Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

QE and the Stock Market - The "Taper" Is Here... This Is What You Need to Know

Stock-Markets / Stock Markets 2013 Dec 19, 2013 - 03:17 PM GMT

By: DailyWealth

Stock-Markets

Porter Stansberry writes: We knew it would happen eventually... so now what?

Yesterday, I explained how the Federal Reserve's quantitative-easing programs have transferred enormous wealth into the hands of the very rich.

Today, I'm going to show you what's going to happen now that the Fed is beginning to rein in these quantitative-easing bond-buying policies. This is what people refer to as "tapering."


In short, not one single sector of the stock market is completely safe... But there is a "window" of opportunity.

Let me explain...

Since the housing market collapse, the Fed has instituted three separate rounds of quantitative easing... QE1, QE2, and QE3.

The Fed also tried something called "Operation Twist," which attempted to replicate the effects of quantitative easing without printing more money.

A lot of the extra QE dollars found their way into the equity markets and have driven up stock prices. The chart below shows how the market reacted to the Fed opening and closing of the money spigot...

With trillions of extra dollars sloshing around the economy, some are bound to be dumped into equities and drive up prices. Notice that every peak and valley for the past five years corresponds with a Fed QE action.

You may think that any policy that helps your investment account can't be all bad. But asset surges predicated by dollar printing never work out well.

It's impossible to know when this Fed-induced market exuberance will end. But we know it will.

Even the Fed knows quantitative easing is not sustainable. That's why the Fed has already tried three times before to stop the charade.

And yesterday, the Fed announced that it will be reducing – or "tapering" – QE3 by $5 billion per month. Notice, in the table below, that every time the Fed stops quantitative easing, the equity markets have pulled back.

Specifically, take a look at the periods below marked with gray highlights. The market has dropped throughout each of these "tapered" periods.


​The market has obviously been indiscriminately selling whenever the Fed hints at tapering its quantitative easing.

The "tapered" periods in the table above (the rows highlighted in gray) lasted an average of 84 days. And the market lost an average of 16% over those periods.

We examined more than 2,000 large U.S. stocks and 39 industry segments to see if we could spot trends that would improve our performance (or limit the damage) as tapering begins. The results of our analysis can be found in the table below...

Clearly, in times of uncertainty, investors hang onto companies that sell the stuff people really need: utilities, food, and medicine. And they buy the things people can't stop using, like sodas and nicotine. On the other hand, construction-related industries and companies with a lot of interest-rate exposure struggled during the taper periods.

​What surprised us was that certain industries had a lot of companies whose stock actually advanced during these periods. You can see this in the column labeled "Percent Winners."

For example, if two out of the 20 companies in a given segment actually had stock-price gains during the taper periods, you'll see 10% (2/20) reflected in the "Percent Winners" column.

Looking at both metrics, our analysis exposed a cluster of industries that all sell mass consumer goods with inelastic demand: big tobacco, beverages, pharmaceuticals, and the stores that sell them. The one thing they have in common is that they can all be growth industries, even in the face of stock-market retrenchment.

Think about the products those companies sell. Marlboros, Cokes, Twinkies, Tylenol... These are not products people stop buying when interest rates rise. And you can buy them at any store on any corner in any town.

That's why, after taking in all the data, we think one of the best ways to play this is to dig into the retailers that sell these goods. Buying the right retailer is like buying a basket of all the products that people need most.

You'll notice the companies in the "Food and Drug Retailers" and "General Retailers" segments lost on average 8%-13% over the Fed's taper periods. That's not too bad compared with the overall market. But when we dug deeper, we noted that 14 companies in these segments enjoyed stock-market gains over the taper periods... and some of the gains were big.

If recent history is any indication, big gains may be hard to come by in the coming months.

But we believe we found the best place to look for opportunity, both during quantitative easing and now that we've reached the "taper."

Regards,

Porter Stansberry

P.S. In the latest issue of my Investment Advisory, we recommended our favorite "general retailer." Its stock rose 7% during the previous taper periods. It's exactly the kind of company you'll want to own as the Fed closes the money spigot. You can get all of the details with a Stansberry's Investment Advisory subscription. To learn more, click here.

Editor's note: If you'd like more insight and actionable advice from Porter Stansberry, consider a free subscription to DailyWealth. Sign up for DailyWealth here and receive a report on how to prosper despite the Fed's inflationary policies. This report will show you how to protect your hard-earned money from what Porter has dubbed the "End of America." Click here to learn more.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

peterpalms
21 Dec 13, 23:15
Tapering

Tapering is just a synonym for "stealing less" from taxpayers


Post Comment

Only logged in users are allowed to post comments. Register/ Log in