Insider Trading, The Legal Way

As iconic movie villain Gordon Gekko put it: “If you’re not inside, you’re outside.”

That’s why our investment team strives to get wind of promising plays ahead of the crowd. Imagine if you could learn the inside scoop on stock movements before they happened. Well, we have a way to make it possible…and it’s 100% legal. More about that in a minute. First, let’s look at the news that’s driving markets.

The U.S. House late Tuesday passed a $3.5 trillion budget that would enact sweeping changes to the nation’s health, education and tax laws. After considerable wrangling, House Speaker Nancy Pelosi (D-CA) struck a deal with moderate Democrats who had been blocking the measure. The deal paves the way for consideration later in September of President Biden’s $1.2 trillion infrastructure package, which was approved last month by the Senate.

Pork. It’s What’s For Dinner

Let’s cut to the chase: The infrastructure bill is what matters most to investors. In my youth, I toiled as a staffer in Congress and my remaining contacts on Capitol Hill tell me that Republican opposition to the $1.2 trillion package is mostly posturing and, behind the scenes, the legislation actually enjoys widespread bipartisan support. Huge servings of pork are at stake.

It’s highly likely that Biden’s Build Back Better bill will get passed in the fall by both chambers of Congress and signed into law. Position your portfolio now; one way is to increase your exposure to plays related to construction. Large-cap engineering and construction companies with global footprints are your best bet, because infrastructure investment is a transnational trend.

Enactment of the U.S. infrastructure bill also is likely to provide a catalyst for the next big leg up in the stock market. Wall Street craves fiscal stimulus and it’s about to get lots of it, largely in the form of local funding to build and repair roads, bridges, railways, tunnels, waterways, and other transportation systems. The need for infrastructure investment is genuine, but to grease the wheels and ensure political support on both sides of the aisle, party leaders allowed members to sneak pet projects into the bill.

On Tuesday, the Dow Jones Industrial Average rose 30.55 points (+0.09%), the S&P 500 climbed 6.70 points (+0.15%), and the tech-heavy NASDAQ increased 77.15 points (+0.52%). The small-cap Russell 2000 pushed ahead 22.61 points (+1.02%). The S&P 500 and the NASDAQ both hit (yet again) all-time highs. The NASDAQ topped 15,000 for the first time, as “Big Tech” stocks rose.

Read This Story: Big Tech: Still in the Driver’s Seat

In pre-market futures contracts Wednesday, all three major U.S. stock indices were trading in the green. The government’s approval this week of a COVID vaccine continues to feed confidence.

Another positive factor for stocks has been stellar second-quarter corporate earnings. According to research firm Refinitiv, S&P 500 Q2 earnings are on track to post a year-over-year gain of 94.7%. Excluding the energy sector (which experienced an exceedingly low baseline in 2020), the year-over-year earnings estimate is 79.2%.

The industrials and consumer discretionary sectors have racked up the highest earnings growth rates for the quarter, while the utilities sector posted the weakest.

The estimated earnings growth rate for the S&P 500 for 21Q3 is 29.7%. Analysts have been increasingly optimistic in their revisions for projected Q3 earnings (see chart, with data as of August 20).

All 11 S&P 500 sectors are projected to see an improvement in earnings relative to the same quarter a year ago.

Despite economic damage from COVID-19, quarterly earnings performance during the pandemic has consistently beaten expectations. The pandemic winners, notably Big Tech, have been enjoying better-than-feared top and bottom line growth. In forthcoming Q3 results, we’re likely to see the S&P 500 continue the trend of crushing expectations.

The 12-month forward price-to-earnings ratio for the S&P 500 currently hovers at 22.2, which means stock valuations, although elevated, aren’t out of whack with projected earnings performance. The bull market case remains intact.

A better way than buy-and-hold…

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Jim Fink has developed proprietary stock filters that provide advanced knowledge of when a stock price is about to rapidly accelerate. Based on this “secret” knowledge, Jim constructs trades that have consistently reaped windfalls for his followers.

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John Persinos is the editorial director of Investing Daily. Send your questions or comments to mailbag@investingdaily.com. To subscribe to John’s video channel, follow this link.