Each week, corporate advisory firm Barclay Pearce highlights the key trading themes of the week, along with which companies and sectors Stockhead readers should be keeping their eye on.

This week’s catch-up with Trent Primmer, Head of Trading at Barclay Pearce, took place amid a big week of US market updates.

Investors digested the latest US inflation print last night, which showed monthly inflation jumped by 0.9%.

That was well above the 0.5% estimate and left annual inflation growth at more than 5% off last year’s low base – the third straight month where annualised CPI printed at decade-plus highs.

US stocks dipped slightly in response, while bond yields edged higher with sharper moves at the shorter end (2-year bond yields) of the curve.

Breaking down the data, there was another huge uplift in used car prices which drove a material uplift in the monthly print.

Those gains are viewed by some analysts as unsustainable, which lends weight to the argument that sharp inflation growth will be transitory in line with the US Fed’s current forecasts.

However, consistently high inflation makes for an interesting backdrop as Fed Chair Jerome Powell gets set to front Congress for his two-day testimony, which kicks off tonight.

Macro view

And in that context, Primmer is taking a more cautious approach to the latest macro developments.

“I think the market will be hypersensitive to any indication of faster tapering. So it’s going to be an interesting week,” he said.

It’s also a big week for US companies, as Q2 reporting season gets underway with some marquee names on deck.

Overnight, banking heavyweight Goldman Sachs’ earnings blew past estimates, while J&P Morgan’s profits more than doubled, but both bank stocks slid by more than 1%.

“What I’m doing is taking a bit off the table. We’ve done pretty well in some recent trades – we made around 15% off Vulcan Energy (ASX:VUL) and Resmed (ASX:RMD). We’ve also got a pretty heavy position in Fortescue (ASX:FMG) and we’re starting to take some out around these levels,” he said.

Returning to the outlook for global interest rates, Primmer also looked across the Tasman, where a recent economist poll indicated the New Zealand central bank could raise rates as early as this year, as inflation pressures mount.

“That’ll be a good read through and my mantra at the moment with this market is be cautious, not overzealous,” he said.

“I’m OK to miss out on a few strong updates if it means we’re being cautious for investors’ sakes. And you don’t go broke taking profits, as the saying goes.”

Stocks to watch

While a tone of caution may be required as the US Fed looms amid a complex outlook for interest rates, Primmer said the broad fundamentals behind some of 2021’s best performing sectors are still in place.

Market ETFs for lithium and rare earths both posted a gain of around 4% by the end of the week, while Barclay’s is still bullish on copper.

“Obviously we’re focused on Locksley Resources (ASX:LKY) which we brought to market last week, and over the next few months we’re expecting some positive news flow,” he said.

“The ‘re-JORCing’ of their resource is a big one, because it’s a historical JORC resource so it has to be re-done.”

“So I think that’s got more legs to run and we’ve been acquiring positions in some other copper plays like Hot Chili (ASX:HCH), but more broadly in this market I want to be fairly cautious,” Primmer said.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.