Hey, Ross here:
There’s been a lot of discussion about the labor market lately.
The unemployment rate has jumped to a four-year high…
And it seems like every week there’s new news about mass layoffs happening at some company or another.
I sympathize with those who are struggling. It’s tough out there.
But as traders, it’s important we understand how to use the environment – something we have zero control over – to our advantage.
So for today’s chart, let’s look at how these layoffs could impact stock prices.
Chart of the Day
This chart shows what effect a 1% savings in labor cost has in earnings across various sectors.
A 1X multiplier means a 1% reduction in labor costs translates into a 1% boost in earnings.
A 0.5X multiplier means that same cost cut only boosts earnings by 0.5%.
And a 5X multiplier means a 1% labor saving leads to a 5% jump in earnings.
As you can see, the highest multipliers are in the healthcare, staples, and consumer discretionary sectors.
Meanwhile, technology – the sector most associated with headline-grabbing layoffs – actually has a below-average earnings impact from labor cuts.
Why is this important you ask?
I explain in the Insight of the Day below.
Insight of the Day
If you understand which sectors benefit most from job cuts, you can spot opportunities before the market fully prices them in.
Remember, stock prices are ultimately a multiple of earnings.
And as you’ve seen above, depending on the sector, job cuts can have an outsized – or undersized – effect on earnings.
But when companies announce layoffs, the market usually reacts after the headlines hit.
Inside the company, however, those decisions aren’t sudden.
Layoffs are typically planned well in advance – modeled, debated, approved, and timed based on how they’re expected to affect costs and earnings.
And the people closest to those decisions? The executives and board members.
In other words, the corporate insiders.
And not only are they aware of how job cuts will impact earnings…
They’re often the ones deciding when and how those cuts happen.
And to top it off, thanks to an SEC loophole…
They can legally act on that knowledge by buying shares of their own company before the earnings impact becomes obvious to the rest of the market.
That’s why insider buying around periods of cost-cutting can be so powerful.
Why following the insiders could have led you to trades with gains like 115% in less than 60 days…
168% in five months…
234% in eight weeks…
And even 1,787% in just two years.
And it’s also why in just a few hours at 1 p.m. Eastern later today…
I’m going LIVE to break down exactly how to follow these insider trades for yourself.
I’ll reveal:
- Where to find real-time insider trade disclosures before the media notices
- How to identify the highest-conviction insider buys worth following
- The 3 most powerful (and counterintuitive) insider buying signals I’ve used to beat the market year after year
My insider strategy breakdown is free to attend…
But you do need to click here to lock in your spot if you haven’t already.
So go ahead and do that now…
And I’ll see you in just a bit at 1 p.m. ET sharp.
Customer Story of the Day
“Ross has a gift for teaching!
He makes what has always been a mysterious and overwhelming topic for me simple to understand with great presentation!”
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
