The Greater the "Tariff Tantrum," the Higher This Stock Will Soar

You’ve heard me say it here — repeatedly.

A “DraftKings Gambling Mindset” has infected the financial markets …

Investing has given way to trading. Stocks have given way to options. And wins have given way to losses … strings of losses.

Retail investors are the latest victims and have been infected badly.

As the old aphorism tells us: “When it Comes to Gambling, the House Always Wins.”

But there is a cure …

First, Wealth Builders invest. Wealth Killers trade.

So … invest … don’t gamble.

Even better: Why not win, while everyone else loses?

If we know that, when it comes to gambling “The House” always wins …

Skip gambling … and own “The House.”

In the financial markets, CBOE Global Markets Inc $CBOE ( ▲ 0.43% )  is “The House.” It’s the market leader in transactions volume (see chart below).

And when markets get bad — as we’ve seen from the “Tariff Wipeout” of the last few weeks — trading volumes soar.

As Barron’s writer Andrew Bary recently said, that’s turned CBOE into “the most defensive stock in the S&P 500.”

And as I’ll show you here today, the changes we’re seeing are here to stay.

That’s turning CBOE into the “Ultimate All-Weather Stock.”

And a company you need to “Accumulate” for the long haul.

Trading Volumes Soar 

Check out this headline about Goldman Sachs Group Inc. $GS ( ▼ 0.09% ) , a company I said would find a way to do well (one way or another) during this second Trump Administration.

Goldman on Monday said its stock-trading revenue zoomed 27% to a record $4.19 billion in the first quarter. That follows similar reports last week from Goldman peers JPMorgan Chase & Co. $JPM ( ▼ 0.45% )  and Morgan Stanley $MS ( ▲ 0.36% ), which saw trading revenue zoom 45% and 48%, respectively.

And it follows 2024, when Goldman said full-year stock-trading revenue zoomed a full 50%.

With trading like that, all roads to victory lead through exchanges — like CBOE.

Because it’s not just stocks … it’s also options … and all sorts of new financial “products.”

And some are both.

Just this week, CBOE said it “launched for trading” a so-called S&P 500 Equal Weight Index (EWI) options.

When Catherine Clay, head of CBOE’s global-derivatives business, talked about the launch, she hit all the “hot buttons” I mentioned to you.

“As investors turn to options at record levels to help manage U.S. equity market exposure and volatility, we are pleased to expand our S&P product suite with [this] launch,” Clay said Monday. "Investors are increasingly seeking to gain more balanced exposure across the market, and with the indexing expertise of S&P Dow Jones Indices and demand for the capitalization-weighted SPX options, the S&P 500 Equal Weight Index is ideally suited to underlie these new options."

With that kind of “institutional tailwind” (direct-and-innovative pushes), it’s no surprise options trading has soared.

Last year, nearly 10.2 billion equity options contracts were traded on U.S. exchanges — setting a new record. And (as ill-advised as I believe it to be) lots of this growth is being driven by retail investors, who accounted for 29% of U.S. options activity as of September, the most-recent data available.

Take a look …

CBOE’s Stock Price Could Zoom

We’ve been telling Stock Picker’s Corner (SPC) subscribers about CBOE since we launched this investing newsletter early last year.

The stock is up more than 11.1% year to date — while the S&P 500 is down nearly 8.1%.

That’s an “outperformance” of nearly 20%.

Over time, that’s the kind of relative performance that separates Wealth Builders from Wealth Killers — and can make you rich.

But others are finally getting wise to this company.

Also on Monday, Zacks Investment Research said it recently upgraded CBOE to a “Buy” — giving the stock its No. 2 numerical ranking (with No. 1 being “Strong Buy” stocks).

CBOE “could be a solid addition to your portfolio given its recent upgrade [to a Zacks “Buy”],” the investment researcher wrote. “This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.”

We’ll get a look at CBOE’s first-quarter earnings on May 2.

And that brings us to a kind of basic “Wealth Builder 101” formula: Rising revenue (from rising trading) will lead to rising earnings … which leads to a rising stock price.

Bank of America Analyst Craig Siegenthaler just reiterated his own “Buy” rating on CBOE and boosted his target price from $251 to $260.

The increasingly uncertain macroeconomic and geopolitical backdrop produced “ideal conditions for trading across asset classes,” Siegenthaler wrote, explaining why he was boosting his earnings estimates for “market-structure” stocks.

Hitting that target would represent a 20% gain from its $217 share price.

And I see more from there in the years to come …

That makes CBOE an “Accumulate” stock – one you’ll want to own now, and add to on pullbacks.

To learn more, check out our full research report here.

See you next time;