Michael Cymbalist, head of market and investment strategy at JP Morgan Asset Management, offers some important guidelines that will allow investors to gauge when stock markets are down.
In the latest edition of his famous Eye on the Market report, he noted that US PMIs were the best leading indicators, and that stock markets were unlikely to rise sustainably until the PMIs hit the bottom. These standards aggregate executive survey results from prominent manufacturing and service firms to measure overall business activity, employment, and inventory.
The ISM Manufacturing Survey for June will be released on July 1st. The consensus of economists’ expectations is for a reading of 54.5 with 50.0 indicating no change from the previous month.
Mr. Cembalest is also keeping a close eye on US Treasury yields. In the past three market cycles, bond yields have trended lower long before stocks hit bottom. “Signing that the PMI has bottomed and Treasury yields have peaked would be a good sign for investors, even as economic data continues to deteriorate,” he said.
The strategist sees plenty of evidence that investors are capitulating, a trend that could signal the approaching perpetual market downturn. He notes that the number of companies trading at stock prices below the value of cash on their balance sheets has jumped to nearly 12 percent, the largest number since 1990.
We all know it’s a bad idea to try to time the market. On the other hand, it is understandable if investors are reluctant to allocate their savings to a rapidly declining market. Mr. Cembalest provided some really good ideas on how to reduce wallet related anxiety.
– Scott Barlow, Globe and Mail market strategist
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stock to think
Aritzia Inc. (ATZ-T) Stocks in fashion stores peaked at a record high in January but have been on a downtrend ever since. The company is due to report its quarterly earnings results at the beginning of July, and it could be another challenging quarter given continuing supply chain disruptions, rising costs and store closures. But the stock price recently stabilized in the mid-1930s and a buying opportunity may be near. Jennifer Dottie considers the investment case.
Inflation fears led to a buildup of consumer stocks. Is it time to go bargain hunting?
Forget tech stocks, the consumer sector has been the main clearinghouse for investors’ hopes and concerns about inflation, interest rates and the economy. Consumer discretionary stocks, specifically, have the worst returns of any S&P 500 sector, with year-to-date losses of 29 percent. The same sector in Canada is down 15 per cent since the start of the year — lagging badly behind the S&P/TSX Composite Index, which is down 9 per cent. Tim Shufelt looks at the paradoxical case of buying it as it went down.
Buying a bear? Stock demand suffered from market pain
You’d be forgiven for thinking about the worst two quarters for stock markets since 2009 where there were investors running for the hills – but you’d be wrong. One of the most startling stats from the first half of 2022 is that investors bought a net $195 billion in stock even as major US and global stock indexes lost nearly a fifth of their value in the face of rising inflation, interest rates and recession fears. . Reuters’ Mike Dolan explains why.
See also: recent rebound tests for US stocks, doubts that the rally could continue
Relaxing COVID-19 rules, focus on growth helps cautious Chinese bulls return
The recent relaxation of travel rules due to the coronavirus, along with other encouraging policy signals, is beginning to lure some foreign investors back into Chinese stocks, increasing the chances that the market will sustain its rebound after months of heavy selling.
As stocks go down, don’t lose sight of the difference between price and value
When stock prices are rising, many investors feel comfortable thinking about the intrinsic value of their investment. But when prices drop dramatically, fear causes us to focus only on recent stock prices. Investment Director Bev Matthews explains why those investors who can focus on economic value rather than price are rewarded – over time.
Why have the prospects for stocks, bonds, and real estate markets rarely looked so bleak?
Sir John Templeton famously said that the four most dangerous words in the world are “It’s different this time”. But this time, in the opinion of Dr. George Athanasakos, it is really different. He believes that years of abuse at all levels of government and in both the professional and retail investment community have put pressure on a dormant volcano that is now poised to erupt, setting off all the meltdowns. The value professor explains his views, and our readers chime in with them.
How Massive Options Trading by JP Morgan Fund Can Move Markets
JPMorgan’s $17 billion fund is expected to reset its options positions on Thursday, which could increase stock volatility at the end of a dismal first half in stocks. Analysts say the JPMorgan Hedged Equity Fund resets distressed markets in the closing hours of last quarter and has the potential to move markets again this time around. Here is what you need to know.
Hedge funds turn tail while commodities collapse into recession
Buy and hold, long max. This has essentially been a commodity hedge fund’s strategy for the past couple of years, but it’s quickly losing its luster. Reuters’ Jamie McGevere explains.
Markets are challenging the Fed’s schedule, threatening more volatility in Treasuries
Bond traders expect the volatility of US Treasuries to continue into the second half of 2022 as investors defy expectations of the US Federal Reserve on the extent to which it will tighten monetary policy to quell the worst inflation in decades.
Other (for subscribers)
Number Breaker: Nine Undervalued Stocks With Strong Growth Potential
Analyst promotions and downgrades on Wednesday
Tuesday Analyst Promotions and Discounts
A strong US dollar may hit emerging economies harder in this cycle
Emerging market “destabilizing” ETFs appear
How advisors guide young investors during a market downturn
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Ask Globe Investor
A question: Labrador Iron Ore Royalty Corp (LIF-T) has seen some extreme fluctuations in its quarterly dividend for the past six quarters. It shows a three-year earnings growth rate of 69 percent and a five-year earnings growth rate of 37 percent on some websites. Do you know the reasons for these fluctuations and are these growth rates (or anything close to them) sustainable? – Franz S.
Answer: LIF has been very volatile, the main reason being that its profitability mainly depends on iron ore prices. It’s been weak lately and the company’s first-quarter financials have been weak. As a result, LIF cut its March dividend to $0.50 from $1.15 in December. The company recently announced that its next dividend, payable in late July to shareholders of record on June 30, will be $0.90. With quarterly fluctuations of this magnitude, it is clear that you cannot expect future earnings growth based on past results.
– Gordon Babb
What’s new in the coming days
Have investors become too pessimistic about Canadian oil and bank stocks? Tim Schoevelt and David Berman will take a look.
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