Trading Desk
Back from vacation: Time to hunt for bargains
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Martin Raab
Investment-Stratege
Back at the screen, refreshed and with a clear head, you can cash in twice: on lagging tech stocks like Qualcomm and on the bond market, where a new, hawkish Fed chair is driving yields higher.
The holidays are over, the vacation tan is still there, and it’s time to turn our attention back to our investment portfolio. Right now is the perfect time to enjoy your first cup of coffee in front of the screen. While you were relaxing on the beach, the market left two areas in need of attention – both of which are perfect to tackle with a clear head: overlooked tech bargains and a bond market that’s practically begging for a bet on rising yields.
Qualcomm is on the shopping list. While Nvidia is soaring to new valuation heights, the mobile chip giant has recently been languishing below its year-to-date opening price and well below the analyst consensus of around USD 200. Although the quarterly results showed a weak core business, the automotive segment has now recorded double-digit growth for the 23rd consecutive quarter. Add to that billion-dollar deals with hyperscalers and a new partnership with Meta, which catapulted the stock price up by double digits after the market closed. Similar laggards with solid balance sheets but without a hype premium can be found in Intel’s turnaround story or among network equipment provider Cisco. Anyone who missed out during the holiday season can comfortably start catching up from the comfort of their office chair.
The second area of concern is U.S. Treasury bonds. Since Kevin Warsh took over as head of the Fed in May, the central bank has sounded significantly less inclined toward easing. The June decision was unanimous; any hint of future interest rate cuts was removed, and at Jackson Hole, Warsh even hinted at rising interest rates. As a result, the 10-year Treasury yield climbed to just under 4.7%, and the 30-year yield rose above 5.2%. Some observers expect 10-year yields to test the 5% mark within six months. At the same time, the Treasury is flooding the market with increasingly large auctions, while the Fed is stepping back as a buyer. Rising yields mean falling prices—a golden opportunity for short sellers.
In practice, this can be achieved through put options or short mini-futures on bond ETFs such as the “iShares 20+ Year Treasury Bond ETF,” through leveraged inverse products such as the “ProShares UltraShort 20+ Year Treasury” or directly through short futures on 10-year or 30-year T-Notes/T-Bonds. For those who prefer a more nuanced approach, a steepener position can be used to bet on a steepening yield curve. The holidays are over, the opportunities are there – it’s time to seize them.
