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Post by Mustang on May 14, 2022 21:53:39 GMT
win1177 I'd like to be wrong, but fear that we're entering a 1970s style Bear Market. More than a bear market. With the government believing that distributing more money to individuals, which will stimulate demand, and thinking it should put higher taxes on companies ,which they just transfer to the customers, we are going to have a bear market and spiraling inflation. Perhaps even double-digit inflation since the producer price index is 11%. Its deja vu all over again - Yogi Berra. |
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Post by Norbert on May 15, 2022 4:15:51 GMT
I took a quick look at CDC and see that it's had comparable returns to SCHD, with somewhat lower volatility. Apparently CDC reduces equity exposure during downturns, but I didn't spot an explanation for its rules. |
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Post by anitya on May 17, 2022 6:37:53 GMT
Nice last hour recovery for the S&P to hold 3900. Yes, The strong close is indicative of having reached a support level which should help the major indexes consolidate their losses here before moving lower. Where is the immediate resistance level? Will tell us how far up the current bounce (bear market rally, dead cat bounce, whatever one would like to call) can go. |
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Post by uncleharley on May 17, 2022 12:37:10 GMT
Yes, The strong close is indicative of having reached a support level which should help the major indexes consolidate their losses here before moving lower. Where is the immediate resistance level? Will tell us how far up the current bounce (bear market rally, dead cat bounce, whatever one would like to call) can go. The 1 and 2 hr intraday charts indicate resistance at 4025, just above yesterdays close at 4008. if that level fails we could see a countertrend rally to 4175 or so. That is on the S&P 500 chart. |
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Post by anitya on May 17, 2022 16:40:35 GMT
Where is the immediate resistance level? Will tell us how far up the current bounce (bear market rally, dead cat bounce, whatever one would like to call) can go. The 1 and 2 hr intraday charts indicate resistance at 4025, just above yesterdays close at 4008. if that level fails we could see a countertrend rally to 4175 or so. That is on the S&P 500 chart. Thanks, UH. That is another 2.5% from current level of 4060. |
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Post by richardsok on May 18, 2022 13:02:31 GMT
THIS FROM POWELL (NYT excerpts) ---
"If we have to go past neutral, we won't hesitate," Federal Reserve Chair Jerome Powell reiterated Tuesday, without saying what the neutral interest rate is; the point at which interest rates neither boost nor hinder economic growth. "We need clear and convincing evidence that inflation is coming down" before the Fed slows its pace of rate increases"
"The underlying strength of the U.S. economy is really good right now. The U.S. economy is strong, the labor market is extremely strong. It is still at very healthy levels. Retail sales numbers, the economy is strong. Consumer balance sheets are healthy. Businesses are healthy. The banks are well-capitalized. This is a strong economy. We think it is well-positioned to withstand less accommodative monetary policy and tighter monetary policy. Of course, we do monitor global events, and global events have been important to our economy. The war in Ukraine ... has upset the global commodity picture, while also threatening the global world more broadly."
"As a policymaker.... we are raising rates expeditiously to what we have been seeing is a more normal level, which is something that we will reach maybe in the fourth quarter. But it is not a stopping point. It is not a looking around point. We don’t know with any confidence where neutral is. We don’t know where tightening is. We just know in this market, higher inflation and very strong growth. What we are going to be looking at, meeting by meeting, data reading by data reading, is what is happening in the financial conditions, what is happening with the economy."
"Monetary policy works through expectations," he added.
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The guy sure talks a good game, IMO. Can't find a thing to criticize. Now to watch what he does and how markets react ahead.
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Post by fritzo489 on May 18, 2022 14:27:46 GMT
Here is what caught my eye. "Retail sales numbers, the economy is strong" What I'm reading today TGT & WAL sales down !
I hope I have the ticker right.
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Post by xray on May 31, 2022 18:51:58 GMT
richardsok, CAPL Still waiting for Qtrly Report due out 5/9 Meanwhile while waiting: Zacks Is CrossAmerica Partners (CAPL) a Great Value Stock Right Now? Zacks Equity Research Tue, May 31, 2022, 9:40 AM In this article: CAPL +2.08% While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies. Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks. Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now. CrossAmerica Partners (CAPL) is a stock many investors are watching right now. CAPL is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CAPL has a P/S ratio of 0.21. This compares to its industry's average P/S of 0.26. Finally, our model also underscores that CAPL has a P/CF ratio of 7.44. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. CAPL's P/CF compares to its industry's average P/CF of 8.66. Within the past 12 months, CAPL's P/CF has been as high as 9.37 and as low as 6.28, with a median of 7.46. ---------- Comment: Some of us " NEVER" like to hold securities with delays in reporting their Quarterly reports (which can be negative in the delay --- hopefully not).... Live Long and Prosper....
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Post by richardsok on Jun 2, 2022 13:11:41 GMT
I picked up this excerpt from this morning's Barron's ------
Fresh data on manufacturing and jobs on Wednesday emphasized continued inflationary pressure. A tight labor market produced 11.4 million job openings in April, meeting expectations but still near record levels as demand for workers exceeds the number of unemployed people.
The Institute for Supply Management’s manufacturing index .... indicates manufacturers are seeing strong demand despite rising interest rates. In addition, 4.4 million people quit their jobs in April even as wages rose.
JPMorgan Chase CEO Jamie Dimon warned people to “brace” for an economic hurricane, as Federal Reserve efforts to combat inflation by raising rates and the uncertainty of Russia’s war in Ukraine cloud the outlook. “That hurricane is right out there down the road coming our way.”
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Post by xray on Jun 2, 2022 19:02:48 GMT
richardsok, Your: I picked up this excerpt from this morning's Barron's ------ Fresh data on manufacturing and jobs on Wednesday emphasized continued inflationary pressure. A tight labor market produced 11.4 million job openings in April, meeting expectations but still near record levels as demand for workers exceeds the number of unemployed people. The Institute for Supply Management’s manufacturing index .... indicates manufacturers are seeing strong demand despite rising interest rates. In addition, 4.4 million people quit their jobs in April even as wages rose. JPMorgan Chase CEO Jamie Dimon warned people to “brace” for an economic hurricane, as Federal Reserve efforts to combat inflation by raising rates and the uncertainty of Russia’s war in Ukraine cloud the outlook. “That hurricane is right out there down the road coming our way.” ---------- My current data does not currently show this and they are (of course) looking forward (what the market always does). Appears to be a (CYA) cover for their previous positive announcements. I noticed that Mr Dimon said (in his warning statement) stated that that their customers have been covered. Obviously they appear to want the market to go lower.... Bottom line, always keep some cash on the sidelines to take advantage of the hurricane (if it hits home).... Live Long and Prosper....
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Post by xray on Jun 12, 2022 15:35:11 GMT
Reference My:
My current data does not currently show this and they are (of course) looking forward (what the market always does). Appears to be a (CYA) cover for their previous positive announcements. I noticed that Mr Dimon said (in his warning statement) stated that that their customers have been covered. Obviously they appear to want the market to go lower....
Bottom line, always keep some cash on the sidelines to take advantage of the hurricane (if it hits home)....
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My current analysis data shows a lower MktPrc market but does not reflect the market in general. 87% of the general market is doing well even with the market decline this past week....
Bottom line, always keep some cash on the sidelines to take advantage of the hurricane (if it hits home)....
Live Long and Prosper....
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Post by xray on Jun 22, 2022 16:53:22 GMT
Something to think about....
Many securities pay their dividends and distributions "QUARTERLY" (in March, June, September, and December of each year). EOY's (end of year "extra" payouts) are declared in either November or December. With that said....
When we buy or sell a security, we should "always" look at the x-div dates to capture the dividend (if possible). When buying, this may give us a "extra" dividend (for those securities currently going x-div next week for a example). This can be extremely important if "insiders" are currently buying/selling....
Live Long and Prosper....
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Post by xray on Jun 23, 2022 16:27:04 GMT
Zacks
Offset Some Inflation Impact With 5 Energy Pipeline Buys
Nilanjan Choudhury
Thu, June 23, 2022, 7:58 AM
Wall Street has been reeling under extreme volatility since the beginning of 2022. Investors are highly concerned about soaring inflation. While an aggressive Federal Reserve is trying to get things under control by hiking the interest rate (already a record-high 75 basis points in June and possibly the same in July), it continues to rage on and is now at a fresh 40-year high.
For investors, who have seen their holdings erode amid the price rise, one of the key themes is to use the energy pipeline space to wade through this period of macro volatility. In this context, investing in the likes of Sunoco LP SUN, Enterprise Products Partners L.P. EPD, Delek Logistics Partners, LP DKL, Global Partners LP GLP and CrossAmerica Partners LP CAPL might offer some respite to investors.
Inflation Affects Purchasing Power
In the United States, several measures of inflation are currently at the 40-year high levels. The outbreak of coronavirus has significantly devastated the global supply-chain system in the last two years. Input costs have soared for businesses, while wages have gone up owing to the shortage of labor. At the same time, strong pent-up demand, supported by massive personal savings during this period, has resulted in soaring prices.
Market participants are highly concerned that inflation will remain elevated in the near term. At present, the lingering war between Russia and Ukraine is the biggest threat to the global economy. As long as this war continues, the chances are bleak that we will get rid of the soaring inflation.
While the cost of going to the supermarket or ordering meals from restaurants has clearly spiked for consumers, another worrying side effect of inflation is that it eats into the returns generated by financial instruments such as equities and bonds by eroding their value.
Allaying Inflation Concerns
A particular asset class that possesses attributes to combat the value destruction from inflation is energy midstream. These entities typically operate transportation services, storage facilities and refined products' terminals. They are often structured as Master limited partnerships (or MLPs), which differ from regular stocks since interests in them are referred to as units, and unitholders (not shareholders) are partners in the business. Importantly, these low-risk hybrid entities bring together the tax benefits of a limited partnership with the liquidity of publicly traded securities that earn a stable income.
Let’s check out the underlying rationale for owning midstream companies during periods of rising consumer prices
Midstream to the Rescue
Inflation Indexation: A salient feature of these entities is that the bulk of their cash flows are under long-term, fee-based contracts, which are indexed to inflation. In other words, midstream operators fix tariff rates in accordance with FERC regulations tied to the Producer Price Index — a measure of changes in prices covering a host of goods and services. Consequently, pipelines can pass on at least a portion of the higher costs to customers.
Real Assets: The properties that these entities own are mostly pipelines and storage facilities, or infrastructure systems that help in moving oil and natural gas. Unlike stocks and bonds, midstream firms own real (physical) assets that do not derive their value from a contractual right. Their intrinsic worth has been historically proven to outperform traditional stock and bond instruments in years when inflation is high. That is because the economy is healthier and demand for real assets rises.
Distribution Growth: Apart from defensive characteristics, investors are typically attracted to MLPs for their reliable distributions. Adjusting costs with the prevailing business activity, the partnerships have focused on the generation of free cash flow (post distribution payment) to lower debt and strengthen their financial position. The growing free cash flows could be used to boost investor returns through buybacks and distribution hikes. Finally, the distribution growth, which often ranges in double digits, can also help investors to offset some of the impacts of high inflation.
5 Pipeline Choices
To guide investors to the right picks, we highlight four pipeline firms that carry a Zacks Rank of #1 (Strong Buy) or 2 (Buy). The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sunoco LP: Sunoco participates in the transportation and supply phase of the U.S. petroleum market across a number of states. It also focuses on motor fuel distribution to convenience stores, independent dealers and commercial customers.
SUN pays out 82.55 cents quarterly distribution ($3.302 per unit annually), which gives it an 8.9% yield at the current unit price. Sunoco beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters, the average being 51.6%. Valued at around $3.7 billion, Zacks Rank #1 SUN has lost some 1.9% in a year.
Enterprise Products Partners L.P.: This leading energy infrastructure firm boasts an extensive network of pipelines that spreads more than 50,000 miles and connects to every major U.S. shale play. Almost 80% of its pipeline contracts with shippers have been extended for 15-20 years, which will help EPD generate steady cash flow for unitholders.
The Zacks #1 Ranked partnership has an expected earnings growth rate of 14.3% for the current year. Enterprise Products Partners pays out a 46.5-cent quarterly distribution ($1.86 per unit annually), which gives it a 7.7% yield at the current unit price. EPD units have edged up 0.3% in a year.
Delek Logistics Partners, LP: The firm is engaged in the gathering, transportation, storage and distribution of crude oil, intermediate products, feedstocks and refined products, and is also into wholesale marketing.
DKL pays out 98 cents quarterly distribution ($3.92 per unit annually), which gives it an 8.5% yield at the current unit price. Delek Logistics beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters, the average being 1.3%. Valued at around $2 billion, #1 Ranked DKL has gained some 9.1% in a year.
Global Partners LP: GLP is a vertically integrated energy partnership focused on the distribution of gasoline, distillates, residual oil and renewable fuels, apart from owning several refined-petroleum-product terminals. Unlike most energy operators, which maintained their payout through the coronavirus-induced downturn, Global Partners is among the minority that continued to increase distributions.
The gasoline station and convenience store operator has an expected earnings growth rate of 163.4% for the current year. GLP pays out 59.50 cents quarterly distribution ($2.38 per unit annually), which gives it a 10.4% yield at the current unit price.
CrossAmerica Partners LP: Wholesale distributor of motor fuels CrossAmerica Partners’ variable rate margins helped it offset the loss in volumes during the pandemic. Further, CAPL’s recent acquisitions of retail and wholesale assets provide it with a wider reach and scale.
The 2022 Zacks Consensus Estimate for this Allentown, PA-based firm indicates 64.9% year-over-year earnings per unit growth. CrossAmerica Partners beat the Zacks Consensus Estimate for earnings in two of the last four quarters. The Zacks Rank #2 stock has a trailing four-quarter earnings surprise of roughly 8.7%, on average. CAPL shares have moved up a modest 1.3% in a year.
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Disclosure: Some of us continue to have maximum positions in both GLP and CAPL in our portfolio's....
Live Long and Prosper....
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Post by richardsok on Jun 23, 2022 22:41:45 GMT
X--
Have no beef with any of the stocks you cite, but point out it's not difficult to find closed end fund MLPs now at 10-20% discounts without the K-1 tax complications.
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Post by xray on Jul 13, 2022 14:40:50 GMT
SmartAsset
Just Accept It, You Can't Time the Market: Do This Instead During Market Volatility
Mike Obel
Tue, July 12, 2022, 4:56 PM
The war in Ukraine, ongoing Covid concerns, market volatility and the threat of a recession are enough to make even seasoned investors anxious – particularly about how much of their portfolio is in stocks. Amid all the stress, including about current and prospective events, the stability of fixed-income securities or even cash can start to look more attractive than equities. Consider working with a financial advisor as you build a long-term investing plan and asset allocation.
What Is Market Timing?
Market timing, which is the opposite of a buy-and-hold strategy, is buying or selling because you expect a specific change in the price of a stock or value of an index. If you think the stock will go up you might plan a sale. If you think the stock will go down, you might sell immediately. By contrast if you think the stock will go down you might plan a buy order, while if you expect it to go up you might buy immediately. It is a form of active management.
In all cases, market timing is based on price volatility. While issues such as asset fundamentals and financial planning might play a role in your decision making, they are simply elements of a decision that revolves around anticipated changes to the price. The goal of market timing is to turn these predictions into a profit. By timing your purchases and sales you can – or hope you can – move before the market does and collect the profits.
The Awful Track Record of Market Timing
Numerous research studies by disinterested parties demonstrate the failures of market timing.
To pull just a few examples:
A study by Merrill Lynch found that model portfolios over a 30-year period could underperform by nearly half their value through market timing.
Charles Schwab tells us that their "research shows that the cost of waiting for the perfect moment to invest exceeds the benefit of even perfect timing. And because timing the market perfectly is, well, about as likely as winning the lottery, the best strategy for most of us mere mortal investors is not to try to market-time at all."
A survey by Putnam Investments found that market timers who miss just 10 days in the market could lose up to half the value of their portfolio. Their model found that getting it wrong by no more than a month was the difference between $6,873 in returns and $30,711.
Why Market Timing Usually Fails
There are several reasons market timing usually fails. One reason is that very few can consistently predict short-term market movements. That goes for spotting a decline before it starts as well as knowing when the market will rebound. The decision to reduce stock exposure, moving these assets into money market investments or cash, not only means anticipating when to exit the market, but choosing when to reenter the market as well, Judity Ward and Roger Young of T. Rowe Price wrote in a recent article. In other words, it requires two acts of successful market timing.
Consider the illustration from T. Rowe Price.
This chart tracks two hypothetical investors, each one of which deposited $2,000 per month into their investment accounts. One investor maintained a steady asset allocation while the other, who let anxiety influence investing decisions, jumped in and out of 3-month Treasurys as cash equivalents whenever stocks dropped 10% or more in a quarter. Obviously, over time the "steady" investor did vastly better than the "anxious" investor.
Another reason market timing exacts such a high price on investors is that over time stocks provide more reliable capital appreciation than bonds. So dumping them because they have lost value or because you expect them to lose value forecloses the possibility of profiting from that capital appreciation.
Alternatives to Market Timing
What to do instead of attempting to time the market depends on what your main concerns are.
If your main concern is having enough cash to live on then it makes sense to build up enough savings to cover two years. This is especially applicable to those nearing retirement or already retired.
If your main concern is getting protection against a major downturn in the stock market, then maintaining or modestly boosting your allocation of bonds makes sense.
If your main concern is missing out on a market rebound, consider investing a little at a time by gradually purchasing stocks. You don't have to time it perfectly. Research by the T. Rowe Price investment team shows that rebalancing into stocks during a downturn historically improved results over the subsequent year, even if that adjustment was made a few months before or after the official market bottom.
Bottom Line
It can be tempting to fantasize about being just one perfectly timed pair of trades away from a seven-figure net worth. The catch is that "perfectly timed" part. Fact is, in times of market volatility, it's impossible to know when it may end. Investors who feel a strategy change is in order could consider gradual adjustments. They could also wait until the volatility subsides to make wholesale shifts to their strategy. What you shouldn't do is fall for the siren song of market timing. You could spend thousands on hot-tip newsletters or financial web site subscriptions, each promising sure-fire tips for market timing. However, the only people making any money off those tips are the people who sell them.
Tips on Investing
Healthcare dangers, foreign wars and a looming recession can tempt you to change your asset allocation suddenly and dramatically. But there's a big risk in that. A financial advisor can help you approach investing decisions rationally – rather than emotionally. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
Determine how your money will grow over time with this free investment calculator from SmartAsset.
Live Long and Prosper....
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Post by Deleted on Jul 13, 2022 22:00:43 GMT
That is a great post x-ray. I have been very tempted to do some things outside my plan and have to keep reminding myself of emotion vs logic in investing.
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Post by Norbert on Jul 14, 2022 14:07:30 GMT
As posted in another thread:
"I can't predict what the market will do, but I can differentiate good prices and bad prices; and I can distinguish friendly investment climates from unfriendly investment climates. Early 2022 saw bad prices and the end of "easy money" / ZIRP, so I went to a high cash position. Staying in stocks or bonds would have compounded the negative hit from inflation."
Trading in and out of stocks based on emotions is clearly not a good idea. But, staying fully invested in all market environments based on a pre-conceived "plan" might not be optimal either.
To repeat, I agree that predicting market actions is super challenging, but think that identifying value (or the lack of it) is doable.
A relevant anecdote. For years I had fantasized about owning a Greek island vacation home. I certainly didn't predict the 2015 crash, which saw prices collapse by 50%. But, I did see the value once the collapse had occurred, and acted.
That's what I call "market timing".
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I think we may be observing the endgame following many years of financial experimentation: Central Bank QE and devil-may-care, bipartisan fiscal deficits. A 30-year period of falling rates has ended with the arrival of inflation, all compounded by Covid and the Russian reaction to American hegemony in Europe.
It's potentially a big deal, though so far just a typical correction.
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Post by retiredat48 on Jul 14, 2022 22:12:47 GMT
Sorry to say, but I have read hundreds of threads and articles that no one can time anything. And I am rather sympathetic that timing, undertaken to their definitions, and the results...especially for individual stock fund purchases, is poor.
But for retirees (and Sara when you get to retirement), consider this. The article gave one option as this "If your main concern is having enough cash to live on then it makes sense to build up enough savings to cover two years. This is especially applicable to those nearing retirement or already retired."
But there's a problem here. OK, you adopt this, having two years in safe relatively short term bond funds/money market funds. Two years goes by, and you have used up this bucket. Now what?? If you are a retiree living off of RMDs you also have an annual issue.
Fact is, you need to do some market timing every year. Do you sell anything from the equity side, or not? If you never do you will be completely imbalanced.
So developing some timing methods as to when to sell (or buy) stock and bond funds in your IRA, becomes worthwhile in maximizing this annual effort...IMO. (Disclosure: I also use a hedge, PSTIX, a fund that moves inverse the market direction, thus neutralizing (freezing) some stock equity percentages, at a fixed point, with no further price gains, up or down. )
For those who can live solely on dividends and income, this is not such an issue. But for me, who lived on IRA withdrawals for last 30 years, such timing is mandatory...not an option. So I developed strategies to maximize this. I think overall it has worked...as my IRAs have grown in size, not declined.
R48
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Post by Deleted on Jul 14, 2022 22:38:56 GMT
R48 - I don't advocate having just 2 years cash on hand as a sole fallback to avoid selling stocks. I have 10 years in my present plan and could go to 5. Then I have my income from investments which I could live off alone. I must tip my hat to you as your plan worked for you. I think most who have a sensible plan will do fine.
Timing - we have gone round on this. Those articles are talking about people who try and time tops and bottoms to reap short term profits. Figuring out the most advantageous sale given needs, circumstances, is why you don't need an advisor to do it for you. That is not what those articles are talking about. I think you are taking note the articles aren't describing retirees though.
People who went to cash - I am pretty sure no one in this group will suffer tragedy no matter what they do. I'm not concerned to a point I would do that - sell.. There is no need in my circumstances. If i were retired and hadn't been planning for my particular circumstances, maybe I would. I have enough problems buying stocks at fair prices in my course of normal investing, so have zero faith I would know when to come back in. I don't know of any fantastic market timers of any type by the way. Do you?
X-rays post is a very good reminder to me to have a plan and keep emotion in check.
We are going to be able to have a post-mortem after all this settles. Might be 4 months or 2 years. I will be very interested to share lessons learned.
Edit - 2 years - I think that is setting a minimum bar to avoid selling at the worse times. It sounds bucket like. Usually there is not only risky equities to back that up. Portfolio strategy 101. I would be comfortable with dividend stocks as a backup as well to 2 years cash.
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Post by Chahta on Aug 10, 2022 11:29:30 GMT
A combo of dividends and saved "cash" from bonds and stocks. Cash can come from rebalancing and strategic sales. Not all RMDs are taken "in kind."
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Post by xray on Aug 10, 2022 17:54:54 GMT
Business Insider
History shows the bear market is almost over as length of most declines are typically 21% of the prior bull run, Fundstrat says
Matthew Fox
Wed, August 10, 2022, 12:06 PM
The bear market in stocks is nearing its end as the duration matches historical declines, Fundstrat's Tom Lee said. He believes the "buy the dip" regime has returned to the stock market and that the low is in. The prior bull market from March 2020 to January 2022 was short, so "makes sense should be a short bear market," Lee said.
The bear market in stocks is almost over, according to Fundstrat's Tom Lee, who told clients in a Wednesday note the odds are high that the bottom is in and a "buy the dip" regime has returned. Lee's confidence in his call that the bear market is essentially over is based on prior bear market declines and the fact that they are ultimately retracements of prior bull market runs. "A bear market is [an] unwinding [of] the prior gains," he said.
Fundstrat found that since 1942, the median duration of a bear market is 21% of the length of its prior bull market run, while the average is 31%. Meanwhile, the last bull market from March 2020 to January 2022 was 651 days long, while the current bear market in stocks has been 164 days long, or 25% of the prior bull market run. "Many investors think 'more time' is needed for this bear market. But given the shortness of the preceding bull market of 651 days versus [the] median [bull market of] 1,309 days, the corresponding bear market should also be shorter," Lee said.
That, combined with Lee's view that the stock market already experienced its fundamental capitulation in mid-June, means a "buy the dip" regime is back and it's likely to generate strong returns for investors going forward.
When more than 54% of S&P 500 stocks fall more than 20% from their 52-week highs, the forward returns are very strong. This criteria was hit on June 17, when 73% of S&P 500 stocks were down more than 20% from their record highs.
"In 3-month, 6-month and 12-month, the best decile for returns is when this figure is oversold [greater than] 54%, hence, buy the dip regime is in force," Lee said. Those forward returns stood at 7.6%, 11.3%, and 20%, respectively, with a positive win ratio of at least 73%.
"In our conversations [with clients], most cite the fundamental risks: inflation is still high, recession is still coming, EPS downgrades coming, too short to be a proper bear, Fed still hiking. While many cite this, look at how well stocks are reacting to incoming news," Lee said.
"If investors are bracing for the worst, bad news itself has less impact, argues to 'buy the dip.'" Read the original article on Business Insider
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Comment: Looking at todays move "UP" by the markets. it is apparent buying is continuing. However, always however's, looking at CEF's, the market has taken off in MktPrc's but is "totally lagging" in NAV's which indicates (to me at least) that market on the sidelines is coming back into the market (and creating "Premiums in NAV's for the short term going forward) There are some very good CapGains currently to be taken in the market at the current time....
Live Long and Prosper....
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Post by xray on Nov 2, 2022 20:27:15 GMT
Appears (Fed announcement on 75bps) some traders and investors will be in a trading pattern for a while. Some securities will provide "opportunity" for CapGains playing the "range game" (GLP a good example of this IMHO)....
Since some investors at 50% cash and currently 50% invested currently, most any new news announcements will furnish little surprises going forward....
Live Long and Prosper....
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Post by xray on Nov 7, 2022 22:48:20 GMT
PR Newswire
FS KKR Capital Corp. Announces Third Quarter 2022 Results, Declares Total Fourth Quarter 2022 Distribution of $0.68 per share
Mon, November 7, 2022, 4:15 PM
FSK
+2.36%
PHILADELPHIA and NEW YORK, Nov. 7, 2022 /PRNewswire/ -- FS KKR Capital Corp. (NYSE: FSK), today announced its financial and operating results for the quarter ended September 30, 2022, and that its board of directors has declared a fourth quarter 2022 distribution totaling $0.68 per share.
Financial and Operating Highlights for the Quarter Ended September 30, 2022(1)
Net investment income of $0.76 per share, compared to $0.71 per share for the quarter ended June 30, 2022
Net asset value of $25.30 per share, compared to $26.41 per share as of June 30, 2022
Total net realized and unrealized loss of $1.21 per share, compared to a total net realized and unrealized loss of $0.96 per share for the quarter ended June 30, 2022
Total purchases of $907 million versus $951 million of sales and repayments, including $300 million of sales to its joint venture Credit Opportunities Partners JV, LLC
Net debt to equity ratio(3) as of September 30, 2022 was 119%, compared to 115% as of June 30, 2022
Paid cash distributions to stockholders totaling $0.67 per share(4)
"FSK again delivered strong earnings during the third quarter as our adjusted net investment income of $0.73 per share increased 9.0% sequentially," said Michael C. Forman, Chief Executive Officer & Chairman. "As a result, we are pleased to announce a fourth quarter distribution totaling $0.68 per share, which consists of our base distribution of $0.61 per share coupled with a supplemental distribution of $0.07 per share. As we begin looking forward to 2023, I believe we are well positioned with respect to our strong capital structure, committed liquidity position, and floating rate-based investment portfolio, which is poised to continue benefiting from rising interest rates."
Declaration of Distribution for Fourth Quarter 2022
FSK's board of directors has declared a total cash distribution for the fourth quarter of $0.68 per share, consisting of a base distribution of $0.61 per share and a supplemental distribution of $0.07 per share, which will be paid on or about January 3, 2023 to stockholders of record as of the close of business on December 14, 2022.
Portfolio Highlights as of September 30, 2022
Total fair value of investments was $15.8 billion of which 71% was invested in senior secured securities.
Weighted average annual yield on accruing debt investments(5) was 11.1%, compared to 9.9% as of June 30, 2022. Excluding the impact of merger accounting, weighted average annual yield on accruing debt investments was 10.4%, compared to 9.2% as of June 30, 2022. Weighted average annual yield on all debt investments(5) was 10.3%, compared to 9.3% as of June 30, 2022. Excluding the impact of merger accounting, weighted average annual yield on all debt investments was 9.7%, compared to 8.6% as of June 30, 2022.
Exposure to the top ten largest portfolio companies by fair value was 19% as of September 30, 2022, compared to 18% as of June 30, 2022. As of September 30, 2022, investments on non-accrual status represented 2.5% and 5.0% of the total investment portfolio at fair value and amortized cost, respectively, compared to 2.9% and 4.9% as of June 30, 2022.
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Live Long and Prosper....
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Post by xray on Nov 7, 2022 23:00:04 GMT
GlobeNewswire
CrossAmerica Partners LP Reports Third Quarter 2022 Results
Mon, November 7, 2022, 4:15 PM
CAPL
+2.00%
Allentown, PA, Nov. 07, 2022 (GLOBE NEWSWIRE) --
CrossAmerica Partners LP Reports Third Quarter 2022 Results
-Reported Third Quarter 2022 Operating Income of $39.6 million and Net Income of $27.6 million compared to Operating Income of $12.6 million and Net Income of $8.9 million for the Third Quarter 2021
-Generated Third Quarter 2022 Adjusted EBITDA of $62.2 million and Distributable Cash Flow of $50.9 million compared to Third Quarter 2021 Adjusted EBITDA of $35.9 million and Distributable Cash Flow of $30.4 million
-Reported Third Quarter 2022 Gross Profit for the Wholesale Segment of $56.8 million compared to $48.2 million of Gross Profit for the Third Quarter 2021 and Third Quarter 2022 Gross Profit for the Retail Segment of $56.3 million compared to $27.9 million of Gross Profit for the Third Quarter 2021
-Distributed 338.1 million wholesale fuel gallons during the Third Quarter 2022 at an average wholesale fuel margin per gallon of 12.5 cents compared to 354.6 million wholesale fuel gallons at an average wholesale fuel margin per gallon of 9.6 cents during the Third Quarter 2021, a decrease of 5% in gallons distributed and an increase of 30% in margin per gallon
-Leverage, as defined in the CAPL Credit Facility, which excludes any pro forma EBITDA from CrossAmerica’s recently announced acquisition of assets from Community Service Stations, Inc., was 3.9 times as of September 30, 2022, compared to 5.1 times as of December 31, 2021
The Distribution Coverage Ratio was 2.55 times for the three months ended September 30, 2022 and 1.74 times for the trailing twelve months ended September 30, 2022
The Board of Directors of CrossAmerica’s General Partner declared a quarterly distribution of $0.5250 per limited partner unit attributable to the Third Quarter 2022
“Our financial results for the quarter were exceptionally strong, as reflected in our Adjusted EBITDA and ending leverage for the quarter,” said Charles Nifong, President and CEO of CrossAmerica. “Our results also illustrate the enduring strength of our underlying business as we continue to provide strong results despite high fuel prices, inflation, and other economic challenges. Our pending acquisition, which we announced during the quarter, is highly complementary to our existing business and we expect it to be immediately accretive to our financial results.”
Third Quarter Results
Consolidated Results
Key Operating Metrics
Q3 2022
Q3 2021
Operating Income
$39.6M
$12.6M
Adjusted EBITDA
$62.2M
$35.9M
Distributable Cash Flow
$50.9M
$30.4M
Distribution Coverage Ratio – Current Quarter
2.55x
1.53x
Distribution Coverage Ratio - TTM ended 9/30/22
1.74x
1.22x
CrossAmerica reported Operating Income of $39.6 million and Net Income of $27.6 million or earnings of $0.71 per diluted common unit for the third quarter 2022 compared to Operating Income of $12.6 million and Net Income of $8.9 million or earnings of $0.23 per diluted common unit during the same period of 2021. During the third quarter 2022, Adjusted EBITDA and Distributable Cash Flow increased by 73% and 67%, respectively, as compared to the third quarter 2021. Each metric, as well as the Distribution Coverage Ratio, benefited from the fuel gross profit performance in both the wholesale and retail segments, as well as the growth of the organization as a result of the acquisition of assets from 7-Eleven during the second half of 2021.
Non-GAAP measures used in this release include EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. These Non-GAAP measures are further described and reconciled to their most directly comparable GAAP measures in the Supplemental Disclosure Regarding Non-GAAP Financial Measures section of this release.
Wholesale Segment
Key Operating Metrics
Q3 2022
Q3 2021
Wholesale segment gross profit
$56.8M
$48.2M
Wholesale motor fuel gallons distributed
338.1M
354.6M
Average wholesale gross profit per gallon
$0.125
$0.096
During the third quarter 2022, CrossAmerica’s wholesale segment gross profit increased 18% compared to the third quarter 2021. This was driven by an increase in motor fuel gross profit resulting from a 30% increase in fuel margin per gallon, partially offset by a 5% decline in wholesale volume distributed. The Partnership’s wholesale fuel margin benefited from its ongoing execution of strategic initiatives, increased volume to CrossAmerica’s company operated retail sites and higher variable margins during the quarter. Higher wholesale variable margins were due to greater market volatility in the third quarter 2022 as compared to the third quarter 2021. CrossAmerica also benefited from higher terms discounts as a result of higher fuel prices during the quarter as compared to the same period in 2021. Wholesale volume distributed declined primarily due to lower volume in the CrossAmerica base business, partially offset from the acquisition of assets from 7-Eleven.
Retail Segment
Key Operating Metrics
Q3 2022
Q3 2021
Retail segment gross profit
$56.3M
$27.9M
Retail motor fuel gallons distributed
126.7M
110.5M
Same store retail motor fuel gallons distributed*
45.8M
49.5M
Motor fuel gross profit
$30.2M
$7.8M
Same store merchandise sales excluding cigs.*
$29.2M
$28.7M
Merchandise gross profit
$20.6M
$15.5M
Merchandise gross profit percentage
27.1%
26.7%
*Includes only company operated retail sites
For the third quarter 2022, the retail segment generated a 102% increase in gross profit compared to the third quarter 2021 due to increased retail fuel gallons sold, higher fuel margins and higher merchandise gross profit.
The retail segment sold 126.7 million of retail fuel gallons during the third quarter 2022, a 15% increase over the third quarter 2021. This increased volume resulted from the increase in company operated sites as a result of the acquisition of assets from 7-Eleven, which occurred primarily during the third quarter 2021. Same store fuel volume for the third quarter 2022 declined 7% from 49.5 million gallons during the third quarter 2021 to 45.8 million gallons. The retail segment generated $22.5 million of additional motor fuel gross profit for the three months ended September 30, 2022, as compared to the same period in 2021 due to greater total motor fuel gallons distributed and higher fuel margins per gallon.
CrossAmerica’s merchandise gross profit and other revenue increased due to the increase in company operated sites driven by the acquisition of assets from 7-Eleven, which occurred primarily during the third quarter 2021. Merchandise gross profit percentage increased from 26.7% to 27.1% with same store merchandise sales excluding cigarettes increasing approximately 2% for the third quarter 2022 when compared to the third quarter 2021.
Acquisition and Divestment Activity
On August 24, 2022, CrossAmerica entered into an Asset Purchase Agreement with Community Service Stations, Inc., pursuant to which the Partnership agreed to purchase certain assets from Community Service Stations, Inc. for a purchase price of $27.5 million plus working capital. The assets consist of wholesale fuel supply contracts to 39 dealer owned locations, 34 sub-wholesaler accounts and two commission locations (1 fee based and 1 lease).
The acquisition is subject to customary conditions to closing. CrossAmerica expects the transaction to close during the fourth quarter of 2022. It is anticipated that the acquisition will be financed with cash on hand and/or undrawn capacity under the CAPL Credit Facility.
During the three and nine months ended September 30, 2022, CrossAmerica sold one and ten properties for $0.2 million and $4.0 million in proceeds, resulting in net gains of an insignificant amount and $0.9 million, respectively.
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Live Long and Prosper....
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Post by ECE Prof on Nov 7, 2022 23:00:53 GMT
I used to own FSK (a BDC)—with high risk at the time. KKR also has a CEF, KIO. KIO was also my favorite. I sold FSK and bought ARCC, another BDC. I made 25% in about a year, and moved the cash to equity and lost now. But, life goes on. As interest rates go up, the leverage works best for the investors. You make more money with more leverage, not a surprise. But, more risky? Sure. Eventually, it will pay off. But, you should own good ones with high asset values. Do not go for flaky ones. NEWT was a highflyer with a big premium, and now, it is at a reasonable price because it is an equity type. There are several more good BDCs that could help you with monthly income. Now, I have settled with PDI and ECC. Enough.
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Post by xray on Nov 13, 2022 19:34:36 GMT
Bloomberg
The $24 Trillion Treasury World Suddenly Looks Less Dangerous
Liz Capo McCormick and Anchalee Worrachate
Sat, November 12, 2022, 4:00 PM
(Bloomberg) -- The historic bond selloff has wreaked havoc across global markets all year, while fueling a crisis of confidence in everything from the 60-40 portfolio complex to the world of Big Tech investing.
The latest US consumer price data suggest inflation may be cooling at long last, driving investors back to the asset class in droves on Thursday as traders pared bets on the Federal Reserve’s hawkishness. Another reason why this once-reliable safe haven appears safer than it has in a while: Even rising interest rates have less power to crush bond portfolios like they have over the past two years.
Just look at duration, which measures the sensitivity of bond prices to changes in yields. It’s a tried-and-tested gauge of risk and reward that guides all flavors of fixed-income investing -- and it’s fallen sharply this year.
With the Fed’s aggressive policy-tightening campaign this year pushing Treasury yields to around decade-highs, the margin of safety for anyone buying US debt right now has improved notably compared with the low-rate era, before the bull market collapsed in the inflationary aftermath of the pandemic.
Thanks to higher yields and coupon payments, simple bond math shows duration risk is lower, meaning a fresh selloff from here would inflict less pain for money managers. That’s a merciful prospect after two years of gut-wrenching losses on a scale largely unseen in the modern Wall Street era.
“Bonds are getting a bit less risky,” said Christian Mueller-Glissmann, head of asset allocation strategy at Goldman Sachs Group Inc., who shifted from underweight positions in bonds to neutral at the end of September. “The total volatility of bonds is likely to fall because you don’t have the same amount of duration, and that’s healthy. Net-net, bonds are becoming more investible.”
Consider the two-year Treasury note. Its yield would need to rise a whopping 233 basis points from before holders would actually incur a total-return loss over the coming year, primarily thanks to the cushion provided by beefy interest payments, according to analysis conducted by Bloomberg Intelligence strategist Ira Jersey.
With higher yields, the amount an investor is compensated for each unit of duration risk has risen. And it’s increased the bar before a further rise in yields creates a capital loss. Higher coupon payments and shorter maturities can also serve to reduce interest-rate risk. “The simple bond math of yields going up brings duration down,” said Dave Plecha, global head of fixed income at Dimensional Fund Advisors.
And take the Sherman ratio, an alternative measure of interest-rate risk named after DoubleLine Capital Deputy Chief Investment Officer Jeffrey Sherman. On the Bloomberg USAgg Index, it’s increased from 0.25 a year ago to 0.76 today. That means it would take an 76 basis-point rise in interest rates over one year to offset the yield of a bond. A year ago it would have taken just 25 basis points -- equivalent to a single regular-sized hike from the Fed.
All told a key measure of duration on the Bloomberg US Treasury index, which tracks roughly $10 trillion, has fallen from a record 7.4 to 6.1. That’s the least since around 2019. While a 50 basis-point rise in yields inflicted a more than $350 billion loss at the end of last year, today that same hit is a more modest $300 billion. That’s far from the all-clear, but it does reduce the downside risk for those wading back into Treasuries attracted to the income -- and the prospect that lower inflation or slowing growth will increase bond prices ahead.
After all, cooling US consumer prices for October offer hope that the biggest inflation shock in decades is easing, in what would be a welcome prospect for the US central bank when it meets next month to deliver a likely 50 basis-point increase in benchmark rates. Two-year Treasury yields surged this month to as high as 4.8% -- the most since 2007 -- yet plunged 25 basis points Thursday on the CPI report. The 10-year note yield, which now hovers around 3.81%, up from 1.51% at the end of 2021, also slid 35 basis points over the past week, which was shortened due to Friday’s Veteran’s Day holiday.
The counterpoint is that buying bonds is far from a slam-dunk trade given the continued uncertainty over the inflation trajectory while the Fed is threatening further aggressive rate increases. But the math does suggests investors are now somewhat better compensated for the risks across the curve. That, along with the darkening economic backdrop, is giving some managers the conviction to slowly rebuild their exposures from multi-year lows.
“We’ve been covering duration underweights,” said Iain Stealey, CIO for fixed income at JPMorgan Asset Management. “I don’t think we are completely out of the woods yet, but we are definitely closer to the peak in yields. We are significantly less underweight than we were.” And of course the recent rally suggests an asset class that’s fallen sharply out of favor over the past two years is finally turning the corner.
The defining narrative of 2023 will be “a worsening labor market, a low growth environment and moderating wages,” BMO strategist Benjamin Jeffery said on the firm’s Macro Horizons podcast. “All of that will reinforce this safe-haven dip-buying that we argue has started to materialize over the past few weeks.”
What to Watch
Economic calendar:
Nov. 15: Empire manufacturing; PPI; Bloomberg November US economic survey
Nov. 16: MBA mortgage applications; retail sales; import and export price index; industrial production; business inventories; NAHB housing index; TIC flows
Nov. 17: Housing starts/permits; Philadelphia Fed business outlook; weekly jobless claims; Kansas City Fed manufacturing
Nov. 18: Existing home sales; leading index
Fed calendar:
Nov. 14; Fed Vice Chair Lael Brainard; New York Fed President John Williams
Nov. 15: Philadelphia Fed President Patrick Harker; Fed Governor Lisa Cook; Fed Vice Chair for Supervision Michael Barr
Nov. 16; Williams delivers keynote remarks at the 2022 US Treasury market Conference; Barr; Fed Governor Christopher Waller;
Nov. 17: St. Louis Fed President James Bullard; Fed Governor Michelle Bowman; Cleveland Fed President Loretta Mester; Fed Governor Philip Jefferson; Minneapolis Fed President Neel Kashkari
Auction calendar:
Nov. 14: 13- and 26-week bills
Nov. 16: 17-week bills; 20-year bonds
Nov. 17: 4- and 8-week bills; 10-year TIPS Reopening
--With assistance from Sebastian Boyd and Brian Chappatta.
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Live Long and Prosper....
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Post by xray on Nov 13, 2022 21:44:43 GMT
Bloomberg
Wall Street Managers Are Pushing Back on Easing Inflation Hopes
Denitsa Tsekova
Sat, November 12, 2022, 1:00 PM
In this article:
(Bloomberg) -- Euphoria is sweeping every corner of Wall Street in the wake of the latest data that suggests inflation is peaking from a four-decade high. Yet big money managers are in no mood to celebrate – betting that the world will have to contend with elevated prices for years to come, in a game-changer for investing strategies of all stripes. JPMorgan Asset Management is clinging onto a record allocation in cash in at least one of its strategies while a hedge fund solutions team at UBS Group AG is staying defensive. Man Group quants expect the great inflation trade to endure, with all signs suggesting price pressures will stay strong for a long while yet. Their cautionary stance comes amid lower-than-expected price data for October that’s spurred a big cross-asset rally with the likes of Citigroup Inc. betting that the US central bank will moderate its hawkish threats.
“The path to a soft landing where the Federal Reserve is able to bring inflation all the way back down to target without causing material economic damage is still narrow,” said Kelsey Berro, a fixed-income portfolio manager at JPMorgan Asset Management. “While the direction of travel for inflation should be lower, the pace of deceleration and the ultimate leveling off point remain highly uncertain.”
JPMorgan Asset remains invested in highly rated short-term debt as it sees enduring price pressures. The firm’s chief investment officer has long warned against sticky inflation that others had predicted would subside after the pandemic.
At Man AHL, the firm’s quantitative investment program, money managers expect trend-following strategies, which have been a big winner after riding relentless inflation-driven price trends, to continue to outperform. A variety of carry trades that take advantage of price differences remain attractive as inflation persists, according to the world’s largest publicly traded hedge fund firm.
“It certainly was the case that people were too optimistic about the outlook for markets earlier this year, and it is still very possible that they’re too optimistic right now,” said Russell Korgaonkar, chief investment officer of Man AHL.
A measure of the market’s inflation expectations is more in line with the belief that the price growth ahead will trend closer to the Fed target of 2%. Traders see borrowing costs peaking next year while pricing in a half-point Fed hike in December. But any money manager with hopes of rapidly easing price pressures may be getting ahead of themselves, according to Bank of America Corp. “‘Inflation stick’ of briskly rising services and wage inflation is here to stay,” Bank of America strategists led by Michael Hartnett wrote. “Inflation will come down but remain above” ranges of the past 20 years.
Investors have also been venturing outside the safety of cash -- which they had turned to as an alternative to equities -- in what might amount to a wager that inflation is coming down. In recent weeks, cash-like exchange-traded funds have seen record outflows, with nearly $5 billion exiting the $20 billion iShares Short Treasury Bond ETF (ticker SHV) in the fund’s biggest two-week outflow on record, according to data compiled by Bloomberg.
But money managers such as UBS’s hedge fund solutions business are not ready to move away from their defensive positioning just yet. “We have been preparing our portfolios for this new regime of higher inflation and lower growth and we expect risk assets to remain volatile,” said Edoardo Rulli, deputy chief investment officer of UBS’s hedge fund solutions business. “We remain defensively positioned with beta to equity and credit markets at historically low levels.”
Ed Clissold, the chief US strategist at Ned Davis Research Inc., also says it might be too soon to jump back into stocks or bonds. The firm is still underweight equities and overweight cash. “Cash yields could remain attractive,” Clissold said. “Aggressive Fed easing would not likely come until something breaks. That would mean lower risk asset prices, like stocks.”
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Live Long and Prosper....
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Post by xray on Jan 22, 2023 20:00:24 GMT
Bloomberg
Investors Struggle With When to Dive Back Into US Stock Market
Jessica Menton
Sun, January 22, 2023, 8:40 AM EST
In this article:
^GSPC
+1.89%
^RUT
+1.69%
(Bloomberg) -- The pause in the stock market’s strong start to 2023 underscores the main question vexing much of Wall Street: When will it be safe to start buying again?Yes, markets have grown increasingly confident that the slowdown in inflation will allow the Federal Reserve to soon end the cycle of aggressive interest-rate hikes that last year drove the S&P 500 index to the worst drop since 2008. But at the same time, those higher rates could drive the economy into a recession and slam the brakes on any growth.
Positioning for this financial yin-yang is tricky, to say the least.
“The S&P 500 has never bottomed before the start of a recession, but it’s not clear yet whether the US economy will actually fall into a downturn,” said Ed Clissold, chief US strategist at Ned Davis Research, whose firm forecasts a 75% chance that the US will slump into an economic slowdown in the first half of 2023. “Some indicators are telling us that a soft landing isn’t off the table. All of these cross currents do make it challenging for investors to position in US stocks.”
Those cross currents leave the stock market poised for a choppy start to the year as investors rely on incoming economic data and eyeball historical trends for clues. Last week, the S&P 500 dropped 0.7%, snapping a two-week winning streak, though the index rallied 1.9% Friday, thanks to a surge in tech stocks as Fed officials dialed back fears of overly aggressive policy moves. The tech-heavy Nasdaq 100 Index had its best day since Nov. 30 to eke out a 0.7% gain for the week.
Clissold said the historical performance of different sectors can provide a guide to where to invest heading into a downturn. Those that tend to peak late in economic cycles, like materials producers and industrial companies, usually perform strongly in the six months ahead of a recession. The same goes for consumer-staples and health-care stocks.
At the same time, stocks from rate-sensitive industries like financials, real estate, and growth-oriented technology tend to lag during that period.
The problem is the scope of last year’s selloff makes historical comparisons difficult to use. In fact, last year’s big losers — like rate-sensitive tech and communications services stocks — are among the best performers this year, leaving investors wondering if the worst of the bear market decline is behind them.
In the coming week, markets will sort through earnings results from Microsoft Corp., Tesla Inc. and International Business Machines Corp. that are poised to shape the direction of equities more broadly. Also, the Commerce Department on Thursday will release its first estimate of fourth-quarter US gross domestic product, which is expected to show an acceleration.
To Mark Newton, head of technical strategy at Fundstrat Global Advisors, the S&P 500 likely bottomed out in mid-October. And he thinks it’s premature to completely write off beaten-down technology stocks.
“I’m optimistic on US equities this year, but the biggest risk for stocks is if the Fed over hikes,” said Newton, who is monitoring whether the S&P 500 can stay above the December lows around 3,800. “Earnings this week from tech companies could be a huge catalyst. Other corners of the market are stabilizing. But if tech falls really hard, that’s a problem and the market won’t be able to broadly rally.”
Forecasters surveyed by Bloomberg are predicting that the economy will contract in the second and third quarters of this year.
While that would meet one standard definition of a recession, since 1979 the official arbiter — the National Bureau of Economic Research — hasn’t declared that such a contraction was underway until an average of 234 days after it started, data compiled by Bloomberg Intelligence show. So don’t hold your breath for a warning.
The stock market is far more likely to be a leading indicator for when a recession starts and stops. Equity prices typically point to the risk of a recession seven months before it starts and bottom out five months before it ends, according to data since World War II compiled by research firm CFRA.
“The S&P 500 may bounce back well before the announcement, as stocks typically rapidly price recessions,” according to Gillian Wolff, senior associate analyst at Bloomberg Intelligence.
While the S&P 500 has priced in an earnings decline, higher borrowing costs and persistent economic uncertainty will likely hold back gains in stocks over the next year, according to Bloomberg Intelligence’s fair-value model. BI’s base-case scenario puts the index around 3,977 at the end of 2023 — roughly unchanged from where it closed Friday. But if the bullish scenario plays out, BI estimates it could hit 4,896, a gain of some 23%.
Kevin Rendino, chief executive officer of 180 Degree Capital, is betting that the US recession has already begun. He’s been snapping up shares of small-cap stocks, specifically technology and discretionary shares that he sees at extremely low valuations.
Small-cap stocks are historically among the first groups to bottom before the broader market bounces higher. The Russell 2000 is up 6% in January, outpacing the big-cap S&P 500’s 3.5% gain.
“While everyone is running away, I’m running toward those hammered small-cap stocks,” Rendino said. “They’ll be the first to discount a recovery, and they’re already starting to do that relative to large caps. Investors are anticipating a recession, but whether we’re in one or not, we’re not headed for Armageddon.”
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Live Long and Prosper....
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Post by xray on Jan 23, 2023 16:01:04 GMT
Mustang, Norbert, anitya, uncleharley, richardsok, fritzo489, xray, retiredat48, Chahta, ECE Prof, Bloomberg Bruised Stock Bears Bust Out the Charts in Arguing the Top Is In Vildana Hajric and Katie Greifeld Wed, January 18, 2023, 4:14 PM EST In this article: ^GSPC +1.00% (Bloomberg) -- A chart breakdown in the S&P 500. Signs of complacency in a closely watched options gauge. Weak readings on the economy piling up. All of it is evidence to bears that the rally in stocks is sputtering out. Equities declined Wednesday for the second straight day — the first time that’s happened this year — as investors once again started fretting over economic growth and just how much more the Federal Reserve might raise interest rates. It’s all been fodder for bears who had been warning that however good the rally thus far this year might have felt — bringing the S&P 500 as much as 4% higher — it wasn’t likely to last. “Bear markets are like a Hall of Mirrors, designed to confuse investors and take their money,” wrote Morgan Stanley strategists led by Michael Wilson. “We advise staying focused on the fundamentals and ignoring the false reflections.”The S&P 500 this week butted up against it 200-day moving average at around 4,000, but failed to meaningfully rally above it amid two consecutive days of losses. It was the benchmark’s fifth such attempt over roughly the past year to bust out above the long-term line, according to John Gagliardi at Fidelity Investments. “Maybe the fifth time will be the charm, but every other time — the last four attempts — have been a fail,” he told Bloomberg TV this week. The index ended Wednesday around 3,929. Stocks declined on Wednesday, with the S&P 500 losing 1.6% and the Nasdaq 100 dropping 1.3%. That happened as weak economic data rekindled concern over the outlook for growth — growth in producer prices fell more than expected last month, and the drop in retail sales exceeded estimates. Plus, business equipment production slumped, with a decline in factory output wrapping up the weakest quarter for manufacturing since the onset of the pandemic. “The US economic data was weaker than expected and is creating an emerging concern about the Fed funds hikes finally catching up to the economy,” said Michael O’Rourke, chief market strategist at JonesTrading. Bears have plenty of other worrying indicators to point to, including the Cboe VIX Index — the fear gauge — dipping below 20 last week, something that in the past had coincided with a reversal in rallies for stocks. It happened in four prior instances since the S&P 500 rout began a year ago — first, in the winter, then April, August and December 2022. While the VIX trading in the mid-20s has been unexpectedly common throughout the year as flushed-out stock positioning weakened the need for protection and kept emotions in check, the drop below the psychologically important 20 line has signaled complacency has gone too far. The gauge finished Wednesday above 20. “It feels like a fickle start to the week,” said Shawn Cruz, head trading strategist at TD Ameritrade. “There’s a long way to go before we can say risk sentiment has turned the corner.” Leveraged exchange-traded funds highlight a fading bullish impulse as well. More than $600 million exited the ProShares UltraPro QQQ ETF (ticker TQQQ) — which tracks triple the performance of the tech-heavy Nasdaq 100 — last week in the biggest withdrawal since late 2021, Bloomberg data show. On the other side of the trade, the ProShares UltraPro Short QQQ ETF (SQQQ) — which provides exposure to three times the inverse performance of the tech-heavy index — absorbed nearly $600 million in its biggest weekly influx since August. Morgan Stanley’s Wilson is looking at the spread between his firm’s earnings model and consensus forecasts, which he says is nearly twice as wide as it’s ever been. It “suggests a drawdown in stocks for which most are not prepared,” his team wrote in a note. The main culprit, he said, is the elevated inflationary environment which could “play havoc” with profitability. “Our negative operating leverage thesis remains underappreciated and will likely catch many off guard starting with this earnings season,” they said.On Friday, the S&P 500 closed above its 200-day moving average but failed to sustain it. And until it can meaningfully break above this important level, technicians will remain uneasy that the latest attempt could be just another failed rally, wrote Bespoke Investment Group strategists in a note this week. There are two key factors to the current 200-day moving average, according to Matt Maley, chief market strategist at Miller Tabak + Co. For one, the 4,000 level is a psychologically important round number. Second, it’s also right around where the trend line from 2022’s all-time highs converges. “They all meet around 4,000, so it’s a very important technical level,” he said in an interview. “If it can’t gather itself within the next couple of days and break above it, it’s going to be a problem.” Keith Lerner, co-chief investment officer at Truist Wealth, says he’s watching the 4,100 level as a key near-term gauge.“If you were able to get above that, I think the technical trends would improve,” he said in an upcoming episode of Bloomberg’s “What Goes Up” podcast. “But so far, we’ve failed there.” ---------- Live Long and Prosper....
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Post by uncleharley on Jan 23, 2023 18:17:00 GMT
The S&P popped over the 200 DEMA today. It might not yet be above the 200 DMA. It is sitting on the upper trendline as I type. We shall see if it will break above or back off this P M>
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