Wall Street Is Struggling? Trade RH Now

by Andrew Zatlin December 20, 2022 9:30 am ET

Wall Street firms are struggling…

We’re talking about shrinking bonuses, hiring pullbacks, and huge layoffs, too.

But as it turns out, this is creating some surprising investment opportunities…

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

Wall Street Is Struggling? Trade RH Now

The market’s been getting smacked lately.

A week ago, the S&P 500 was above 4,100. Now it’s below 3,900 — down four percent.

If you recall, I recently forecasted a Santa Claus rally, and advised you to sell into it before the market fell. I hope you did!

Now I’m convinced a ten-percent drop is coming.

Let me show you how to prepare for it…

The Market’s Next Low Point

Keep the number 3,600 in your mind.

That’s where I’m convinced the S&P 500 will settle before long.

My theory has to do with the S&P’s performance over the last two years:

If you notice, we spent most of 2021 heading up, but much of this year falling back down. The thing is, last year’s climb was fairly steady. Meanwhile, this year’s drop has been forceful — like a sharp knife cutting the market down each time.

This year, the highs and lows have been lower than a year ago. And this is a basic sign that the market is heading down, down, down.

The next low point to test is 3,600, and maybe even below that.

Another Bad Sign: Trading Volume

The chart above isn’t the only reason I’m so convinced. Take a look at this:

This shows trading volume for the S&P 500. Volume is down!

This is a bad sign for the market…

And a really bad sign for those looking to land a job on Wall Street…

Look Out, MBAs!

When there’s less trading action on Wall Street, there’s less hiring action, too.

Let me show you.

Here’s hiring for investment-firm Goldman Sachs:

Notice how its hiring has collapsed.

And here’s hiring for Morgan Stanley:

It’s the same story at Charles Schwab:

And JP Morgan:

That’s four Wall Street firms where hiring has crashed. Furthermore, Goldman Sachs just announced hundreds and hundreds of layoffs.

So if you’re an MBA, it’s going to be tough getting a job on Wall Street.

But what does this mean for investors like you?

How to Trade This News

You could bet against a company like Goldman Sachs or Charles Schwab. (If you’re a Moneyball “Pro” subscriber, I’ll share more thoughts on this option below.) But here’s another idea…

Companies like Gartner (NYSE: IT) and FactSet (NYSE: FDS) sell data and info to the big investment firms. And when you’ve got fewer people on Wall Street, you’ve got fewer people seeking this information. Not to mention that a lot of this research is nice to have, not need to have.

Gartner projects fifteen-percent growth this year, but only eight-percent growth next year. FactSet’s in a similar position: fifteen-percent growth in 2022, but just seven percent in 2023.

Granted, these projections may change because these companies often work on annual contracts that might not renew until we get into the new year. But the pressure is on for these firms. And I wouldn’t be surprised to see them fall.

Earlier, I mentioned that bonuses on Wall Street are evaporating. That means less discretionary spending for the bankers and brokers, many of whom enjoy living in the lap of luxury.

Where do they like to spend their money? One place certainly comes to mind: Restoration Hardware (NYSE: RH).

RH sells $5,000 dining tables and $2,000 chandeliers. Products like these might not be in such high demand this year. And in fact, we’re already seeing RH’s hiring take a dive: