Financial Stocks – What They Are & Why Should You Invest in Them

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The financial sector is one of the darling sectors on Wall Street for good reasons. Financial stocks are known for steady, reliable growth that outpaces the rate of inflation. At the same time, the sector comes with some of the best dividends on the market.  

Perhaps that’s why two of the largest holdings in the legendary value investor Warren Buffett’s portfolio are in the financial sector. 

But what exactly are financial stocks, what are the pros and cons of investing in them, and how much of your investment dollars should you allocate to the sector? Read on to find out!


What Are Financial Stocks?

The financial sector is a broad category of companies that work in the financial services industry. The sector includes:


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  • Retail and Commercial Banks and Lenders. Banks and lenders offer deposit accounts like checking and savings accounts and loans like mortgages and auto loans. Two of the most popular companies in this subcategory include Bank of America (BAC) and Wells Fargo (WFC). 
  • Asset Managers and Investment Banking Services. Brokerages, investment banks, and other companies that provide services surrounding the management of assets fall into this subcategory. Some of the most popular players in this corner of the financial sector include JPMorgan (JPM) and Morgan Stanley (MS). 
  • Credit Card Companies. Credit card companies, also known as card issuers, offer revolving loans that can be accessed at the point of purchase using a credit card. Some of the most popular players in this space include Citi (C) and American Express (AXP). 
  • Fintech Companies. Fintech companies blend finances with technology to provide services that make managing your finances easier. Some of the most popular fintech players include Block (SQ) — previously Square — and PayPal (PYPL). 
  • Insurance Companies. Insurance companies that provide health, life, auto, home, and other forms of insurance fall into the financials category. Metlife (MET) and Humana (HUM) are some of the most popular insurance stocks. 

Pros & Cons of Financial Stocks

As with any other sector, there are advantages and disadvantages to investing in the financial sector. Although the sector is known for stable growth and dividends, it’s not the best option if you’re looking for market-leading price appreciation. Some of the most important pros and cons to consider before investing in the space are detailed below.

Pros

The financial sector offers a relatively low-risk way to access stable growth and dividends, but that’s not the only perk of investing in the sector. Some of the biggest advantages of financial stocks include:

  1. Lower Risk. The financial sector comes with lower risk than some other sectors like technology and health care. This stability has improved significantly in recent years. According to Davis Funds, the largest U.S. banks are now holding record volumes of cash on their balance sheets thanks to lessons learned during the financial crisis of 2008. Stock prices tend to be more stable in the sector as well. 
  2. Dividend Income. Financial stocks are known for providing strong dividend payments. As of mid-2022, the sector produced a 3.11% average dividend yield, according to Dividend.com. 
  3. Strong Growth When Interest Rates Rise. Banks make more money when the Federal Reserve increases the Fed funds rate. As inflation rises, the Federal Reserve has hinted at steady increases throughout the foreseeable future, which suggests bank stocks are worth your attention. 
  4. Outpace Inflation. Historically, financial sector investment returns have significantly outpaced the rate of inflation, making them a great inflation hedge.  

Cons

Although there are plenty of reasons to consider diving into financial stocks, there are also a few big drawbacks that you should consider before taking the plunge. 

  1. Financials Aren’t Strong Growers. Financial stocks are known for steady growth, not necessarily strong growth. If you’re looking for growth stocks, you may find a few in the fintech space, but growth investors will be better served by stocks in the tech sector.  
  2. Lower Earning Potential When the Fed Funds Rate Is Low. Although the Federal Reserve has hinted at increasing its rate ahead, the rate is currently below 1%. This low rate means companies in the sector, particularly lenders, have limited revenue potential.  
  3. Lack of Excitement. The best investments are educated investments, meaning you need to research opportunities to be successful in the market. Unfortunately, the financial sector isn’t sexy like technology and biotechnology is for most people. The research process to evaluate financial companies may be daunting for some investors.

Should You Invest in Financial Stocks?

Financial stocks fit well into most investment portfolios. Even aggressive investors who seek to beat the market find them useful as a means of diversification. Nonetheless, there are some investors who won’t find diversification with these assets beneficial. 

You might be a great candidate to invest in financial stocks if:

  • You’re an Income Investor. The financial sector is known for providing some of the strongest dividends on the market today. So, income investors benefit from the outsize dividend yields that come with investments in some of the most established companies in the industry. 
  • You’re Risk-Averse. If you have a low to moderate appetite for risk, financial stocks may be a great home for your investment dollars. These stocks are known for relatively low volatility when compared to stocks in other sectors, and most banks have beefed up their cash and cash equivalent holdings since 2008, making them a force to be reckoned with on the financial stage. 
  • You’re an Aggressive Investor Who Needs Balance. If you’re an aggressive investor who wants to beat the market, chances are you’ll want to invest most of your assets in other sectors. However, you can use financial stocks as a way to diversify your holdings and reduce the overall risk in your portfolio. 
  • You’re a Beginner. If you’re a beginner investor, it’s best to stick with large, safe companies that you know and do business with before venturing into other investments. Financial institutions often fit this bill. In fact, one of the best first investments you can make is often an investment in the stock of the bank you use. That is, as long as you work with a major financial institution. 

How Much of Your Portfolio Should You Allocate to Financial Stocks?

The amount of allocation you should direct to the financial sector is heavily dependent on your goals and risk tolerance. Here’s how you should decide how much to invest in financial stocks: 

  • Your Goals. Your goals play an important role in determining the best style of investing. If your goals include producing slow, yet meaningful and stable gains while generating income from your investments, the financial sector is a great place to start. Consider allocating a large portion of your stock portfolio to stocks in the sector. However, if you want to produce market-leading gains and you’re not so concerned about income, minimal allocation to financials is best. 
  • Your Risk Tolerance. Financial stocks experience less volatility than stocks in other sectors and are known for maintaining a hefty sum of cash on their balance sheets. As a result, they’re relatively low-risk plays. If you have a low-to-moderate risk tolerance, a large allocation to financials fits the bill. However, if you have a moderate-to-high risk tolerance, you may want to keep allocation to the sector to a minimum. 
  • Your Need for Investment Income. Financial stocks are a great option for retirees because they’re known for high dividend yields. Financial stocks are a great option if you depend on the income your investments generate. So, if you’re a retiree, a heavy allocation to this sector is warranted. 

Don’t forget your safe-haven allocation. Fixed-income investments, gold, and other safe havens protect you from significant losses when stocks take a dive. So, always keep safe havens in mind when determining your portfolio’s asset allocation.  


Consider Financial ETFs

If you don’t know how to research and maintain a balanced portfolio of stocks or don’t have the time to do it, you have another option. You can invest in financial exchange-traded funds (ETFs).  

These funds collect investment dollars from a group of investors to purchase financial stocks and other securities. When the stocks rise in value, investors share in the price appreciation. Moreover, when the stocks held in the fund’s portfolio pay dividends, shareholders receive their share of dividends based on the number of ETF shares they own. 

The best part is that financial ETFs are managed by professionals yet very inexpensive to tap into. With a little research on the best performing funds in the financial sector, you can take a largely hands-off approach to financial sector exposure. 

The best financial ETF for you depends on your investment goals. Popular financial ETFs on the market today include the Financial Select SPDR Fund (XLF), the Vanguard Financials ETF (VFH), and the SPDR S&P Regional Banking ETF (KRE). 


Final Word

Financial stocks are a great addition to just about any investment portfolio. If you’re an income investor or a risk-averse investor, you’ll enjoy the relatively stable price appreciation and meaningful dividends in the financial sector. If you’re a more aggressive investor who’s interested in growth, financial stocks are a great way to bring balance to your portfolio through diversification. 

It’s no wonder that nearly every investing mogul from Warren Buffett to George Soros seems to have at least some allocation to the sector. 

Financial stocks tend to do best when economic conditions are positive and interest rates are on the rise. As of mid-2022, that seemed to be the case. Consumer prices are rising, and the Federal Reserve has hinted at coming interest rate hikes that will bode well for financial corporation profitability. This suggests financial stocks will head up moving forward.

However, not all stocks in the financial sector are created equal. Some grow while others fall. Some pay dividends while others don’t. Simply put, some are winners and some are losers. Always do your research and get a good understanding of what you’re investing in before risking your hard-earned money. 

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Joshua Rodriguez has worked in the finance and investing industry for more than a decade. In 2012, he decided he was ready to break free from the 9 to 5 rat race. By 2013, he became his own boss and hasn’t looked back since. Today, Joshua enjoys sharing his experience and expertise with up and comers to help enrich the financial lives of the masses rather than fuel the ongoing economic divide. When he’s not writing, helping up and comers in the freelance industry, and making his own investments and wise financial decisions, Joshua enjoys spending time with his wife, son, daughter, and eight large breed dogs. See what Joshua is up to by following his Twitter or contact him through his website, CNA Finance.

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Stock Market Today: May Delivers One Final Roller-Coaster Ride

May’s final session was a fitting one for a wild month, with the major indexes swinging up and down Tuesday before closing in the red.

Over the Memorial Day weekend, Federal Reserve Governor Christopher Waller said during a speech in Germany that he expects 50-basis-point interest-rate increases to continue into the later part of the year – a departure from previous dovish statements from Fed members suggesting hikes of that magnitude would be limited to the next two summer meetings.

That sent bond yields spiking Tuesday, with the 10-year Treasury yield reaching as high as 2.88%.

“It is really too bad that the Fed can’t learn to speak with one voice on this,” says Dean Smith, portfolio manager and chief strategist of investment technology platform FolioBeyond. “The constant seesaw from hawkish to dovish is increasing uncertainty in the market and in the economy. The ‘buy-the-dip’ mentality that has been nurtured in a generation of investors is being supported and encouraged by these carelessly dovish Fed speakers. In the end, all it does is make their job harder.”

Also Tuesday, the Federal Reserve’s preferred gauge of inflation – the core personal consumption expenditures (PCE) price index – rose by 4.9% year-over-year and 0.34% month-over-month, which was more than expected.

“The April increase represents the third month of more muted, but still solid, increases,” UBS analysts note.

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The consumer discretionary (+0.5%) and communication services (-0.1%) sectors were the best performers in a largely down day. That was largely thanks to Amazon.com (AMZN, +4.4%), whose shareholders on Friday approved a 20-for-1 AMZN stock split set to take effect June 6; that lifted spirits at Alphabet (GOOGL, +1.3%), which intends on executing its own 20-for-1 GOOGL/GOOG stock split in July. (Indeed, 2022 is shaping up to be quite a busy year for stock splits.)

That helped the Nasdaq Composite deliver the smallest loss among the major indexes Tuesday: a 0.4% decline to 12,081. However, the tech-heavy index posted a 2.1% decline for the entire month. The S&P 500 (-0.6% to 4,132) finished May marginally higher, however, as did the Dow Jones Industrial Average (-0.7% to 32,990).

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Other news in the stock market today:

  • The small-cap Russell 2000 slid 1.3% to 1,864.
  • Gold futures declined 0.5% to $1,848.40 ounce, clinching the yellow metal’s second consecutive monthly decline.
  • U.S. crude oil futures were down 0.4% to $114.67 per barrel, good for a nearly 10% gain in the commodity across May. Oil had a back-and-forth session; gains from the European Union’s agreement to ban most Russian crude oil imports were negated after a report that OPEC+ was considering suspending Russia from its oil-output deal.
  • Bitcoin rebounded hard during the long weekend, improving by roughly 10% to $31,649 from its Friday afternoon prices. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 

As Red Flags Mount, Stock Up on Quality

A few cracks are starting to show in the American economic engine. Wealth management firm Glenmede’s Jason Pride and Michael Reynolds say that several U.S. leading indicators are signaling slowing growth.

“Last week, the Flash Composite PMI, which tracks the manufacturing and services sectors, fell,” they say. “The latest round of retail earnings reflects slowing demand as consumers grapple with higher costs and pivot their spending from goods to services. The housing market is starting to show signs of softening as sales of newly built homes fell 16.6% in April from March (rising mortgage rates are reducing buyer demand).”

This has Glenmede’s recession model projecting a 10% probability of recession within the next 12 months, up from 0% projections to start the year.

That’s the kind of environment that, unlike the year-plus of rip-roaring gains out of the COVID bottom, necessitates selectivity – every stock pick isn’t just going to stick to the wall, so to speak. Defensively minded investors, for instance, will want to focus on stocks that seem best positioned to perform in bear markets. Dip-buyers will need to make a distinction between “cheap” and “undervalued” – the latter you’re likely to find in these high-growth-potential stocks boasting low prices.

And on the whole, it pays to invest in the best of the best. These 10 S&P 500 stocks, for instance, represent the best the index has to offer right now, in the eyes of Wall Street’s analyst community. Each of them is teeming with bullish pros who believe they have anywhere between 20% to 110% upside over the next year.

Source: kiplinger.com

What Is Market Overhang?

Market overhang is a market phenomenon whereby investors hold off trading a stock that’s seen a drop in price, because the expectation is the price will drop even further.

A market or stock overhang can be precipitated by the awareness that a large block of shares — say, from an institutional investor — is about to hit the market, potentially driving a stock’s price down. But it can result from other factors as well. Although the event has not happened, investors may hesitate to sell or buy shares in anticipation of price drop — and this can further depress the stock price.

While there is also a business use of the term “overhang,” we’ll primarily focus on how market overhang works in finance and what it means for investors.

Market Overhang Definition

In its broadest use, an overhang describes a somewhat artificial market condition brought on by an anticipated shift in supply and demand (a.k.a. the price of a stock). Market overhang has a couple of uses in the business and finance worlds, and in an IPO market as well.

What Is an Overhang in Business?

An overhang in a business context can refer to the practice whereby a company, typically an industry leader, delays the release of a new product in order to stoke greater consumer demand for that product.

A familiar example might be the release of a new technology product or video game. The anticipation of the new release may cause consumers to avoid buying other products as they wait for the arrival of the new one. The overhang may result in lower purchases for existing products — and higher purchases of the newly released product. While this practice can be considered manipulative, it’s not uncommon.

What Is an Overhang in Finance?

More commonly: An overhang in finance is used to describe a dynamic that’s specific to how investors’ expectation about supply and demand can impact a company’s share price.

A market overhang is when a stock’s price declines because investors expect a further price drop on the horizon. Thus, some shareholders may hesitate to sell their shares, because that could further drive down the share price. Other investors may also hesitate to buy shares because of the anticipated price drop.

The business use of the term and the finance use describe different situations, but the common element is how investors’ anticipation of a future event can impact a company’s revenues or share price.

Needless to say, a market overhang can cast a shadow over a company’s performance, influencing share price, liquidity, and more, especially if the situation is prolonged. In many cases, though, market overhang is relatively short-lived and temporary. The difficulty for investors is knowing when the overhang, like bad weather, is finally going to pass. To that end, it helps to know some conditions that can cause a market overhang.

How Market Overhang Is Created

There are a few conditions that can lead to a market overhang. Often these conditions can overlap.

A Stock Decline

The first is where a stock is already declining, perhaps owing to a change in key economic indicators or market conditions, and there is a buildup of selling pressure as investors hesitate to let go of their shares in a down market. This type of market overhang may be resolved once there are signs of price stability (even if it’s at a lower level).

The Role of Institutional Investors

Another type of stock overhang can be created by institutional investors — or companies that manage investments on behalf of clients or members of a firm. Institutional investors tend to have a larger stake in a particular stock compared with individual investors. This means that when the institutional investor plans to sell a large portion of their shares, a market overhang could kick in when investors become aware of this possible sale.

The anticipation of a large block of shares entering the market could drive prices down, and thus investors might hold off trading this particular stock — impacting its price, even before the institutional investor has made a move.

The stock overhang might be worse if it occurs during a price decline. In that case, investors may see the decline in share price, become aware that a large investor may sell a block of shares (which could further depress the price), become even more wary of buying or selling the company’s shares.

IPOs and Market Overhang

A third way that market overhang may occur is after an initial public offering (IPO). An IPO market can be a hot market, after all, and a company may get significant press coverage as its IPO approaches, which can drive up the stock price.

But if the IPO isn’t a big hit, and the share price isn’t what investors hoped (in IPO terms), there might be a bit of an overhang as investors wait for the lock-up period to end. The lock-up period is when company insiders can sell their shares, potentially flooding the market and further lowering the price.

Understanding the Effects of Market Overhang

Market overhang can last for a few weeks or even months — sometimes longer. The chief impact of a market overhang is that it can artificially depress the price of a stock, and if the market overhang is prolonged, that can have a negative impact on company performance.

As noted above, a market overhang typically ends when a stock price stabilizes. Unfortunately that often occurs at a lower price point than before the shares began to decline.

Example of Market Overhang

While some consider the market overhang phenomenon more anecdotal than technical, it’s something to watch out for. It could present an opportunity. And it doesn’t require a complicated, technical stock analysis to understand.

For example, let’s say a large tech company is trading at $300 a share. But there are reports that the company has been facing some headwinds, and it may undergo a rebranding and repositioning. In the face of this change and uncertainty, it’s natural that it might impact company performance and the share price might wobble a bit. But then, if enough investors are concerned about the company’s “new direction,” there could be a bigger shift in trading behavior that might further depress the share price in advance of the company pivot — creating an overhang.

While this isn’t ideal for current shareholders, a market overhang like this could be a “buy” opportunity for other investors. It depends on a number of factors, and it’s always important to understand market trends as well as company fundamentals. But it’s possible that some investors may view the company as a good prospect, despite a currently undervalued share price, and buy shares with the hope they might rise to their previous levels.

Why Market Overhang Matters

Market overhang is a valuable phenomenon for investors to be aware of, largely because it reflects many of the basic tenets of behavioral finance, which is the study of how emotions can impact financial choices. A market overhang could be viewed as the result of loss aversion and herd mentality — two well-documented behavioral patterns among investors.

Loss aversion is, as it sounds, the wish to avoid incurring losses. Herd mentality is, not surprisingly, the tendency for investors to behave as a group: buying or selling in waves. You can see how these two very human impulses — to protect oneself from losses, and to follow the herd — might create a market overhang.

The good news, though, is that investors are capricious and markets can be volatile, which means the market overhang will usually pass, and the stock will regain its normal momentum, whatever that may be. As an investor witnessing the changing weather, so to say, it’s up to you whether a stock overhang might present a buy opportunity or a sell opportunity — if you need to harvest some losses, for tax purposes.

What Market Overhang Means for Shareholders

Market overhang affects different shareholders differently. Since institutional investors tend to be the ones who create market overhang, they also tend to have the upper hand on what it means for their investments.

Regular investors might worry that some of their shares are losing value. But with the ebbs and flows of the stock market, a price can rise and fall at various times throughout the year — even throughout a given day. Fluctuation is normal and this is part of the risk in investing in the stock market. Consider waiting out the storm to make an informed decision. There’s a chance the stock could rise to new highs and your investment will be worth even more.

The Takeaway

What is a market overhang? While this type of trend is considered more behavioral in nature, it’s worthwhile for investors to keep it in mind when a stock isn’t performing as expected. In some cases, when investors anticipate an event that could drive down a stock’s price, they may hold off on trading that stock, further depressing the price and creating a market overhang.

In that sense, a market overhang can become a self-fulfilling prophecy. Institutional investors can create a market overhang, for example, when they contemplate selling a large portion of their holdings. This might spook other investors, who likewise decide not to trade their shares, creating a sort of temporary downward spiral in the share price. But because two common investor dynamics are at play here — the fear of losses, and the desire to comply with what other investors are doing — the emotions are usually temporary, and the market overhang passes. And just because a price decline might upset some investors, it could present a buying opportunity for others.

If you’re ready to start your own portfolio, consider opening an Active Invest self-directed brokerage account with SoFi Invest. You can set it up easily on your phone or laptop, and start trading stocks, ETFs, crypo, IPO shares, and more. SoFi members even have access to complimentary financial advice from professionals. Get started investing for your future today!


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Stock Market Today: Stocks Snap Weekly Losing Streak

Stocks headed into the long weekend on a high note with all three major indexes posting gains for the week for the first time in a long time. As a a reminder, markets will be closed this Monday, May 30, for Memorial Day.

Boosting investor sentiment today was the latest inflation update, with this morning’s report from the Commerce Department showing that the core personal consumption expenditures (PCE) price index – which excludes energy and food prices – rose 4.9% annually in April. While this pace is still elevated, it’s down from the 5.2% year-over-year rise seen in March. 

Separate data showed consumer spending was up 0.9% sequentially last month. However, the personal savings – or, savings as a percentage of disposable income – rate fell to 4.4% from March’s 5.0%.

The drop in the savings rate indicates “U.S. consumers are now starting to chip away at those much-ballyhooed excess savings [accumulated during the pandemic], to help pay for the spurt in food and energy costs,” says Douglas Porter, chief economist at BMO Capital Markets. 

But even with that money already spent, there’s still an estimated $2.3 trillion, or more than 9% of gross domestic product, in savings, he adds. “True, they are not well distributed across income cohorts – hence the wildly differing experiences by varying retailers. But, even if just a third of these pandemic savings are spent, this will readily support overall outlays through 2023,” Porter says.

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A round of well-received earnings reports from several tech firms like software maker Autodesk (ADSK, +10.3%), IT solutions firm Dell Technologies (DELL, +12.9%) and integrated circuit specialist Marvell Technology (MRVL, +6.7%) also buoyed the broader markets.

At the close, the Dow Jones Industrial Average was up 1.8% at 33,213, the S&P 500 Index was 2.5% higher at 4,158 and the Nasdaq Composite had gained 3.3% to 12,131. 

For the week, the Dow rose 6.2% to snap its eight-week losing streak, while the S&P 500 (+6.6%) and Nasdaq (+6.8%) held their consecutive weekly declines to seven.

stock price chart 052722stock price chart 052722

Other news in the stock market today:

  • The small-cap Russell 2000 rose 2.7% to 1,887.
  • Gold futures edged up 0.2% to settle at $1,851.30 an ounce.
  • Bitcoin did not participate in today’s broad-market rally, sinking 2.0% to $28,779.96. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • Ulta Beauty (ULTA) jumped 12.5% after the cosmetics retailer said revenue jumped 21% year-over-year in its first quarter to $2.3 billion, while earnings soared 53.4% to $6.10 per share, both figures more than analysts were expecting. “We believe [ULTA’s earnings] clearly demonstrates that beauty spending is recovering strongly as households feel more comfortable in re-engaging in pre-pandemic routines,” says UBS Global Research analyst Michael Lasser (Buy). “Plus, ULTA is executing nicely and gaining share in the process.”
  • Red Robin Gourmet Burgers (RRGB) surged 25.1% after the burger chain reported a slimmer-than-expected loss and higher-than-anticipated revenue for its first quarter. RRGB also said same-store sales were up an impressive 19.7% over the three-month period. “We see multiple tailwinds at off-premium and structural efficiencies from [Red Robin’s] menu/labor model that give us confidence in continued momentum through 2022 and 2023,” says Jefferies analyst Alexander Slagle (Buy). “We believe risk/ reward for RRGB at current valuation is among the most attractive at trough multiples relative to category peers, and see tangible drivers of same-store sales upside beyond the near term that have yet to be fully reflected at current levels.”

Is it Too Late to Buy Energy Stocks?

Worried you’ve missed the runup in energy stocks? Several macro catalysts such as sizzling inflation, short-term supply and demand dynamics and the Ukraine war have boosted oil prices in 2022. U.S. crude futures tacked on 0.9% on Friday to settle at $115.07 per barrel, bringing their weekly gain to 4.3%. This helped fuel a more than 8% weekly gain for the energy sector, bringing its year-to-date return to 59.4%. 

“With commodity prices up and inflation creating waves, is it too late for investors to capitalize on high commodity prices?” asks Lucas White, portfolio manager at asset management firm GMO.

No, the strategist says – for a number of reasons, including the fact that energy sector components are still considered value stocks. “Though commodities are up, resource companies trade at more than a 60% discount relative to the S&P 500, a level that has almost never been seen,” White explains, adding that the recent spike in commodity prices has yet to flow through to companies’ fundamentals – meaning investors can still expect strong returns going forward. 

For those looking to capitalize on the red-hot sector, there are plenty of energy stocks to choose from, including high-yielding master limited partnerships (MLPs). But for those looking for more diversified exposure to high oil prices, may we suggest this list of energy exchange-traded funds (ETFs). The funds featured here sport a variety of strategies that should help investors leverage any additional gains in oil and natural gas.

Source: kiplinger.com

What Is Dividend Yield?

A stock’s dividend yield is how much the company annually pays out in dividends to shareholders, relative to its stock price. The dividend yield is a ratio (dividend/price) expressed as a percentage, and is distinct from the dividend itself.

Dividend payments are expressed as a dollar amount, and supplement the return a stock produces over the course of a year. For an investor interested in total return, learning how to calculate dividend yield for different companies can help to decide which company may be a better investment.

But bear in mind that a stock’s dividend yield will tend to fluctuate because it’s based on the stock’s price, which rises and falls. That’s why a higher dividend yield may not be a sign of better value.

Keep reading to understand how to calculate dividend yield, and how to use it as a metric in your investment choices.

How to Calculate Dividend Yield

What is dividend yield, exactly, and how does it differ from dividends?

•   Dividends are a portion of a company’s earnings paid to investors and expressed as a dollar amount. Dividends are typically paid out each quarter (although semi-annual and monthly payouts are common). Not all companies pay dividends.

•   Dividend yield refers to a stock’s annual dividend payments divided by the stock’s current price, and expressed as a percentage. Dividend yield is one way of assessing a company’s earning potential.

What Is the Dividend Yield Formula?

Now to answer the question: How to calculate dividend yield? The dividend yield formula is more of a basic calculation than a formula: Dividend yield is calculated by taking the annual dividend paid per share, and dividing it by the stock’s current price.

Annual dividend / stock price = Dividend yield (%)

How to Calculate Annual Dividends

Investors can calculate the annual dividend of a given company by looking at its annual report, or its quarterly report, finding the dividend payout per quarter, and multiplying that number by four. For a stock with fluctuating dividend payments, it may make sense to take the four most recent quarterly dividends to arrive at the trailing annual dividend.

It’s important to consider how often dividends are paid out. If dividends are paid monthly vs. quarterly, you want to add up the last 12 months of dividends.

This is especially important because some companies pay uneven dividends, with the higher payouts toward the end of the year, for example. So you wouldn’t want to simply add up the last few dividend payments without checking to make sure the total represents an accurate annual dividend amount.

Example of Dividend Yield

If Company A’s stock trades at $70 today, and the company’s annual dividend is $2 per share, the dividend yield is 2.85% ($2 / $70 = 0.0285).

Compare that to Company B, which is trading at $40, also with an annual dividend of $2 per share. The dividend yield of Company B would be 5% ($2 / $40 = 0.05).

In theory, the higher yield of Company B may look more appealing. But investors can’t determine a stock’s worth by yield alone.

Dividend Yield: Pros and Cons

For investors, there are some advantages and disadvantages to using dividend yield as a metric that helps inform investment choices.

Pros

•   From a valuation perspective, dividend yield can be a useful point of comparison. If a company’s dividend yield is substantially different from its industry peers, or from the company’s own typical levels, that can be an indicator of whether the company is trading at the right valuation.

•   For many investors, the primary reason to invest in dividend stocks is for income. In that respect, dividend yield can be an important metric. But dividend yield can change as the underlying stock price changes. So when using dividend yield as a way to evaluate income, it’s important to be aware of company fundamentals that provide assurance as to company stability and consistency of the dividend payout.

Cons

•   Sometimes a higher dividend yield can indicate slower growth. Companies with higher dividends are often larger, more established businesses. But that could also mean that dividend-generous companies are not growing very quickly because they’re not reinvesting their earnings.

   Smaller companies with aggressive growth targets are less likely to offer dividends, but rather spend their excess capital on expansion. Thus, investors focused solely on dividend income could miss out on some faster-growing opportunities.

•   A high dividend yield could indicate a troubled company. Because of how dividend yield is calculated, the yield is higher as the stock price falls, so it’s important to evaluate whether there has been a downward price trend. Often, when a company is in trouble, one of the first things it is likely to reduce or eliminate is that dividend.

•   Investors need to look beyond yield to the type of dividend they might get. And investor might be getting high dividend payouts, but if they’re ordinary dividends vs. qualified dividends they’ll be taxed at a higher rate. Ordinary dividends are taxed as income; qualified dividends are taxed at the lower capital gains rate, which typically ranges from 0% to 20%. If you have tax questions about your investments, be sure to consult with a tax professional.

Pros and Cons of Dividend Yield

Pros Cons
Can help with company valuation. Dividend yield can indicate a more established, but slower-growing company.
May indicate how much income investors can expect. Higher yield may mask deeper problems.
Yield doesn’t tell investors the type of dividend (ordinary vs. qualified), which can impact taxes.

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The Difference Between Dividend Yield and Dividend Rate

As noted earlier, a dividend is a way for a company to distribute some of its earnings among shareholders. Dividends can be paid monthly, quarterly, semi-annually, or even annually (although quarterly payouts tend to be common in the U.S.). Dividends are expressed as dollar amounts. The dividend rate is the annual amount of the company’s dividend per share.

A company that pays $1 per share, quarterly, has an annual dividend rate of $4 per share.

The difference between this straight-up dollar amount and a company’s dividend yield is that the latter is a ratio. The dividend yield is the company’s annual dividend divided by the current stock price, and expressed as a percentage.

What Is a Good Dividend Yield?

Two companies with the same high yields are not created equally. While dividend yield is an important number for investors to know when determining the annual cash flow they can expect from their investments, there are deeper indicators that investors may want to investigate to see if a dividend-paying stock will continue to pay in the future.

A History of Dividend Growth

When researching dividend stocks, one place to start is by asking if the stock has a history of dividend growth. A regularly increasing dividend is an indication of earnings growth and typically a good indicator of a company’s overall financial health.

The Dividend Aristocracy

There is a group of S&P 500 stocks called Dividend Aristocrats, which have increased the dividends they pay for at least 25 consecutive years. Every year the list changes, as companies raise and lower their dividends.

Currently, there are 65 companies that meet the basic criteria of increasing their dividend for a quarter century straight. They include big names in energy, industrial production, real estate, defense contractors, and more. For investors looking for steady dividends, this list may be a good place to start.

Dividend Payout Ratio (DPR)

Investors can calculate the dividend payout ratio by dividing the total dividends paid in a year by the company’s net income. By looking at this ratio over a period of years, investors can learn to differentiate among the dividend stocks in their portfolios.

A company with a relatively low DPR is paying dividends, while still investing heavily in the growth of its business. If a company’s DPR is rising, that’s a sign the company’s leadership likely sees more value in rewarding shareholders than in expanding. If its DPR is shrinking, it’s a sign that management sees an abundance of new opportunities abounding. In extreme cases, where a company’s DPR is 100% or higher, it’s unlikely that the company will be around for much longer.

Other Indicators of Company Health

Other factors to consider include the company’s debt load, credit rating, and the cash it keeps on hand to manage unexpected shocks. And as with every equity investment, it’s important to look at the company’s competitive position in its sector, the growth prospects of that sector as a whole, and how it fits into an investor’s overall plan. Those factors will ultimately determine the company’s ability to continue paying its dividend.

The Takeaway

Dividend yield is a simple calculation: You divide the annual dividend paid per share by the stock’s current price. Dividend yield is expressed as a percentage, versus the dividend (or dividend rate) which is given as a dollar amount.

A company that pays a $1 per share dividend, has a dividend rate of $4 per year. If the share price is $100/share, the dividend yield is 4% ($4 / $100 = 0.04).

The dividend yield formula can be a valuable tool for investors, and not just ones who are seeking cash flow from their investments. Dividend yield can help assess a company’s valuation relative to its peers, but there are other factors to consider when researching stocks that pay out dividends. A history of dividend growth and a good dividend payout ratio (DPR), as well as the company’s debt load, cash on hand, and credit rating can help form an overall picture of a company’s health and probability of paying out higher dividends in the future.

If you’re ready to invest in dividend-paying stocks, consider opening an Active Invest account with SoFi Invest. You can trade stocks, exchange-traded funds (ETFs), IPO shares, and crypto, — right from your phone or laptop, using SoFi’s secure online platform. SoFi doesn’t charge management fees, and SoFi members have access to complimentary financial advice from professionals. Get started today!

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How Much Do Stocks Drop in a Recession?

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The U.S. economy has been through quite a bit over the past couple of years. Some suggest what we’re actually seeing is the beginning of a recession, and there’s no question that the U.S. stock market is acting like that’s the case. A 2022 selloff has compressed stock valuations and created significant volatility. 

Stock prices aren’t the only prices plummeting either. Cryptocurrencies like Bitcoin and Ethereum have also taken a dive. 

As interest rates increase, Wall Street is seeing signs of the end of the bull market, and economists are warning of a coming recession. What can we expect to see from the stock market if a recession is happening? And what should you do as an investor to protect your wealth?

How Much Do Stocks Drop in a Recession?

Historically, recessions have always triggered a bear market. With less money going around, consumers are more apt to save than spend, which sends corporate profitability down the tubes. During these times, every stock market index from the Dow Jones Industrial Average to the Nasdaq and S&P 500 index turns red and billions of dollars are wiped out of the global market cap. 


You own shares of Apple, Amazon, Tesla. Why not Banksy or Andy Warhol? Their works’ value doesn’t rise and fall with the stock market. And they’re a lot cooler than Jeff Bezos.
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But is it really that bad? How badly have recessions affected the stock market in the past?

How Recent Recessions Affected the Stock Market

The chart below shows historic S&P 500 returns during recent recession periods:

Era S&P 500 Top S&P 500 Bottom S&P 500 Return
1980-82 Recession 475.10 (Nov. 1980) 317.52 (July 1982) -33.17%
1987 Recession 833.40 (Aug. 1987) 576.90 (Nov. 1987) -30.78%
1990 Recession 796.95 (June 1990) 658.46 (Oct. 1990) -17.38%
2000-02 Recession 2,539.08 (Aug. 2000) 1,302.00 (Sept. 2002) -48.72%
2007-09 Recession 2,144.34 (Oct. 2007) 1,001.19 (Feb. 2009) -53.31%
2019-20 Recession 3,634.63 (Dec. 2019)  2,894.74 (March 2020) -20.36%

Markets have been down substantially during every period of poor economic activity since 1980. If you go back farther, you’ll see more of the same. 

However, there’s no telling how far stocks will fall when a recession takes hold. 

Think about it this way: the dot-com bubble burst of the early 2000s was the worst economic period in the U.S. since the Great Depression. From August 2000 to September 2002, the S&P 500 fell from 2,539.08 to 1,302.00 in a dramatic 48.72% fall from glory. 

The market took an even bigger hit in the 2008 financial crisis. The S&P 500 was down 53.31% at the end of the 2008 recession. 

Fast forward to 2020, and while the world was in a panic from the worst global pandemic in living memory, the S&P only gave up about 20%. And it quickly recovered. 

Given this data, short-term declines can be expected any time a recession takes hold. However, the extent of those declines is largely dependent on investor morale during the economic crisis. After all, the market is a careful balance between supply and demand. If more investors are willing to hold their positions through economic blues, you can expect to see fewer declines. 

Right now it looks like 2022 is shaping up to be one for the chart above. In December 2021, the S&P 500 was at 4,942.53. By late May 2022, the index had fallen to around 3,900, giving up about 20% of its value. 


Stocks to Avoid During a Recession

There are always winners and losers in the stock market whether there’s an economic contraction or not. There are two different types of stocks:

  • Cyclical Stocks. Cyclical stocks are known to ebb and flow with economic trends. These include high-growth stocks like tech stocks that are dependent on consumers having extra money to spend on the latest and greatest technology.
  • Non-Cyclical Stocks. Non-cyclical stocks are more stable regardless of economic conditions. These stocks often represent companies that provide necessities like utility services. 

It’s best to avoid cyclical stocks when the economic cycle is turning negative. Some of the biggest sectors to avoid during an economic recession are:

  • Technology. Technology companies spend massive amounts of money on research and development to stay ahead of the curve. However, consumers are less likely to splurge to buy the latest technology when economic conditions are poor. These companies tend to take big hits during economic recessions. 
  • Restaurants. You’re more likely to save than spend during a recession, meaning you’re going to want to eat more of your meals at home. Restaurant chains take a big hit during recessions as a result. 
  • Travel Companies. Hotels, airlines, and theme parks all feel the pain when economic pressure on consumers is high. The last thing you’re going to do when you’re worried about money is to plan a pricey vacation. 
  • Automobile Manufacturers. You’re less likely to make a big purchase when economic conditions are poor. That new car may have to go on the back burner until the economy improves. 

When considering new investments during a recession, it’s important to ask yourself whether the company offers a product or service people will want even when economic times are tough. If the answer is no, chances are it’s a cyclical stock you should avoid until economic conditions improve. 


Recession-Proof Stocks

Some classes of stocks tend to do better during economic downturns than others. Those are non-cyclical stocks. 

These stocks tend to follow a slow and steady growth pattern regardless of the state of economic growth. Some call these stocks “recession-proof,” but of course any stock can rise or fall at any time.

Some non-cyclical sectors to consider during a recession include:

  • Utilities. You may be willing to adjust your thermostat a couple of degrees when you’re worried about money, but you’re not going to turn your electricity off. Utilities are always in demand, regardless of the state of the economy. 
  • Health Care. Health care is a booming industry. Medical ailments don’t care what the economy’s doing when they strike. As a result, the health care industry is a great place to invest your money when you’re worried about an economic downturn. 
  • Military Contractors. Like medical ailments, geopolitical disagreements and national security threats happen regardless of economic conditions. It’s important for the military to have the latest and greatest in defense technology when it’s time to defend the country. Military spending may slow in the toughest economic times, but it never stops. 
  • Low-Cost Retail Chains. You’re more likely to shop in low-cost stores than higher-end retail outlets when you’re worried about money. This creates an economic shield for companies that provide low-cost consumer goods. 

What Should Investors Do in a Recession?

Recessions are part of the normal economic cycle, but when they hit and markets go from bullish to bearish, it can be hard to decide what to do. Although I can’t give you personal investment advice, I can say following the steps below will set you on the right path:

Step #1: Stay Calm

It can be scary to watch markets turn red, especially when you’ve done everything right to build up a nest egg in the stock market. However, as mentioned above, recessions are a normal part of the economic cycle. 

Knowing there have been so many recessions throughout history can make it easier to deal with them as they come up in the future. Stay calm and think rationally. You’ll make it through this! 

Step #2: Dump Cyclical Stocks

You don’t want cyclical stocks in your portfolio during a recession because they take the biggest hits. Start by combing through your portfolio and dumping any stocks, exchange-traded funds (ETFs), or mutual funds in cyclical sectors. 

Step #3: Reassess What’s Left

If you believe a recession is taking place, chances are stocks have already begun to fall. Take a look at the non-cyclical stocks in your portfolio and take note of how they’ve performed since the overall market started to take a dive. 

You want to hold stocks that are either in the green, flat, or only slightly red. If any of your positions have had reactions you’d expect from cyclical sectors, it’s time to sell them. 

Step #4: Increase Your Safe-Haven Holdings

Safe-haven investments are investments that tend to hold their value in the face of tough economic times. These include investments in assets like bonds, gold, and even cash. 

Yes, you read that right, cash. 

After all, the telltale sign of a recession is falling prices. When prices fall, your cash buys more, meaning it increases in value. 

Nonetheless, decide which safe havens meet your needs as an investor and increase your holdings in them. 

Step #5: Invest In Non-Cyclical Stocks

Next, any unused money that remains should be invested in non-cyclical stocks. Dive into utilities and health care for the opportunity to generate some upward movement while the economic cycle gets over its rough patch. 

Step #6: Stay On Top of the Market

Economic recessions don’t last forever. Many don’t last long at all. 

You’ll want to readjust your portfolio to take a bullish stance as the signs of a recession fade because some of the biggest gains in the market tend to happen shortly after the worst declines. Keep a close eye on the market so you don’t miss your opportunity to bank on the economic rebound. 


Final Word

Economic downturns happen from time to time. These events are often fuelled by unforeseen circumstances that simply can’t be controlled. 

The worst thing you can do as an investor in the face of an economic recession is panic. It’s more important than ever to stay calm and think logically when things are tough. 

Follow the steps above, do your research when making stock picks, and shield yourself from the storm with a larger allocation to safe havens, and you’ll make it to the other side in one piece! 

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GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

Joshua Rodriguez has worked in the finance and investing industry for more than a decade. In 2012, he decided he was ready to break free from the 9 to 5 rat race. By 2013, he became his own boss and hasn’t looked back since. Today, Joshua enjoys sharing his experience and expertise with up and comers to help enrich the financial lives of the masses rather than fuel the ongoing economic divide. When he’s not writing, helping up and comers in the freelance industry, and making his own investments and wise financial decisions, Joshua enjoys spending time with his wife, son, daughter, and eight large breed dogs. See what Joshua is up to by following his Twitter or contact him through his website, CNA Finance.

Source: moneycrashers.com

Stock Market Today: Stocks Finish Lower as Traders Mull Recession Odds

The potential for the U.S. to slip into recession was the topic du jour Monday as stocks kicked off the week with a wobbly, uneven session.

Over the weekend, former Goldman Sachs chief Lloyd Blankfein told CBS’ Face the Nation that recession was “a very, very high risk factor.” That opinion was met by a number of other calls Monday morning.

Wells Fargo Investment Institute, for instance, says “our conviction is that the chances of an outright recession in 2022 remain low” but believes odds are growing that 2023 could see an economic contraction. UBS strategists say the chances are different depending on where you look – their global economists say “hard data” points to a sub-1% chance of recession over the next 12 months, but the yield curve implies 32% odds.

“There’s no crystal ball to predict what’s next, but historical trends can come into play here. With the [S&P 500] closing 15% below its weekly record, there’s only been two times in the past 60-plus years that the market didn’t fall into bear territory after a similar drop,” adds Chris Larkin, Managing Director of Trading at E*Trade. “This doesn’t mean it’s bound to happen, but there is room for potential downside.”

Larkin says to keep an eye on major retail earnings this week – which will kick off in earnest with Walmart’s Tuesday report – to get a pulse check on the American consumer.

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Monday itself was a fairly quiet affair. Exxon Mobil (XOM, +2.4%) and Chevron (CVX, +3.1%) were among a number of plays from the energy sector (+2.7%) that popped after U.S. crude oil futures jumped another 3.4% to $114.20 per barrel.

Twitter (TWTR, -8.2%) shares dropped after Tesla (TSLA, -5.9%) CEO Elon Musk spent the weekend questioning how much of Twitter’s traffic comes from bots. Wedbush analyst Daniel Ives said the move feels more like a “‘dog ate the homework’ excuse to bail on the Twitter deal or talk down a lower price.” TWTR stock has now given up all its gains since Musk announced his stake in the social platform.

The major indexes finished an up-and-down session with mostly weak results. The Dow Jones Industrial Average managed to eke out a marginal gain to 32,223, but the S&P 500 declined 0.4% to 4,008, while the Nasdaq Composite retreated 1.2% to 11,662.

Also worth noting: Warren Buffett’s Berkshire Hathaway will file its quarterly Form 13F soon. Check back here tonight as we examine what Buffett has been buying and selling. 

stock chart for 051622stock chart for 051622

Other news in the stock market today:

  • The small-cap Russell 2000 closed out the session with a 0.5% dip to 1,783.
  • Gold futures gained 0.3% to settle at $1,814 an ounce.
  • Bitcoin was off 1.6% to $29,551.92 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • JetBlue Airways (JBLU, -6.1%) ramped up its hostile takeover attempt of Spirit Airlines (SAVE, +13.5%) on Monday, urging SAVE shareholders to vote against a buyout offer from fellow low-cost air carrier Frontier Group Holdings (ULCC, +5.9%). JBLU last month offered to buy Spirit Airlines for $33 per share – a premium to the $21.50 per share ULCC offered in February – but SAVE’s board of directors rejected the bid citing concerns over regulatory approval. JBLU followed up in early May with an “enhanced superior proposal,” including paying a $200 million, or $1.80 per SAVE share, reverse break-up fee should regulators block the deal.
  • Warby Parker (WRBY) fell 5.3% after the eyeglass maker reported a loss of 30 cents per share in its first quarter. This was much wider than the per-share loss of 3 cents the company reported in the year-ago period and missed the consensus estimate for breakeven on a per-share basis. Revenue of $153.2 million also fell short of analysts’ expectations. WRBY did maintain its full-year revenue guidance of $650 million to $660 million. “We remain cautiously optimistic on shares as WRBY continues to show ability to grow the top line, open new stores, and is recession resistant as a lower cost option for non-discretionary spend,” says CFRA Research analyst Zachary Warring (Buy). “We see the company leveraging SG&A to become profitable in the second half of 2022.”

Check Out Europe’s Dividend Royalty

If you’re seeking out more stable opportunities amid an uncertain U.S. market … well, the rest of the world is admittedly looking pretty shaky, too. But that doesn’t mean there aren’t a few morsels worth a nibble. 

BCA Research notes that while there’s negative news around the globe, “European benchmarks already discount a significant portion of the negative news.” And looking ahead, inflation there is expected to peak over the summer “as the commodity impulse is decelerating” – that should help stagflation fears recede and help European shares.

Graham Secker, Morgan Stanley’s chief European and U.K. equity strategist, chimes in that his firm remains “overweight [European] stocks offering a high and secure dividend yield.”

We’ve previously highlighted our favorite European dividend stocks, which on the whole tend to produce higher yields than their U.S. counterparts.

But we’d also like to shine the spotlight on Europe’s twist on an American income club: the Dividend Aristocrats. The S&P Europe 350 Dividend Aristocrats have somewhat different qualifications than their U.S. brethren, but in general, they’ve proven their ability to provide stable and growing dividends over time.

Read on as we look at the European Dividend Aristocrats.

Source: kiplinger.com

Stock Market Today: Stocks Paper Over Lousy Week With Wild Friday

Wall Street spent most of Friday applying some vibrant lipstick to what was otherwise a pig of a week for investors.

A broad market rally – one that saw each of the S&P 500’s 11 sectors finish higher – wasn’t a response to any new positive catalysts. Quarterly reports were light today, with most investors flipping the earnings calendar to next week’s retail-heavy slate.

And Friday’s most noteworthy datapoint was the University of Michigan’s latest consumer sentiment index reading, which dropped from 65.2 in April to 59.1 in May – a 10-year nadir that was well lower than the 64.1 reading expected.

Sometimes the market just enjoys a relief rally.

“Following a week of heavy selling, but with inflationary pressures easing just at the margin, and the Fed still seemingly wedded to 50-basis-point hikes for each of the next two FOMC meetings, the market was poised for the kind of strong rally endemic to bear market rallies,” says Quincy Krosby, chief equity strategist for LPL Financial.

He adds that given the Federal Reserve is only at the beginning of its rate-hike cycle and would like to see demand pull back further, “this rally will most likely weaken.”

Of course, even if this is just a pause before more market declines, investors don’t necessarily have to time the bottom to buy in at a decent valuation.

“This is still an attractive entry point, as we do not believe this is 1999/2000,” says Nancy Tengler, CEO and CIO of asset management firm Laffer Tengler Investments.

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The buying was strongest in consumer discretionary stocks (+3.9%) such as Amazon.com (AMZN, +5.7%) and Tesla (TSLA, +5.7%), along with technology plays (+3.3%) including Nvidia (NVDA, +9.5%) and Advanced Micro Devices (AMD, +9.3%).

Energy (+3.4%) was also bid higher amid a big pop in oil; U.S. crude futures finished 4.1% higher to $110.49 per barrel, helping to spark new highs in gasoline futures prices.

Notably absent from the rally was Twitter (TWTR, -9.7%), which sank after Elon Musk tweeted that the deal was “temporarily on hold.” 

All the major indexes put up spectacular gains Friday, though for the week, it was still losses all around: The Nasdaq Composite (+3.8% to 11,805) still finished off 2.8% for the week, the S&P 500 (+2.4% to 4,023) was down 2.4% across the five days, and the Dow Jones Industrial Average (+1.5% to 32,196) closed the week 2.1% in the red.

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Other news in the stock market today:

  • The small-cap Russell 2000 bounced 3.1% to 1,792.
  • Gold futures had no such luck. The yellow metal was off 0.9% to a 14-week low of $1,808.20 per ounce.
  • Bitcoin snapped back 5.1% to $30,034.99. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)

Keep Your Guard Up Against Inflation

Inflation is prevalent virtually everywhere – including on corporate America’s earnings calls.

We’re most of the way through the first-quarter earnings season, and over the past few months, publicly traded companies keep repeating the “I” word as they discussed their most recent financial results.

FactSet used its Document Search technology to track mentions of the term “inflation” on corporate earnings calls, According to their senior earnings analyst, John Butters, of the 455 S&P 500 companies that have conducted earnings conference calls from March 15 through May 12, “377 have cited the term ‘inflation’ … which is well above the five-year average of 155.”

In fact, this is the highest overall number of S&P 500 companies citing inflation on their calls going back to at least 210. (The previous record? 356 … in the final quarter of 2021.)

It’s another signal that inflation continues to be a persistent problem – and with forecasts calling for still-high inflation to come, more active investors might do well to pack a little more protection. We’ve previously analyzed other ways to stay in front of inflation, such as stocks with pricing power and inflation-fighting funds.

Today, we look at another batch of investments that can help harness high inflation, with a focus on commodities, real estate and other areas of the market.

Kyle Woodley was long AMD, AMZN and NVDA as of this writing.

Source: kiplinger.com