📓 Throw Out The Traditional Playbook

The Daily Dough team is always asking - “What’s the next big trend nobody’s thinking about yet?”

And that’s where Exploding Topics comes into play. Their platform helps us find hot ideas, company, and trends before the masses.

We think this is a tool every entrepreneur, trader, and investor needs in their toolbelt.

What’s on the Menu 🍴

Sometimes the markets do exactly what we expect…

But more often than not, they surprise most people by doing something totally unexpected.

And right now, they’re ditching the traditional playbook and playing a brand new game.

Today’s newsletter is all about showing you how to think in this weird new world.

Let’s chow down!

• Throw Out The Traditional Playbook 📓

• Uncle Sam's Stablecoin Ambitions 🏛️

• The Trend Line Of Doom In The S&P 500 ☠️

• Stock Picking: Waste of Time or a Wealth Multiplier? 📈

Today’s newsletter is a 4 minute read.

Throw Out The Traditional Playbook 📓

Long term US government bond yields are mooning again this week, causing broad pain across industries and asset classes.

Even utilities, often seen as “defensive” stocks during market selloffs, have been brutalized:

The old idea that higher interest rates will lead to a recession which will lead to investors bidding up traditionally defensive stocks is NOT working at the moment.

We’re in a strange market environment that many stock investors haven’t seen before, so we must question the traditional playbook.

Higher treasury yields not only translate into higher borrowing costs for companies that carry a lot of debt (such as utilities) but they also mean higher opportunity costs.

Stocks that used to trade at high valuations (& low dividend yields) must trade at lower valuations (& higher dividend yields) to entice investors away from fatter yields in bonds.

Utilities, REITs, bond funds, and dividend stocks are not obvious bargains until they’ve been repriced dramatically lower to account for higher rates AND higher solvency risk.

On the flip side, energy stocks usually get hit hard during market selloffs and rising recession fears, but could this time be different?

The energy sector is entering this selloff as the cheapest sector in the S&P 500, and many energy companies have deleveraged their balance sheets in recent years.

On top of that, higher interest rates appear to be suppressing new oil supply.

The count of oil & gas drilling rigs operating within the US is down 15% since April:

Whether by choice or due to higher costs, energy companies are maintaining discipline despite the recent rise in crude oil prices to over $90 per barrel.

This could mean that energy stocks will hold up better this time around than they have historically during past market corrections.

Of course, if a deep recession does hit it’s unlikely that energy stocks will be spared.

But if the economy muddles along even as rates & energy prices remain high, having some energy stock exposure in the portfolio could provide a nice “stagflation” hedge!

Uncle Sam's Stablecoin Ambitions 🏛️

So, Uncle Sam's itching to ride the crypto wave with federal stablecoin regulation.

Hold up, did we just say 'federal stablecoin'? You betcha.

The big man in the House Financial Services Committee, Patrick McHenry, isn't lounging around. He's hell-bent on sliding that legislation across President Biden's desk.

His vision? A digital dollar, backed one-to-one by good old American greenbacks, in a neat, government-sanctioned package.

Alright, let's say the feds slap their seal of approval on a U.S. dollar-backed stablecoin.

What's in it for us—or not?

Pros:

• Piece of cake for the government to create a one-to-one stablecoin.

• The U.S. Dollar flexes its muscles globally.

• Sets the tone for federal crypto policies.

Cons:

• Say hello to Big Brother watching your stablecoin stash.

• Whichever party's in power calls the shots.

• More government mitts in the crypto cookie jar.

So, ready to let the feds crash the crypto party?

The Trend Line Of Doom In The S&P 500 ☠️

We’ve written in prior Daily Dough newsletters about the possible S&P 500 selloff (so, hopefully the weakness hasn’t caught you by complete surprise).

We like to pay attention to technical analysis to give us an idea of momentum in the market, and possible levels where price could go (or bounce off of).

The S&P 500 is teetering on the edge of a very key trend line of support around $4,200. (We also call this the “trend line of doom.”)

The problem is, this isn’t just any trend line of support.

Price is lining up with:

1. Very strong resistance turned support (horizontal line)

2. The 200-day moving average

3. A trend line of support

Said another way… many factors are converging to make this a strong support level (aka: hope for the bulls).

If price falls through it lower, we will know that the bears have control of this market, and the fear is real.

On the other hand, if we see buyers come in at the trend line of doom and price bounces, we could be looking at dip buyers holding things up as the convergence of technical factors are too strong.

Grab your popcorn and let’s take this candlestick, by candlestick to see if the bulls or bears will take control from here.

Stock Picking:
Waste of Time or a Wealth Multiplier? 📈

Is researching and investing in individual stocks a waste of time?

Well, I’m here to tell you why they might be completely wrong, and how to do it right.

Instead of just giving you my opinion, let’s dive into the data.

Food For Thought 🧠

"You have power over your mind - not outside events.
Realize this, and you will find strength.”
- Marcus Aurelius

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.