Mish Schneider: Dumpster Diving, the YOLO Trade, & Betting on Vanity

As ever, the Chief Strategist at MarketGauge.com brought a bunch of thought-provoking trade ideas to the Talking Markets Table...

It could be a good time to go dumpster diving, MarketGauge.com chief strategist Mish Schneider said last Friday on Talking Markets. As ever, Mish brought a ton of “huh, I haven’t thought about it like that” trade ideas to the table:

XRT: Retail Therapy Rally?

Mish has her eye on the XRT, an ETF that tracks the retail sector. Mish sees XRT, along with other sectors in her "Modern Family," trapped in a months-long trading range. But what happens if XRT bursts through its $79.80 ceiling? According to Mish, that could be the sign that investors are ditching their growth-stock obsessions and rediscovering the allure of the real economy. And the driving force behind that would be the consumer, the “belly” of the American beast as Mish puts it.

Strong consumer spending is crucial for economic growth, especially since it represents 70% of GDP. If consumers keep swiping those credit cards, especially during the upcoming holiday season, it could fuel a market-wide rally.

Err, but what about inflation, a world embroiled in chaos, and election anxiety? Well, that’s where YOLO (yes, YOLO) comes in. An uptick in consumer spending could also be fueled by a “you only live once” mentality, with the public thinking, as Mish put it, “Well, maybe the whole world’s going to come to an end, [so] I’m gonna go out and spend money and enjoy it, because who knows if we’ll even be here tomorrow?”

TAN: Dumpster Diving Opportunity

While nuclear and oil are getting a lot of the attention, Mish is keeping an eye on the solar sector, with the TAN ETF. She acknowledges that TAN has taken a hit lately, but sees this dip as a chance to maybe get a bargain. “Solar energy,” she points out, “didn't go away. It's still very much a thing.” She sees TAN's recent price action, specifically closing above a key support level around $37.33, as a glimmer of hope.

For Mish, this isn't just about chasing a beaten-down sector; it's about recognizing the enduring potential of solar energy in a world grappling with climate change and seeking sustainable solutions. She believes that the current market pessimism surrounding solar is an overreaction, a knee-jerk response to short-term headlines. While the headlines scream "nuclear" and "oil," Schneider sees a quieter, more persistent trend taking shape – the continued growth and adoption of solar energy worldwide. This, coupled with TAN's attractive valuations, makes it a prime candidate for her dumpster diving strategy, where she seeks out hidden gems amidst the market's discarded treasures.

ELF, ULTA, MTCH: The Vanity Trade

Mish says investors need to start thinking about a new type of consumer hitting the market, fueled by the wave of semaglutide weight loss treatments that have emerged on the post-pandemic landscape. “All of a sudden, [there’ll be] a huge percentage of people who stayed out of anything to do with dating or beauty or skincare or makeup because they didn’t feel good about themselves, and now they do,” she said.

Mish highlighted stocks like Elf Beauty, Ulta Beauty, and even Match.com as potential beneficiaries of this trend. While these companies have faced recent setbacks, Schneider believes their slump is temporary.

Silver: The Canary in the Inflation Coal Mine

Mish is particularly interested in the relationship between gold, silver, and the US dollar, forming a "trifecta" of indicators that could signal a surge in inflation that traditional metrics like CPI might miss. “Right now, to me, the most interesting thing is silver,” she said, noting that the precious metal has just broken out of a decade-long trading range, potentially heading towards $50.

This breakout, coupled with a weakening dollar (especially if it drops below 100) and silver outperforming gold, sets off alarm bells for Mish, as it suggests that inflationary pressures could be building beneath the surface, even if official data hasn't caught up yet. “If we see the dollar go down and we see the silver start to outperform the gold,” she warns, “we're looking at some issues from an inflation standpoint.”

And a Final Snippet for Thought… Gold Miners

Historically, gold miners have tended to lead gold prices, but in recent years, Mish says, “We've seen gold way outperform the miners and silver for that matter too.” Now, however, she sees signs that this dynamic may be shifting, with gold miners starting to show strength. “The miners starting to move up is... an interesting scenario,” she said.

To watch the full episode, right this way.

Enjoy,

Maggie

Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and determine if an allocation to oil aligns with your overall financial plan.