Displaying items by tag: stocks
In a recent Business Insider article, Charles Schwab is warning that stocks could see more volatility through the rest of this year, as we head into what the firm considers a weak earnings season. The company believes that more companies could miss earnings estimates in the following quarter, using FedEx as an example. The transportation firm slashed its earnings guidance last week in what is expected to be a sign of things to come for the rest of the S&P 500. In a note on Monday, analysts stated, "We believe the weakness in expected earnings growth is early in its trip to an ultimate negative (year-over-year decline) destination." Analysts also noted that the rate at which S&P 500 companies beat earnings expectations fell to 5% last quarter. This compares to over 20% in the middle of 2021. The company noted that the trend could be even lower in the third quarter as earnings reports come in. Excluding the energy sector, Schwab estimates that earnings growth in the S&P 500 will shrink by 2% over the third quarter, down over 11% from June.
Finsum:Analysts atCharles Schwab are warning of more stock volatility as we head into a weak earnings season.
According to an analysis by ESG specialist Elisabeth Steyn, U.S. equity funds that are classified as ESG, have on average 29% of their holdings in tech stocks. Steyn told Alice Ross of Financial Times that the figure is well above the 23% average for general equity funds. Ross used the iShares ESG Aware MSCI USA ETF as an example. The fund’s top holdings include Apple, Microsoft, Amazon, Tesla, and Alphabet. This may help explain why many ESG funds are seeing heavy losses this year. Ross attributed the reason to two factors. First, ESG funds are exclusionary. Once certain areas of the market are stripped out, tech is typically over -represented. The second reason is that ESG rating agencies can differ greatly on which companies are sustainable. That reason alone can help explain why the SEC is going after ESG labeling. Ross also noted that ESG funds outside the U.S. are not typically overweight in tech stocks.
Finsum:U.S. ESG funds are heavily overweight in tech stocks due to differing ESG labels and exclusionary factors.
When it comes to September, stocks have a track record of not exactly rocking – much less rolling. For the 30 year period, average returns chime in at -0.34% and -0.26% for the 15-year period, according to forbes.com. The five year period: -0.92%.
And it just keeps getting better with the month in a category of its own as a period when the market held down the rear, drooping on average in every time period.
Now, consider that along with the fact that, already, the year, stoked by factors such as flaming inflation, bulging interest rates and a recession keeping nearly everyone on edge has, you might say, been crackling with volatility. So, how could investors react? Why, they might go shopping for a placeholder for their considerable assets.
Fed chair Jerome Powell, addressing this year’s Jackson Hole Economic Symposium, acknowledged that to stave off growth, it’s probable rates will remain on the high side, not exactly comforting to households and businesses, according to talkmarkets.com.
Trying to read the tea leaves, there are market watchers who believe Powell means he’s no longer homed in on a soft landing. Rather, his focus might on a “growth recession,” as economists characterize it. A growth recession, of course, loosely is marked as a period when the economy’s headed north, yet so slowly that it’s putting a crimp in the volume of available jobs.
As investors grapple with inflation and economic uncertainty, there is one industry that has been outperforming the market, and that’s cybersecurity. While most technology companies have cautioned investors about slower corporate spending, cybersecurity firms are still seeing massive demand. For instance, CrowdStrike and SentinelOne, both recently increased their forecasts for this year. While cybersecurity has always been important, companies are now even more concerned about system vulnerabilities due to an increase in cyber-attacks amidst the war in Ukraine. In addition, the advent of remote and hybrid working arrangements has also increased the demand for cybersecurity solutions. While companies can trim spending on software items such as CRM, cybersecurity is too important to risk. The minute a company lets up, they are at risk of a ransomware attack. This has resulted in the Global X Cybersecurity ETF (BUG) outperforming the NASDAQ this year.
Finsum:While other software companies are seeing slowing demand, the sheer necessity of cybersecurity has resulted incybersecurity ETFs outperforming the NASDAQ this year.
Single security ETF launches have been all the rage this summer, but regulators are now sounding the alarm. Broker-dealers that sell single-stock ETFs in Massachusetts are being investigated by regulators according to Massachusetts Secretary of States William F. Galvin. Galvin has directed his Securities Division to investigate Mass-based registered broker-dealers that sell single stock ETFs to retail investors. He believes that the leverage used to magnify gains and losses in single stocks is not suitable for "Main Street" investors. This follows a statement by SEC Commissioner Caroline Crenshaw earlier in the summer in which she stated that the approval of single-stock ETFs posed a “greater risk” for investors than index-based leveraged and inverse ETFs. She also stated it would be difficult for advisors to recommend these products while meeting their Reg BI obligations.
Finsum:Regulators are sounding the alarm on single-stock ETFs, indicating that advisors may be in breach of Reg BI for recommending them.