THE RESEARCH TEAM at Bank of America put out a pair of seemingly contradictory investment notes last week. On the bullish side, the folks there pointed to extremely cheap valuations in the small-cap space. But a few days later, the economics department rocked Wall Street with a bearish forecast calling for five consecutive quarters of negative real U.S. GDP growth.
I chuckled at the sequencing: It’s often said the stock market leads the economy by about six months,
IF YOU THINK STOCKS have fallen fast this year, check out the collapse in the National Association of Realtors’ housing affordability index. The index tracks how financially easy it is for the typical family to buy a house with a conventional 30-year mortgage.
May’s reading of 102.5 is down sharply from the 154.4 recorded in December 2021 and it’s just a whisker away from the lowest levels seen in the past four decades. For those of us in the southern U.S.,
THE LATEST ESTIMATE for first-quarter GDP growth was issued by the Bureau of Economic Analysis (BEA) on Wednesday morning. While not market-moving news, it revealed that the economy shrank at an annualized rate of 1.6%, a tad worse than market expectations. The most surprising part of the revised estimate was the downward adjustment in personal consumption. Along with recent credit- and debit-card spending data, as well as comments from a few consumer goods companies,
STOCK INVESTORS are hanging tough. Bond investors? Not so much.
Citing flow of funds data from EPFR, Bank of America Global Research says investors collectively purchased $195 billion of stocks this year through June 22. The implication: People aren’t panicking. That’s great news, and it supports the narrative that today’s stock investors are less bullied by market volatility.
It’s a different story in the bond market, where we’ve seen so-called capitulation. Bank of America notes that $193 billion of bonds have been sold this year by investors.
MORE WEALTH HAS been lost in this year’s stock and bond market decline than in any previous downturn, according to research firm Bespoke Investments. And, no, that doesn’t include the $2 trillion of crypto value that’s gone up in smoke.
A counterpoint to this jarring reality: Folks today are wealthier than during previous bear markets. Goldman Sachs reports that U.S. household net worth as a percentage of disposable personal income remains sharply above pre-pandemic levels.
CONSUMERS’ MOOD HAS never been worse—at least according to the University of Michigan Consumer Sentiment Index. The monthly survey, released last Friday morning, paralleled the worse-than-expected Consumer Price Index report. May’s inflation reading notched a fresh four-decade high as Americans—and the rest of the world—grapple with soaring food and energy costs. The issue is front and center, and we all feel it every day.
The hits keep on coming. This weekend, AAA confirmed a grim milestone: The average price of a gallon of regular gas topped $5.
GAS PRICES TOOK another step higher last week—troubling news for the millions of families planning their summer vacations.
It’s already shaping up as a big travel year. An estimated 39.2 million folks hit the road or took a flight over the Memorial Day weekend, according to AAA, up 8.3% from last year. GasBuddy data show the average price for a gallon of regular unleaded was $4.60 over the holiday weekend. Steep? By July 4,
INVESTING FOR education costs has never been more popular, as evidenced by recent Morningstar data. The research company found that 2021 was a record-breaking year for assets in 529 college savings plans. At almost $500 billion, total investments are up nearly fourfold over the past decade.
A big reason is the tax advantages—investments grow tax-free if they’re used for qualifying education expenses—plus 529 accounts are treated relatively leniently under the college financial-aid formulas. You can learn more about the accounts from other authors who have real life experience saving through 529 plans.
BEAR MARKET territory. On Friday, that phrase was all over the “financial pornography” channel, as commentator Carl Richards labels it. During trading, the S&P 500 finally dropped 20% from its early January all-time closing high. In truth, that number alone doesn’t mean much. Consider that stocks in both 2011 and late 2018 briefly encroached on 20% before bouncing back in a big way.
The media was ready last week to go with all the flashing banners and alerts.
AMID THIS YEAR’S market wreckage, perhaps the most disappointing performers have been target-date retirement funds (TDFs).
Many 401(k) investors are familiar with these products. Just one of these funds can be used throughout your investment lifetime, as it automatically shifts from a stock-heavy portfolio in the decades leading up to the targeted retirement date to owning more bonds in the years immediately before and after the target year. Normally, performance is pretty steady for TDFs close to their target date,
WHEN I STUDIED FOR the Chartered Financial Analyst (CFA) exams, I snagged extra prep time by listening to textbooks while commuting. As boring as that sounds, it helped me absorb the dry curriculum—and it made listening to financial information part of my daily routine.
While I no longer commute—or even own a car—I continue to plug in my earphones to catch up on the latest investment insights, often during my afternoon walks. Here are my eight favorite podcasts:
The Long View.
HAS THE ECONOMY reached peak inflation? That might be the biggest question in financial markets right now. Economists at several Wall Street firms, including Goldman Sachs and Bank of America, say the highest pace of consumer price increases may now be in the rearview mirror.
Inflation is typically measured as a percent change from a year ago. From here, prices for goods and services may still go up, but at a slower pace. That’s the hope.
EVERY MARKET DECLINE is different, but all of them can feel unnerving, even for the most steadfast of investors. Spooked by 2022’s financial market turmoil? There’s good news: Stock and bond values today look much more compelling than at the turn of the year.
Thanks to 2022’s 14% drop, the S&P 500 now trades below its five-year average price-to-earnings (P/E) ratio, based on expected profits. On top of that, corporate earnings rose impressively in this year’s first quarter.
THE S&P 500 IS DOWN 10% so far this year—but the pain hasn’t been dished out evenly. Value and steady dividend-paying stocks are about flat for 2022, while technology companies and speculative small-cap stocks have suffered mightily. Money has fled the market’s unprofitable glamor companies and flocked to old-fashioned cash flow generators.
Just how bad has the drubbing been among formerly hot growth names? Look no further than Cathie Wood’s ARK Innovation ETF (symbol: ARKK).
EXPERIENCED INVESTORS know that the stock market and the economy sometimes diverge. Early 2020 offered a stark example: Even as the economy was still contracting rapidly, stocks started bouncing back.
But right now, many areas of the stock market are doing about what you’d expect. After all the efforts by the Federal Reserve and Congress to prop up the economy over the past two years, rising inflation is front and center, along with rising interest rates.