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A Pairs Trade Designed to Profit From COVID-19 and Interest Rates

by | Jul 23, 2021 | Uncategorized

On Monday morning, investors thought the world was going to end. It had everything to do with the news of the COVID-19 delta variant affecting the stock market.

We saw S&P 500 futures dip almost 2%, and the market was puking out stocks after a particularly bad trading session this past Friday. 

As I mentioned in my video Monday, if the market does not see an uptick in deaths and hospitalizations, then it has a chance to withstand all of the incoming news about the pandemic and delta variant.     

If investors want a fighting chance to finish 2021 strong, then the market needs to be able to bear the weight of the delta variant. This pandemic isn’t going anywhere anytime soon…

However, the COVID-19 delta variant disrupting the stock market isn’t the only thing I’m seeing that could derail everything right now…

It’s interest rates.

The COVID-19 Delta Variant and Interest Rates: The Biggest Risks to the Stock Market

This week, Wall Street had a flash flood on interest rates — as more traders feared the effects of the COVID-19 delta variant — and now there’s a huge bid on the bond market  

This tells me two things:

  1. Investors are more scared and nervous than ever before.

  2. Investors also want more security now than ever.

And to be perfectly honest, I’m nervous, too.

Taking a look at 10-year U.S. Treasury yields, you’ll see the exact point they rebounded Tuesday due to a shift in investor sentiment. This line of thinking came to fruition after Monday’s “broad-based flight to safety” on fears about the spread of the delta variant.

However, some experts are saying the new COVID-19 news and investor worries about the effect of it on the global economy might have been overplayed — causing yields to plummet far more than necessary.  

Is that true? Perhaps.

However, there could still be room for the rebound in the 10-year yield to run its course to the end of July.

And in the meantime, I was able to time a perfect pairs trade that should be able to combat all of the negativity surrounding interest rates and the COVID-19 delta variant on the stock market. 

Check out my short video below to learn more and be sure to share your thoughts about the COVID-19 delta variant effect on the stock market in the comments section below. 

And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.

WRITTEN BY<br>Jeff Zananiri

Jeff Zananiri

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