Two taper tolerant actions to watch out for



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Shares are coming out of a losing week after fears that the Federal Reserve might remove stimulus as early as this year rocked investors.

Much of the S&P 500 is returning to record levels since its pandemic coronavirus low was attributed to central bank easing and an abundance of money in the market.

With concerns over the stimulus package ending in the past week, CNBC’s “Trading Nation” has asked its traders for their top picks of taper-tolerant stocks – names that can survive, and even thrive, with a less accommodating Fed.

One way to combat the Fed’s headwinds is to find stocks with tailwinds that can counter them, according to Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors.

“We think the most taper-resistant choice right now is probably something happening in the infrastructure game, and the infrastructure game takes us straight to Nucor,” Sanchez said on Friday.

North Carolina-based steel producer Nucor has already grown nearly 120% this year. Shares are up 12% this month.

“It was already hot because steel prices were going up, then the infrastructure bill came in, and that was a big win. It’s the biggest diversified player in the United States and it’s cheap. “Sanchez said. “The thing about [tapering] It’s as soon as you hear the decrease you start to worry about stocks that are overvalued, but Nucor is a stock that is trading at around 8.5 times earnings forward. “

Craig Johnson, chief market technician at Piper Sandler, said it serves investors to look back on the last time tapering was mentioned – in May 2013, when Fed Chairman Ben Bernanke first suggested times to change policy. Johnson said the top performing sectors in the second half of 2013 were materials, industrials and technology.

Like Sanchez, Johnson is betting on outperformance in this second sector, industrials, in particular mining stocks.

“When you look at this group right now, we are testing the highs of 2018, and we are also on the verge of reversing the downtrend channel that the diversified mining group has been in since 2006-2007,” Johnson said. during the same interview.

“I would take a look at Cleveland-Cliffs,” he said. “You can see a much higher low that has been hit, you go over the upper end of resistance and in the shorter term the trend is our friend here,” Johnson said.

Cleveland-Cliffs, another steel producer, is up 58% this year. Stocks rose 15% in the past month, although they fell sharply last week.

Disclosure: Lido owns NUE.

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