Rare earth stocks are Wall Street’s hottest trade right now
Rare earth stocks are having a blast at the moment. Small stocks in the critical and rare earth minerals sector — the latest flashpoint of US-China trade relations — have ripped, but the trade went into overdrive to start this week.
After JPMorgan announced on Monday a $10 billion plan to directly invest in key industries like critical minerals, the sector spiked as traders responded to the news and continued to bet on the US government’s ongoing support for the nascent sector.
In the announcement, Jamie Dimon, JPMorgan’s CEO, wrote that “the United States has allowed itself to become too reliant on unreliable sources of critical minerals, products, and manufacturing.”
One name in particular, MP Materials, soared 21% on Monday, with an eye-watering $4.7 billion worth of the stock trading in a single session. Ironically, that’s even more than the $3.3 billion that changed hands in JPMorgan stock.
Remarkably, the rare earth trade didn’t seem to be losing any steam on Tuesday.
With risk-off sentiment dominating the premarket session — the US and China having just rolled out their tit-for-tat port fees — the one winner from the trade tensions seems to still be the rare earth stocks. Indeed, other names in the industry were also trading higher yesterday, most notably United States Antimony Corp. (up 4.6%), Critical Materials (up 29%), and American Battery Technology Co. (up 23%).
The Takeaway
One of the big themes this year has been “follow the feds” replacing “follow the Fed” as a financial market maxim, with novel economic policies out of Washington having massive ramifications for traders. The reality is, one of the biggest end consumers of these rare earths is the Pentagon and one of the biggest suppliers is China, a situation that was inevitably going to become untenable as the Pentagon ratchets up pressure on, well, China. If you’re an American company with skin in the game on rare earths, traders increasingly seem to think this is your moment. Y