There are many old sayings on Wall Street, and for good reason. Over time, certain truths become evident.

Recently, “don’t fight the Fed” is one saying that has been especially relevant. The Fed’s monetary policy decisions since the onset of the coronavirus pandemic four years ago has sent bond yields (and prices) careening from one extreme to the other.

As for the stock market, “don’t fight the tape” has also been good advice while Wall Street was (and still is) pouring money into big tech companies. If you bought NVIDIA (NSDQ: NVDA) when I recommended it seventeen months ago, you’d be sitting on a 600% profit right now.

I think that is about to change. The Fed has finished raising interest rates and may not start cutting them as soon as some people on Wall Street hope.

At the same time, big tech stocks appear to be overvalued and ripe for a pullback soon. If that happens, then getting out of the way of the tape would be a better move than not fighting it.

I’d like to suggest a new saying that I believe will be the driving force behind the stock market’s behavior over the remainder of this year: Don’t fight the consumer.

After all, consumer spending is what determines where a lot of dollars go. No matter what the Fed is doing or Wall Street is saying, consumer spending ultimately determines how most companies will perform.

During the past ten days, I have closed out two trades for big gains based on trends in consumer spending. It wasn’t hard to do and didn’t require access to inside information.

Polo Match

Last week, I closed out a call option trade on apparel designer Ralph Lauren (NYSE: FL) for a 260% profit. A call option increases in value when the price of the underlying security goes up.

I opened this position three months ago after several big box retailers surprised Wall Street with stronger than expected quarterly results. Even though those stocks rose on that news, the companies whose products they sell did not.

That didn’t make sense to me. If the biggest retailers in the world are reporting a big jump in sales, then so should the manufacturers that make the products they sell.

That’s when I issued a buy alert for Ralph Lauren. Despite posting solid quarterly results, its share price was lower than when the quarter started.

On November 21, I recommended buying the call option that expires in January 2025 at the $120 strike price. The cost of buying that option was $19. That made our breakeven price $139.

Last month, the company released its next set of quarterly results. As I expected, those numbers reflected the surge in sales reported by the big box retailers a few months earlier.

On February 27, I recommended selling that option to close out that trade while RL was trading near $180. That day, our call option could be sold for around $68.

Target Market

Last week, I closed out a call option trade for big box retailer Target (NYSE: TGT) for an 115% gain that I opened last August. At that time, TGT was trading at its lowest share price since the onset of the coronavirus pandemic after reducing guidance after mismanaging its inventory.

I said then, “That may hurt its share price performance in the near term but should help it next year when its sizable investment in upgrading its stores starts to pay off.” That day arrived on March 5, when Target released its fiscal 2023 Q4 results and announced a new membership pricing plan that excited Wall Street.

It’s too soon to know if that pricing plan will generate the additional profits for Target that Wall Street is now expecting. But now that I’ve sold my option and doubled my money, I’m just a spectator.

Now, I’m looking for other trends in consumer spending that might indicate where the next big profit opportunity will be. One place to find that information is the latest Personal Consumption Expenditures (PCE) report issued last week.

Most people only look at the top-line numbers to gauge how quickly inflation is slowing down. But if you dig a little deeper, there is a treasure trove of data in the spreadsheet that shows exactly where consumers are spending their money.

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