Nick’s Note: If you’ve been following world-renowned cryptocurrency expert Teeka Tiwari, you’d know cryptocurrencies are the best-performing asset class year-to-date.
With bitcoin rapidly approaching $9,000, Teeka says now is the time to get into the altcoin market—which will likely see gains surpassing bitcoin.
But I wanted to see if there was a way for you to play the Crypto Spring in the stock market, too. So I reached out to our Wall Street insider, Jason Bodner.
Jason spent nearly a decade as an executive at Cantor Fitzgerald—where his clients were among some of the largest institutions in the world… As a trader, he’d frequently move over a billion dollars per minute.
He knows where the smart money’s going… So I asked him how it’s likely playing the crypto rally…
By Nick Rokke, analyst, The Palm Beach Daily
Nick: Thanks for joining me today, Jason. Bitcoin has finally caught a bid. It’s up over 150% since bottoming out in February.
Is there a way to gain exposure to this rally in the stock market?
Jason: First, I just want to say I’m not an expert in cryptocurrencies. Teeka has the best edge in this space that I know of… so I’ll defer to him when it comes to cryptos.
But is there a way to gain exposure to this rally in the stock market? Sure, there is.
As you know, I’ve been big on semiconductors for months. These companies make the chips and circuits that go in our electronic devices. Some people call them the “brains” of computers.
I’ve seen a lot of smart money buying this sector all year. The iShares PHLX Semiconductor ETF shot up nearly 37% from January to April 2019 before the recent pullback.
Now, that run up may or may not be related to the crypto resurgence. But crypto mining is computing intensive. So miners will need the powerful computer chips made by these companies.
In fact, global consulting firm Accenture says growing use of blockchain technology will fuel demand for semiconductors. That’s just one reason to be bullish on this sector.
Nick: But semiconductor gains have been cut in half since April. Does that worry you?
Jason: No. In fact, I think the pullback is healthy. The sector has pretty much gone up in a straight line all year… and nothing can go straight up forever. Eventually, it has to take a break.
And that’s what’s happening right now. So it’s a good time to buy the dip.
Nick: What do you think caused the pullback?
Jason: It’s simple: Trade war fears.
You see, traders used the geopolitical strife as an excuse to take profits. And some quant funds realized they could use the knee-jerk reaction to push prices down even further by selling more. That caused a quick decline in semiconductor prices.
But again, I think the pullback is temporary…
As I’ve said before… this trade war rhetoric is nothing more than saber-rattling. At least that’s what the smart money thinks.
If investors really believed there’d be a full-fledged trade war, they’d pile into safe-haven stocks like utilities, health care, and consumer staples. We’d see major volume in those sectors. But we’re not seeing that.
Instead, we’ve just been seeing money leave the semiconductor space over the past few weeks. That suggests investors are sitting on cash. And they’re not going to do that for long… If they do, they’d lose about 4% per year, due to inflation.
So I predict once we see some kind of resolution to this trade dispute, the semi space will quickly recover.
The fundamentals haven’t changed. It’s still the fastest-growing sector in technology.
Not only are semis seeing huge demand from blockchain and crypto projects… but from artificial intelligence and internet-of-things technology, too. And that’ll be good for prices moving forward.
Nick: Great. Before I let you go, can you let us know if your market outlook has changed?
Jason: Nope. I’m still long-term bullish.
As of this week, 97% of S&P 500 companies have reported their first-quarter earnings. Of those, 76% reported positive earnings surprises. And 59% reported positive revenue surprises.
Those are healthy numbers… And it shows that companies continue to beat expectations.
I believe that’ll continue. Even after these beats, most companies are leaving their full-year guidance unchanged because of trade war concerns. No company wants to raise its guidance and then have to lower it because of the uncertainty.
But if these past earnings numbers are any indication, future guidance is conservative… So barring any major catastrophe, companies will be beat them going forward.
That being said, my proprietary ratio just dipped below 50%… That means sellers are in control for now… and that could lead to some short-term volatility. But that’s normal for this time of year.
When earnings season ends, liquidity dries up. And the summer is always a volatile time for stocks. So I expect a little choppiness—especially after a huge run like we just had.
Nick: So what should investors do in the meantime?
Jason: I’m using any pullbacks to add to my positions and buy into new positions. That’s the way to use this volatility to your favor.
If you stick to your investing plan… and hold on to the great companies that institutions are buying… you’ll come out ahead.
Nick: Thanks for your time Jason… and for telling us how to take advantage of the crypto trend in the stock market.
Jason: You’re welcome.
Sincerely yours Palm Beach Reseach Group