He nailed the March coronavirus selloff — now he says there’s another 30% to go before the stock market hits bottom

Hedge-fund manager Dan Niles, in a note cited by Yahoo Finance this week, warned his clients way back in February that he was getting “increasingly worried” investors weren’t ready for the impact the spread of the coronavirus could have on the U.S. economy.

So Niles positioned his portfolio accordingly. Good thing. While the Dow Jones Industrial Average

DJIA, +0.33%

posted its worst first quarter ever, his Satori Fund closed in positive territory.

But, more importantly, where do stock markets go from? Definitely not higher, if Niles has it right.

“If you go back and look at history, there are nine times that the market has sold off about 30% or so since the 1920s, so it’s pretty normal,” he said this week. “You get one of these every 10 years or so and if you look at every one of them, you always get these bear market rallies.”

Nile told Yahoo Finance that he sees another major drop from here, pointing to valuations that are still hovering well above historical norms, even after the painful pullback.

“Just to get to average, you would have to have the market go down 30%,” he said. “It is very easy to figure out the market probably goes down 30% before we’re even near fair valuation.”

So, no bottom yet?

“I sort of laugh when I hear people talking about a V-shaped recovery because we are going to have at least 10% unemployment, my guess is closer to 20% before all of this is said and done,” Niles said. “You are not going to get a fast recovery with that many people out of a job and we’re not just talking in the United States. We are talking all across the globe there are problems that are happening.”

Nile explained that he’s still adding to his short positions, but he’s also going long in areas he believes to be resistant to the next batch of selling. He said he’s adding to his stakes in Activision

ATVI, +3.34%

, Take-Two Interactive

TTWO, +0.42%

and Amazon

AMZN, -0.40%


Check out the full interview:

Stocks came off their highs in Thursday’s session, with the Dow, S&P

SPX, +0.56%

and tech-heavy Nasdaq

COMP, -0.05%

all turning lower in afternoon trades.

Also read: Brace for the ‘deepest recession on record,’ says BofA analysts

Original source link

Here are the best bets for investors seeking income, according to Goldman Sachs

Getty Images

Home Depot is one of Goldman Sachs’ best bets for dividends.

It’s hard times for anyone relying on income investments. The stimulus bill signed into law Friday keeps any companies that borrow from the government from paying dividends to shareholders for at least a year after the loan is repaid — even as bond yields have collapsed to to near all-time lows.

That makes it critical for investors focused on income to “consider stocks with both high dividend yields and the capacity to maintain the distributions,” Goldman Sachs strategists wrote in an analysis out Monday.

Earlier coverage: Dividend ETFs may lose out under the $2 trillion coronavirus relief bill

The provisions of the CARE Act likely exacerbate a trend of companies trying to keep as much cash on hand as possible as the economic downturn worsens. The Goldman strategists estimate dividends for S&P 500 stocks will decline 25% to $44 per share in 2020, and note 12 companies, ranging from Apache Corp.

APA, +9.70%

  to Old Dominion Freight Line

ODFL, -1.43%

, have already reduced or suspended their shareholder payouts.

“We expect significantly more dividend cuts are likely to be announced during April in conjunction with the release of quarterly financial results,” the analysts wrote.

The Goldman team screened the Russell 1000 for companies with an annualized dividend yield greater than 3%, ample cash on hand, healthy balance sheets, and what they call “reasonable payout ratios.” Each of the stocks they identified have not under-performed the rest of the market since the peak, are rated by S&P as at least BBB+.

“The typical stock on our list has paid its dividend for 90 quarters (23 years) without reducing its distribution,” the Goldman strategists wrote. Their full list contains companies from 10 of the 11 S&P 500 sectors; energy is the only one missing. We’ve listed the top — highest-yielding — stock from each of the 10 sectors below.

Company Annual dividend yield Consecutive quarters with no dividend cut Sector
Omnicom Group Inc.

OMC, +0.93%


5% 50 Communication services
Home Depot Inc.

HD, -1.79%


3.1% 128 Consumer discretionary

ADM, +0.29%


4.3% 23 Consumer staples
Wells Fargo & Co.

WFC, -0.04%


6.7% 39 Financials
Bristol-Myers Squibb

BMY, -1.07%

  (tied with Merck & Co. Inc.

MRK, +0.58%


3.4% 114 Health care, pharmaceuticals
3M Co.

MMM, -0.56%

  (tied with Emerson Electric Co.

EMR, +1.17%


4.4% 156 Industrials

IBM, +1.30%


6.0% 102 Tech
Nucor Corp.

NUE, +0.03%


4.8% 41 Materials
Regency Centers

REG, +0.38%


5.9% 39 Real estate
CenterPoint Energy

CNP, +1.03%


7.1% 55 Utilties
Source: Goldman Sachs

About one-third of the stocks that wound up on Goldman’s list of 40 are financials. The strategists wrote that their bank equity research analyst colleagues had modelled stress scenarios and found that “banks are in a position to maintain dividends at or close to the current run rate.”

That’s an important caveat given the particularly precarious position for financials now. It’s not just the economic fall-out from the coronavirus pandemic that’s troubling them, but an expected wave of defaults and bankruptcies from the collapse in oil prices.

Related: American businesses are tapping their credit lines at the fastest pace ever

Original source link

Bear-market survival tips from an analyst who spent years warning of a bubble

A rally for oil prices is helping spark stock gains on Thursday, as investors struggle through what they hope is the eye of the coronavirus storm right now.

There is the grim health front, then the economy. Coming up is weekly jobless claims, which may beat last week’s record 3.3 million jump as the virus continues to hack away at the global economy.

Our call of the day comes from Jesse Colombo, an independent economic analyst who predicted the 2008 crash, and has been warning of an “everything bubble” for years as underlying issues from that crisis were never fixed. Read his recession prediction last summer, here.

Colombo says the virus is the pin that just happened to prick the bubble, and as a “prepper,” he has tucked away a year’s worth of food as he foresees social unrest and economic strife ahead.

As for markets, he tells MarketWatch the selloff for equities and many other assets will continue until speculative excesses get corrected first. He’s not buying stocks bonds, or any paper assets “inflated” by central banks, or residential or commercial real estate.

“What I believe in this point is hard assets and alternative assets…physical gold, physical silver, some bitcoin and then some survival-type investments…homestead out the country, ranch, farmland,” he says.

As for those excesses, he refers to a chat he had with MarketWatch in 2018 when he warned that household wealth had been dangerously outpacing the economic expansion. At the time of the article, household wealth as a share of nominal gross domestic product was at 505%, vs. 473% in the housing bubble peak, 429% in the dot-com bust and an average of 371% since 1951.

He says the latest data shows that ratio reached 545% in the fourth quarter of 2019. “We could very well erase this entire rally in household wealth and my whole point is that…a 3-week correction is not enough to erase 11 years of asset price inflation,” he says.

He points to another chart showing overvalued assets — the ratio of the total market capitalization of all U.S. stocks to GDP, a favorite of Berkshire Hathaway’s

BRK.A, -3.95%

BRK.B, -3.76%

 Chairman Warren Buffett.

He says it isn’t impossible we’d drop back to 1980 levels and then some. “When a secular bear market occurs, prices won’t just go down to historic averages and stop. A lot of times they overshoot.”

The market


YM00, +1.54%,


ES00, +1.42%

and Nasdaq

NQ00, +0.98%

futures are climbing, as oil

CL00, +9.26%

 jumps after President Donald Trump says that Saudi-Russia oil spat will be resolved. European stocks

SXXP, +0.44%

are also up, while Asian markets

ADOW, -0.47%

finished mixed. Gold

GC00, +0.96%

is moving higher.

The tweet
The chart

When do the lockdowns end? Deutsche Bank’s chart takes a stab at it. Analysts note their forecasts depends on how the epidemic curve progresses in each country. Spoiler alert — hay fever might all but disappear.

The buzz

Global coronavirus cases have neared 950,000 and Trump may ban domestic flights between outbreak hot spots. Higher virus levels are proving more lethal, Italy has been undercounting its dead, Florida has now shut down, but California Gov. Gavin Newsom wants everyone else to get on board. Award-winning songwriter Adam Schlesinger and a New Orleans jazz patriarch have died from the virus.

The Federal Trade Commission is suing to unwind tobacco maker Altria’s

MO, -2.74%

 $12.8 billion investment in e-cigarette group Juul Labs over antitrust claims.

Random reads

Here’s what might survive 2020, but be far less popular.

Teaching his dog to drive lands man in jail.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Follow MarketWatch on Twitter, Instagram, Facebook.

Original source link

Dow slides more than 600 points as Trump’s warning on coronavirus puts investors on edge

Stocks fell early Wednesday after President Donald Trump warned that a “very, very painful” two weeks lies ahead for the country in face of a rapidly spreading COVID-19 pandemic.

The pandemic has raised fears the world’s largest economy is experiencing an unprecedented disruption to industries, small businesses and households, after leaving U.S. equities with their worst quarterly performance since 2008 in the first quarter.

What are major indexes doing?

The Dow Jones Industrial Average

DJIA, -3.14%

  fell 674 points, or 3.1%, to 21,243. The S&P

SPX, -3.29%

 slipped 84 points, or 3.2%, to 2,501. The Nasdaq Composite

COMP, -2.82%

  shed 199 points, or 2.6%, to 7,501.

Stocks ended lower on Tuesday, capping a quarter that saw stocks tumble from February records into a bear market at record speed. The Dow logged a 23.2% quarterly fall, its biggest first-quarter drop on record and biggest quarterly decline since 1987. The S&P 500 fell 20% for its biggest quarterly selloff since the final three months of 2008. The Nasdaq Composite fell 14.2% for the quarter.

Read: Here’s how the stock market tends to perform after brutal quarters

What’s driving the market?

A continued rise in COVID-19 cases in the U.S. and around the world weighed on equities, with Trump warning late Tuesday that a “very, very painful” two weeks lies ahead for the country. The White House released new projections for 100,000 to 240,000 deaths in the U.S. from the coronavirus pandemic even if current social distancing guidelines are maintained.

See: Dow faces crucial April test as coronavirus pandemic brings ‘blizzard of bad news’

The number of COVID-19 cases world-wide rose to 862,234 on Wednesday, while the number of deaths rose to 42,404 according to data from Johns Hopkins Unviversity. The U.S. has the most number of cases world-wide, at 189,633, and 4,081 deaths.

“The grim situation world-wide makes it inevitable that major economies will suffer a severe downturn and the prospect of a prolonged period of business shutdowns is likely to weigh on equity markets for at least the next few weeks, if not months,” said Raffi Boyadjian, senior investment analyst at XM, in a note.

The U.S. labor market saw growing cracks as businesses curtailed hiring and shed workers. Automatic Data Processing reported the U.S. economy lost 27,000 private-sector jobs in March, though the data is expected to be of little use in predicting the official unemployment numbers due on Friday due to distortions created by the pandemic.

In other U.S. data published Wedneday, the IHS Markit final U.S. March manufacturing PMI fell to 48.5 from initial 49.2. A reading of the index below 50 indicates contraction in activity.

The Institute for Supply Management’s March U.S. manufacturing index is due at 10 a.m. Eastern is expected to fall to 44% from 50.1% in February. A reading below 50 indicates a contraction in activity.

Meanwhile, expectations are growing for another round of fiscal stimulus following the passage last week of a $2 trillion relief package.

As Washington considers other steps for responding to the coronavirus pandemic and the resulting economic damage, Trump and House Speaker Nancy Pelosi both have suggested a “Phase 4” package could include spending on infrastructure.

Which companies were in focus?


XRX, -4.22%

  dropped its $35 billion hostile bid for HP Inc.

HPQ, -8.09%

 , saying it was prioritizing its response to the outbreak over all other considerations. The company’s shares were down more than 2%.

Shares of T-Mobile US Inc.

TMUS, -0.04%

  were up slightly after the network provider officially closed its merger with Sprint.

Whiting Petroleum

WLL, -43.32%

filed for bankruptcy and said it had agreed with some of its debtholders to pursue a financial restructuring. Under the proposed terms, it would hand 97% of any new equity to its bondholders. Low crude prices have put oil companies under pressure, raising the likelihood that the U.S. energy sector will see a spate of defaults.

How did other markets trade?

Government bond yields extended their drop, with the yield on the 10-year U.S. Treasury

TMUBMUSD10Y, -10.33%

 tumbling 10 basis points to 0.602%.

Oil prices traded near depressed levels, with the price of a barrel of West Texas Intermediate crude oil

CLK20, -0.88%

  for May delivery was virtually flat at $20.47 a barrel on the New York Mercantile Exchange. In precious metals, gold

GCJ20, -0.42%

  for June delivery fell $6.80, or 0.4%, to trade at $1,576.60 an ounce on Comex.

The U.S. dollar

DXY, +0.54%

  rose 0.6% against a basket of its major trading partners, according to the ICE U.S. Dollar index.

European stocks traded sharply lower, with the STOXX Europe 600 index

SXXP, -2.77%

  down more than 3.2%. In Asia overnight, stocks reported similar losses. The China CSI 300

000300, -0.30%

 was down 0.3%, and Japan’s Nikkei 225

NIK, -4.50%

  booked a 4.5% decline on Wednesday.

Original source link

Stockpiling triggers boom in grocery sales as self-isolating Brits buy 22% more alcohol

Christmas came early for U.K. grocers as supermarket sales in March trumped those usually posted over the festive period and broke all records, new data show.

Households facing lengthy lockdowns appear to have panic bought long-life items such as pasta, rice and tins of vegetable, as they splashed out a hefty £10.8 billion ($13.4 billion) over the past four weeks at Britain’s grocers, according to latest figures from market research firm Kantar.

The widely followed data give the first insight into the effect stockpiling has had on supermarket sales as investors look to food retailers, such as Tesco

TSCO, -1.84%,


SBRY, +0.10%

and Morrison

MRW, -2.41%,

which are increasingly being seen as defensive stocks during the crisis. The U.K’s third biggest player, Asda, is owned by Walmart

WMT, -1.36%,

which has said it is reviewing its options for the chain. Developments in the U.K. grocery market could be seen as a playbook for the U.S., which is slightly behind Britain in terms of the coronavirus crisis.

Read: Resurgent Tesco stock could have more good news ahead

Fraser McKevitt, head of retail and consumer insight at Kantar, said: “Retailers and their staff have been on the frontline as households prepare for an extended stay at home, with grocery sales amounting to £10.8 billion during the past four weeks alone — that’s even higher than levels seen at Christmas, the busiest time of year under normal circumstances.

“Growth has been primarily driven by people making additional shopping trips and buying slightly more, rather than a widespread increase in very large trolleys,” or shopping carts, full of purchases.

In the four days between March 16 and March 19, a Monday-through-Thursday span, 88% of households visited a grocer, making five trips on average — adding up to 42 million extra shopping trips in less than a week.

Read: U.K. grocer Sainsbury is placing big bets, and here’s how that could boost the stock

McKevitt said: “With restaurants and cafés now closed, none of us can eat meals on the go any longer and an extra 503 million meals, mainly lunches and snacks, will be prepared and eaten at home every week for the foreseeable future.

Those missing the pub have been stocking up on booze to recreate trips to their favorite haunts, some of them socializing with friends over apps like Houseparty and FaceTime. The Kantar data show alcohol sales were boosted by 22%, an additional £199 million, in the past month, as Brits hit the bottle.

Clive Black, an analyst at broker Shore Capital, warned: “With so much stocking up, consumption of filled-up larders and freezers is likely to lower near-term U.K. grocery demand.”

While the economic shadow of the coronavirus crisis could be long and dark, he offers some optimism: “From a relative perspective, that may enhance the attractiveness of the U.K. supermarkets as equity investment plays, as their defensiveness, free cash generation, liquidity and solvency shines through.”

Original source link