last 12 months.
Our AI’s Top ETF trades for the next month are to invest in volatility futures and oil and gas, and to short value stocks. Top Buys are the the iPath Series B S&P 500 VIX Short Term Futures ETN, the United States Natural Gas Fund LP and the ProShares Ultra Bloomberg Crude Oil ETF. Top Shorts are the Invesco FTSE RAFI US 1000 ETF and the Invesco FTSE RAFI US 1500 Small Mid ETF.
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