Displaying items by tag: bear market

(Washington)

Elizabeth Warren is currently the only candidate that is really rising in the polls, and that is terrifying Wall Street. The far-left candidate has the most comprehensive plans to change the status quo of the financial system and she is gaining traction with voters. That is making Wall Street very nervous. Famed investor Leon Cooperman said he expected a year-plus long bear market with losses of 25% or more if either Sanders or Warren wins the election. Biden currently still leads Warren, but the gap is close, with his advantage down to 31% to 25% of Democratic voters.

FINSUM: Our own feeling on this is that Warren may have the momentum to win the bid, but that it will likely prove quite hard for her to win the general election, as her policies are very progressive for middle-of-the-road voters.

(New York)

With the Fed coming in less dovish than expected this week, there is suddenly much more anxiety in the market. Without a clear direction on rates, and with lingering worries about the economy, the outlook for stocks and bonds is not clear. And as we all know, markets hate uncertainty. Accordingly, the search for the best recession-proof stocks continues, and we have a new proposal today: fast food stocks. As consumer spending falls in a recession, bargain-providing companies, like fast food, often do well. The sector also provides healthy dividends. Take a look at the usual suspects: McDonalds, Wendy’s, and Chipotle, and some you may not have thought of, like Cracker Barrel and Restaurant Brands International.

FINSUM: The “Dollar menu” suddenly becomes very attractive to the American consumer when times start getting tough. These stocks seem a good bet, especially because they have solid dividends, which should provide some protection in case a downturn doesn’t happen.

(New York)

How to defend against this tough equity market? Some say to buy defensive sectors like healthcare and consumer staples. Others buy gold. Ironically, however, the best protection may be to stick with the old 60/40 balanced portfolio. Despite all the market turmoil recently, if you had been holding a 60% SPY and 40% AGG portfolio over the last month you would have had a net return of negative 0.62%, which is pretty good considering how ugly markets were. If you had been holding it for the whole year, you would have a sterling return of 14.45%.

FINSUM: These stats are a testament to old fashioned diversification!

(New York)

September is usually a very poor month for stocks. Investors are generally uptight because of this, but this year tensions are much higher after a brutal August that saw benchmarks fall around 3%, a figure which frankly does not do justice to the turmoil. The Dow actually averages a large decline in September historically, and the month has only had positives returns 36% of the time in the last 100 years. This statement from Barron’s says it all: “If you only owned the S&P 500 in September during every year, a $100 investment starting in 1969 would now be worth just $70.

FINSUM: September is usually bad (which does not really mean anything for this year in itself), but this year could be extra ugly because it may just be more of the same turmoil that has already been occurring.

(New York)

Stop worrying so much about the US economy. That is what Bank of America is saying. The bank’s CEO went on the record yesterday explaining the simple reason that the US will avoid a recession. That reason? US consumer health. Moynihan cited internal statistics from BAML that showed that consumer spending has risen almost 6% in Bank of America accounts in the last 12 months versus the previous 12 months, showing that consumers are healthy. Consumer spending makes up 68% of the US economy. Moynihan was dismissive of the yield curve inversion, saying it is likely just a product of an influx of money because of negative yields elsewhere.

FINSUM: Bank of America is the largest US deposit holder, so it has an unparalleled insight into consumer spending. We think this is quite a positive sign.