Chaos! ...Your Broker Loves It
“It’s like traders have an acute case of Attention Deficit Disorder,” my friend Rob said last weekend.
“They can’t focus on any one thing for more than a day or two. But they’re buying and selling as quickly as possible based on whatever ‘shiny object’ catches their eye.”
And he’s right!
As the market fluctuates higher and lower, traders are increasingly distracted by the prospects of trade wars, higher interest rates, technology scandals, inflation, political issues and so many others!
Which is why today I want to talk about why this creates opportunities, and share three stocks that are set to benefit…
Trade War Heats Up – Then Cools Off…
Last week, a good bit of the market’s selloff was attributed to panic about the potential for a global trade war.
The thought was that if the U.S. slaps tariffs on China for steel and aluminum, China would retaliate with tariffs on food and other products we export to China.
While the initial threats in this argument were relatively moderate in size (a few billion dollars doesn’t actually make a huge difference when stacked against the entire U.S. economy), the fear of much bigger trade actions had investors very worried.
That was last week.
This week, the market is staging a rebound because it looks like that trade war is much less likely to materialize.
Frankly, a trade war really doesn’t make a lot of sense right now.
Trump is a pro-business, pro economic growth leader. He’s definitely got his faults, but one thing is for sure. He wants the U.S. economy to grow. He wants more American jobs. And he wants to see higher profits for U.S. businesses.
China’s leadership is in the same boat.
China wants to have the U.S. as a trading partner. They want to be able to sell steel, aluminum and plenty of other items to the vibrant U.S. market. In the end, both countries want fair and open trading across borders.
They just both want the best deal possible for their own respective economies.
In other words, no one really wants to go nuclear when it comes to a trade war. That would simply lead to mutually assured destruction.
So today, it looks like the leaders of both countries are willing to come to the negotiating table and avert an all-out crisis. And that’s good news for the overall market and for our investment opportunities.
Trading Firms Love This Uncertain Environment
I love this business of investing because whenever there is a challenge in one area of the market, it always opens up an opportunity in some other area.
For example, the more volatile market environment is naturally leading to higher trading volumes from money managers and individuals. After all, investors of all kinds are now scrambling to figure out how to adapt to the changing market dynamics.
So what kind of opportunities does all of this scrambling create?
Well think about all of the brokerages who are collecting fees and commissions from investors.
As people move money into one area and out of another area, brokers are charging for each and every trade. And those fees add up quickly!
I know that I’ve been much more active in my brokerage accounts lately. And I’m a relatively “steady” investor. I’m not a day trader and I keep a pretty balanced perspective. But just like you, I’m looking for ways to capture the new opportunities that the market has been offering.
Shares of trading firms like E Trade Financial (ETFC), Interactive Brokers (IBKR) and TD Ameritrade (AMTD) have been rising steadily.
I’m particularly excited to see what happens when these companies report first quarter earnings. After all, this last quarter was completely different than the market environment we’ve seen for two year.
Here’s to growing and protecting your wealth!