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Investor sentiment is at all-time highs.
Market volatility, as measured by the VIX, has been scraping historic lows for the past 12 months.
Correlation between sectors and asset classes, which flashes warning signs when high, has been noticeably low. Over the last three months, correlation fell to 18% between S&P sectors; that's close to the lowest figures on record, according to research by Credit Suisse.
Economic and equity growth has been global, and all that's just the tip of the iceberg.
To some, it could be overwhelming to look at all the potential for the coming year, but I've narrowed the breadth of the markets into just the sectors with the most opportunity for any investor or trader.
On Wednesday, I released part one of my 2018 Capital Wave Forecast, which you can find right here. Now I'm sharing the six best opportunities in four more sectors.
Here are six more plays to focus on in 2018…
Banks Flush with Capital
When CVS Health Corp. (NYSE: CVS) announced its intention to buy Aetna Inc. (NYSE: AET) for more than $69 billion in early December, Goldman Sachs and Barclays each committed to pony up $20 billion in cash towards bridge financing to close the deal and get in on selling bonds as part of the permanent financing the deal requires.
It used to be that only JPMorgan Chase & Co. (NYSE: JPM) was big enough to plunk down $20 billion or more to facilitate a deal. With Goldman and Barclays proving there are more flush banks out there, deals and mergers like the one CVS announced won't face any financing impediments in 2018.
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Replacing bridge money with permanent financing is all about selling debt securities. Whether debt financing facilitates M&A deals, refinancing existing debt, expansion plans, or generating cash for buybacks, there's a healthy appetite globally for debt securities, from investment grade to junk.
Financially flush big banks have the ample resources to facilitate economic and market growth in 2018.
If you want a big bank that weathers everything it manages to foul up on its own, manages all its regulators and international regulars, and is the biggest bank in the United States (by assets and earnings this year)?
JPMorgan Chase is it.
JPM knows how to make money and it's poised to have an excellent 2018. Interest rate hikes are fattening its net interest margins, which we'll see more of in 2018, and loan demand and deal-making are going to ratchet up globally this year. JPM's not going to miss a beat on any front. A trending global economy and what should prove to be a more volatile year for commodities and currencies will add to JPM's trading profits. The stock should advance handsomely in 2018, by at least 30%.
On the small end of banking, I like little Customers Bancorp Inc. (NYSE: CUBI). This little bank's stock is cheap right now, but it's well-positioned for a pop in 2018. It generates good cash flow and is seeing its margins improve. It's been left for dead, but there are some surprises ahead for CUBI if it makes itself more attractive in the market. I'm playing this little bank as an acquisition target. It's cheap and would give larger Pennsylvania, along with other regional banks, access to its profitable markets. CUBI could easily rise 30% on its own, but much more if it's to be acquired.
The cheap U.S. dollar has been helping domestic exporters and companies with overseas earnings.
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.