CLF - Is The Market Wrong About Steel? Why Cleveland-Cliffs Is A Steal
2024-06-03 05:46:03 ET
Summary
- Traders are buying SOFR options, indicating a belief that interest rates may remain higher for longer.
- Steel stocks, such as Cleveland-Cliffs, tend to perform well when inflation is high.
- Cleveland-Cliffs has made strategic acquisitions, improved its balance sheet, and is positioned for future gains in the steel industry.
Introduction
It seems that slowly, but steadily, the market is adapting to the elevated probability that interest rates may remain higher for longer, which is a thesis I have discussed in countless articles since the pandemic.
According to Bloomberg (emphasis added):
It's a wager that began attracting attention in March , when a slew of surprisingly strong readouts on growth and inflation hit. But the bet's grown substantially since then, reinforced by data earlier this week showing US consumer confidence unexpectedly rose in May. It's the latest indication that the options market expects the US central bank to stay the course - or even raise rates over the next year.
In this case, traders/investors are buying SOFR options.
According to Investopedia , " The Secured Overnight Financing Rate is a benchmark interest rate for dollar-denominated derivatives and loans that replaced the London Interbank Offered Rate. "...
Is The Market Wrong About Steel? Why Cleveland-Cliffs Is A Steal