Share to Twitter Share to Linkedin Key Takeaways: Equity Index Futures Bounce Back From an Overnight Selloff as Investors Try to Hang on to the Gains Stocks Fell on Tuesday as Interest Rates and Oil Prices as well as a Rare Miss by Goldman Sachs Investors Are Forced to Re-Evaluate Valuations When Interest Rates Rise Stocks are looking to rebound on Wednesday from Tuesday’s selloff as equity index futures are pointing higher. Futures fell overnight but rebounded with European markets. London’s FTSE 100, Germany’s DAX, the French CAC 40, and the Stoxx 600 traded higher. However, there’s a number of earnings announcements for investors to sort through on Wednesday. Financial companies continue to dominate the reports, but there are other companies of note. Starting with the financials, Morgan Stanley MS (MS) and Bank of America BAC (BAC) both beat on earnings estimates despite missing on revenues while U.S. Bancorp TBBK (USB) missed on top … [Read more...] about Rising Interest Rates May Be Leading To Revaluations In Stock, Bond, And Housing Markets
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Share to Twitter Share to Linkedin Another downer week, only worse. Thursday morning's secure-looking barriers gave way in the afternoon. Friday blipped up then continued Thursday's fall, failing to fill its role as opposite day. (Charts at the end of the article show the action.) The broad, strong declines signaled a move into bear territory, regardless of the percent-below-peak calculations. However, there is hope because one week's dramatic move doesn’t necessarily define a trend. ADVERTISEMENT A convergence of factors can occur in a week that makes everything look magical or horrible. But then comes the respite - a weekend of calm contemplation. By Monday's opening, investors will have determined whether the previous week’s drama was appropriate or overdone. Will "overdone" be the conclusion this time? It would make for a nice rise. For stockholders, a sign that this selloff may be an over-and-done adjustment. For cash holders, a sign that some … [Read more...] about The Stock Market Stepped Into Bear Territory Last Week – Temporary Visit? – Next Week Will Tell
Share to Twitter Share to Linkedin We believe that Microsoft stock (NASDAQ: MSFT) currently appears to be an attractive pick over its industry peer Electronic Arts stock (NASDAQ: EA) , despite its comparatively higher valuation. MSFT stock trades at 13.4x trailing revenues, compared to 5.7x for EA stock. Although both the companies saw a rise in revenue over the recent quarters, the growth has been better for Microsoft, aided by robust demand for its cloud offerings, including Azure. Looking at stock returns, MSFT, with 7% returns over the last six months, has outperformed EA, which is down around 1%, and it has also outperformed the broader markets, with only a 3% rise for the S&P500 index. However, there is more to the comparison, and we believe that Microsoft stands out with higher expected returns compared to Electronic Arts, as we discuss in the sections below. We compare a slew of factors such as historical revenue growth, returns, and … [Read more...] about This Tech Giant Appears To Be A Better Pick Over Electronic Arts Stock
Share to Twitter Share to Linkedin Big data and analytics player Palantir’s stock (NYSE: PLTR) has already lost about 21% of its value year-to-date in 2022, underperforming the S&P 500 which is down by about 6%. The stock also remains down by almost 45% from its November 2021 highs. While high-growth software stocks have seen a sell-off, due to the prospect of rising interest rates and the broader market rotation out of pandemic winners into real economy sectors, there are some stock-specific factors that are impacting Palantir, as well. For example, investors are likely a bit concerned about the slower growth at the company’s government business over Q3 2021 and also due to its growing dependence on the U.S. market for commercial revenue growth. However, we think that Palantir stock looks like a good pick at its current market price of about $15 per share. Despite the recent concerns, Palantir’s overall growth rate is likely to remain solid. Sales are on … [Read more...] about Down 45% Since November, Is Palantir Stock A Buy?
Share to Twitter Share to Linkedin The Federal Reserve is planning to raise interest rates (the Federal Funds rate) earlier than expected to cool down the hot economy. The stock market is reacting swiftly: the Nasdaq 100 is in correction territory. What can investors expect from the stock market when interest rates rise? Interest rates are going up Super-easy pandemic monetary policy gave strong support to asset prices. The prices of bonds in the secondary markets increased as new bonds could be issued at lower rates (and thus lower current yields - see example on how interest rates affect bonds). Historically low bond yields and massive fiscal stimulus drove investors into riskier assets including stocks, which was a major contributor of the outperformance of the S&P 500 in 2020 and 2021. When there's an alternative to equities for yield again, investors recalculate the equity risk premium. High-flying equity valuations are getting a … [Read more...] about How Do Stocks Perform When Interest Rates Rise?
Share to Twitter Share to Linkedin When the stock market is in turmoil, many investors are tempted to go to cash and wait for the dust to settle before getting back in. One of the issues here is how to time your exit and entry—unlike a flash flood or significant weather event, investors aren’t going to get an emergency alert on their phone when it’s time to take cover, run for the hills, or once it’s safe to return. Aside from the fact that in the financial markets, we only know this information in hindsight, the notion of going to cash until the market recovers also ignores another very real but less visible danger: missing out on the recovery. Stick it out or sell to cash? By way of example, here are three long-term investors who started to invest in 2006. For simplicity, this example doesn’t include the impact of taxes, inflation, and rebalancing. Dividends and capital gains assumed to be reinvested. Kim Kim invested $100,000 in March 2006 in an … [Read more...] about Should You Go To Cash Until The Market Recovers Or Ride It Out?
Share to Twitter Share to Linkedin Most investors realize trying to time the market by always buying low and selling high isn't a realistic endeavor. Yet even with that knowledge, if you have a substantial amount of cash to invest, the thought of investing when the stock market is hovering near all-time highs may give you pause. Similarly, when facing the opportunity to 'buy the dip' ( remember March 2020 ?), few investors have the stomach to do so. As reasonable as these examples may sound, they both describe aspects of market timing. Despite the recent pullback in the U.S. stock market, the S&P 500 has already set 10 new record highs in 2021 and coming off two very strong years. So what should you do if you have cash to invest and the market is strong? Should I invest when the market is high? Sitting in cash just because the S&P 500 is setting new highs is a mistake on several levels. First, when investing, it's critical to make decisions based … [Read more...] about Should I Invest When The Market Is High? Dispelling The Buy Low, Sell High Myth
What happened Well, it's looking like another miserable day for stock markets on Monday, with the Dow down 1.7% and the tech-heavy Nasdaq off 2.6%. Once again, semiconductor stock Nvidia ( NASDAQ:NVDA ) is leading tech stocks lower as its shares had slumped 6.6% by 10:25 a.m. ET today. The most obvious answer is that investors are favoring "cheap" semiconductor stock Intel ( NASDAQ:INTC ) over "expensive" semiconductor stock Nvidia today, especially because Intel had some good news to report last week. Image source: Getty Images. So what On Friday, Intel announced that it has chosen to locate two new chip factories near Columbus, Ohio, picking the city from a field of 40 locations that had competed for the investment. Construction will commence later this year, and production should start in 2025. And as The Wall Street Journal, reports, the $20 billion that Intel will be investing in Ohio is only part of a $100 billion investment plan for building out … [Read more...] about Why Nvidia Stock Just Crashed 6.6%
Share to Twitter Share to Linkedin My firm’s Focus List Stocks: Short Model Portfolio outperformed the S&P 500 as a short portfolio by 36% in 2021, and 29 out of the 31 picks outperformed. We’re starting 2022 by reviewing the two stocks that underperformed last year and their potential returns this year. Tesla Inc. (TSLA) and Box Inc. (BOX) were the only two Focus List Short stocks that underperformed as shorts in 2021, and I remain bearish on both stocks. Focus List Short Stocks Outperformed in 2021 The Focus List Stocks: Short Model Portfolio contains the best of my Danger Zone picks and leverages superior fundamental data, as proven in The Journal of Financial Economics, which provides a new source of alpha. The Focus List Stocks: Short Model Portfolio fell, on average, -16% in 2021 compared to an average return of 20% for the S&P 500, per Figure 1. Figure 1: Focus List Stocks: Short Model Portfolio Performance from Period Ending 4Q20 … [Read more...] about Tesla and Box: Two Focus List Shorts Poised To Payoff
- A + A (Jan 25): The strategists who saw this miserable stock rout coming say there’s still more pain ahead. With the S&P 500 sliding more than 10% from recent records, bears from the likes of Mizuho International Plc and Bank of America Corp. warn of fresh selling to come as growth momentum eases just as the Federal Reserve amps up borrowing costs. “There’s probably more downside over the next few months as the market adjusts to the reality of the Fed removing accommodation, earnings slowdown and much less federal stimulus,” said Ed Clissold, the chief U.S. strategist at Ned Davis Research, who late last year predicted a double-digit drop in stocks and today is warning of a correction on the order of 20% from the early January peak. The S&P 500 could slide another 12% as a “tightening tantrum” gathers pace, according to Mizuho strategists who came into 2022 warning of a 10% to 15% plunge in the second quarter, if not sooner. A slew of factors -- … [Read more...] about Strategists who predicted this market rout also see more selling