Today we’re going to review the broader market (SPY), see what rising rates (TLT) mean, and then we’ll also go over our long Discovery (DISCA) thesis.

The broader market is looking strong. Small-caps just hit new highs and overall breadth is solid. Sentiment reset itself and now it’s acting as a neutral to bullish tailwind for the market.

The main hurdle markets have to face going forward is rising rates. The yield on the 10-year is hovering just below 3.1% and the rate of change in yields is at levels that usually precede stock market volatility. There’s a circular relationship between yields and equities. When yields rise fast, we see stock market volatility, which in turn causes people to flood into bonds which lowers bond yields again. So it’s a self correcting process. We’ll probably see this cycle play out again soon with another small sell off in stocks. But that will hopefully put an intermediate ceiling on yields and clear the way for a more sustained stock rally.

A stock our team is digging into to play this trend is Discovery (DISCA). You guys are probably familiar with the Discovery channel with programs like Shark Week and MythBusters. Discovery Inc is a global media company that owns Discovery channel and more including TLC, Animal Planet, HGTV, Food Network, and the Oprah Winfrey Network. They have 400 distribution feeds in 40 different languages around the world.

The stock has been beaten down the last few years because of the “old media” narrative and the rise of cord cutting. These are legit reasons, but now the stock is trading 50% below its price from a few years ago and it’s looking like the market has overdone it. We are now looking at going long.

If you’d like to learn more, make sure to watch the video above. Running length 00:02:57

And as always, stay Fallible out there investors!