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. 

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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

What Is Inflation (Definition) – Causes & Effects of Rate on Prices & Interest

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Additional Resources

People have always grumbled that a dollar doesn’t go as far as it used to. But these days, that complaint is truer than ever. No matter where you go — the gas station, the grocery store, the movies — prices are higher than they were just a month or two ago.

What we’re seeing is the return of a familiar economic foe: inflation. Many Americans alive today have never seen price increases like these before. For the past three decades, inflation has never been above 4% per year. But as of March 2022, it’s at 8.5%, a level not seen since 1981.

Modest inflation, like what we had up through 2020, is normal and even healthy for an economy. But the rate of inflation we’re seeing now is neither normal nor healthy. It does more than just raise the cost of living. It can have a serious impact on the economy as a whole. 

Recent inflation-related news:


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  • In March 2022, the U.S. inflation rate hit a 40-year high of 8.5%. 
  • Prices for gasoline have increased nearly 50% over the past year.
  • Retail giant Amazon has added a 5% fuel and inflation surcharge for sellers.
  • The Federal Reserve is planning a series of interest rate hikes to cool the overheated economy.

What Is Inflation?

Inflation is more than just rising prices. Prices of specific things we buy, from a gallon of milk to a year of college tuition, rise and fall all the time. These price increases affect individual consumers’ lives, but they don’t have a big impact on the entire economy.

Inflation is a general increase in the prices of goods and services across the board. It drives up prices for everything you buy, from a haircut to a gallon of gas. Or, to put it another way, the purchasing power of every dollar in your pocket declines.

Most of the time, inflation doesn’t disrupt people’s lives too much, because prices rise for labor as well. If your household spending increases by 5% but your paycheck increases by 5% at the same time, you’re no worse off than before.

But when prices rise sharply, wages can’t always keep up. That makes it harder for consumers to make ends meet. It also drives them to change their spending behaviors in ways that often make the problem worse.


Causes of Inflation

Inflation depends on the twin forces of supply and demand. Supply is the amount of a particular good or service that’s available. Demand is the amount of that particular good or service that people want to buy. More demand drives prices up, while more supply drives them down. 

To see why, suppose you have 10 loaves of bread to sell. You have 10 buyers who want bread and are willing to pay $1 per loaf. So you can sell all 10 loaves at $1 each.

But if 10 more buyers suddenly enter the market, they will have to compete for your bread. To make sure they get some, they might be willing to pay as much as $2 per loaf. The higher demand has pushed the price up.

By contrast, if another seller shows up with 10 loaves of bread, the two of you will be competing for buyers. To sell your bread, you might have to lower the price to as little as $0.50 per loaf. The higher supply has pushed prices down.

Inflation results from demand outstripping supply. Economists often describe this as “too much money chasing too few goods.” There are several ways this kind of imbalance can happen.

Cost-Push Inflation

Cost-push inflation happens when it costs more to produce goods. To go back to the bread example, cost-push inflation might happen because a wheat shortage makes flour more expensive. It costs you more to make each loaf of bread, so you can’t afford to bake as much.

As a result, you bring only five loaves to the market. But there are still 10 customers who want to buy bread, so they must pay more to get their share. The higher cost of production drives down the supply and thus drives up the price.

In the real world, cost-push inflation can result from higher costs for anything that goes into making a product. This includes:

  • Raw Materials. The wheat that went into your bread is an example. Higher-cost wheat means higher-cost flour, which means higher-cost bread.
  • Transportation. In today’s global economy, materials and finished goods move around a lot. Transporting products requires fuel, which usually comes from oil. So whenever oil prices go up, the price of other goods rises as well. 
  • Labor. Another factor in production cost is labor. When schools closed during the COVID-19 pandemic, many parents had to stop working to care for their children. That created a worker shortage that drove prices up.

Demand-Pull Inflation

The opposite of cost-push inflation is demand-pull inflation. It occurs when consumers want to buy more than the market can supply, driving prices up.

Typically, demand-pull inflation results from economic growth. Rising wages and lower levels of unemployment put more money in people’s pockets, and people who have more money want to spend more. If the booming economy hasn’t produced enough goods and services to match this new demand, prices rise.

Other causes of demand-pull inflation include: 

  • Increased Money Supply. Another way people can end up with more money in their pockets is because the government has put more money in circulation. Governments often do this to stimulate a weak economy or to pay off past debts. But as the money supply increases, the purchasing power of each dollar shrinks. 
  • Rapid Population Growth. When the population grows rapidly, the demand for goods and services grows also. If the economy doesn’t produce more to compensate, prices rise. In Europe during the 1500s and 1600s, prices soared as the population grew so fast that agriculture couldn’t keep up with the new demand.
  • Panic Buying. Early in the COVID pandemic, consumers started buying extra groceries to fill their pantries in preparation for a lockdown. This led to shortages of many staple products, like milk and toilet paper. As a result, prices for those goods went up.
  • Pent-Up Demand. This occurs when people return to spending after a period of going without. This often happens in the wake of a recession. It also occurred as pandemic restrictions eased and people returned to enjoying movies, travel, and restaurant meals.

Built-In Inflation

When consumers expect prices to be higher in the future, they often respond by spending more now. If the purchasing power of their savings is only going to fall, it makes more sense to take that money out of the bank and use it on a major purchase, like a new car or a large appliance.

In this way, expectations of high inflation can themselves lead to inflation. This type of inflation is called built-in inflation because it builds on itself. 

When workers expect the cost of living to rise, they demand higher wages. But then they have more to spend, so they spend more, driving prices up. This, in turn, reinforces the belief that  prices will keep rising, leading to still higher wage demands. This cycle of rising wages and prices is called a wage-price spiral.


Effects of Inflation

Inflation does more than just drive up the cost of living. It changes the economy in a variety of ways — some harmful, others helpful. The effects of inflation include:

  • Higher Wages. As prices rise with inflation, wages typically rise as well. This can create a wage-price spiral that drives inflation still higher.
  • Higher Interest Rates. When the dollar is declining in value, banks often respond by raising interest rates on loans. The Federal Reserve also typically raises interest rates to cool the economy and rein in inflation, as discussed below.
  • Cheaper Debt. Inflation is good for debtors because they can pay off their debts with cheaper dollars. This is most useful for loans with a fixed interest rate, such as fixed-rate mortgages and student loans.
  • More Consumption. Inflation encourages consumers to spend money because they know it will be worth less later. All this spending keeps the economy humming, but it can also drive prices even higher.
  • Lower Savings Rates. Just as inflation encourages spending, it discourages saving. Higher interest rates can counter this effect, but they often don’t rise enough to make a difference.
  • Less Valuable Benefits. High inflation is worse for people on a fixed income. They face higher prices without higher wages to make up for them. Benefits such as Social Security change each year to adjust for inflation, but higher benefits next year don’t help when prices are rising right now.
  • More Valuable Tangible Assets. Inflation reduces the purchasing power of the dollars you have in the bank. Tangible assets like real estate, however, gain in dollar value as prices rise.

Measuring Inflation

The most common measure of inflation is the Consumer Price Index, or CPI. The Bureau of Labor Statistics (BLS) determines the CPI based on the cost of an imaginary basket of goods and services. BLS workers painstakingly check prices on all these items each month and record how each price changes.

To calculate the annual rate of inflation, the BLS looks at how much all prices in its basket have changed since a year earlier. Then it “weights” the value of each item based on how much of it people buy. The weighted average of all items becomes the CPI.

The BLS then uses the CPI to calculate the annual rate of inflation. It divides this month’s CPI by the CPI from a year ago, then multiplies the result by 100. This shows how the purchasing power of a dollar has changed over the last year. The result is reported monthly.

Other measures of inflation include:

  • Personal Consumption Expenditures Price Index (PCE). This inflation measure is published by the Bureau of Economic Analysis. Like the CPI, it’s a measure of consumer costs, but it’s adjusted to account for changes in the products people buy. The Federal Reserve uses the PCE to guide its monetary policy, as discussed below. 
  • Producer Price Index (PPI). The PPI measures inflation from the seller’s perspective, not the buyer’s. It’s calculated by dividing the price sellers currently get for a basket of goods and services by its price in a base year, then multiplying the result by 100.

Historical Examples of Inflation

A little bit of inflation is normal. But sometimes inflation spirals out of control, with prices rising more than 50% per month. This is called hyperinflation, and it can be devastating for an economy.

Hyperinflation has occurred at various times and places throughout history. During the U.S. Civil War, both sides experienced soaring inflation. Other examples include Germany in the 1920s, Greece and Hungary after World War II, Yugoslavia and Peru in the 1990s, and Venezuela today. In most cases, the main cause was the government printing money to pay for debt. 

The last time the U.S. had prolonged, high rates of inflation was in the 1970s and early 1980s. The inflation rate was nowhere near hyperinflation levels, but it spiked above 10% twice. Eventually, the Fed hiked interest rates to double-digit levels to get it under control.

Although high inflation can be destructive, zero inflation isn’t a good thing, either. At that point, an economy is at risk of the opposite problem, deflation. 

When prices and wages fall across the board, consumers spend less. Sales of products and services fall, so companies cut back staff or go out of business. As a result, jobs are lost and spending drops still more, worsening the problem. The Great Depression was an example.


The Federal Reserve, or Fed, is the U.S. central bank — or more accurately, banks. It’s a group of 12 banks spread across the country under the control of a central board of governors. Its job is to keep the economy on track, reining in inflation while trying to avoid recessions. 

The Fed maintains this balance through monetary policy, or controlling the availability of money.

Its main tool for doing this is interest rates. When the economy is weak, the Fed lowers the federal funds rate. This makes it easier for people to borrow and spend. 

When the problem is inflation, it does the opposite, raising interest rates. This makes it more costly to borrow and more worthwhile to save. As a result, consumers spend less, slowing down the wage-price spiral.

The Fed has other tools for fighting inflation as well. One option is to change reserve requirements for banks, requiring them to hold more cash. That gives them less to lend out, which in turn reduces the amount consumers and businesses have to spend.

Finally, the Fed can reduce the money supply directly. The main way it does this is to increase the interest rate paid on government bonds. That encourages more people to buy bonds, which temporarily takes their money out of circulation and puts it in the hands of the government.


Inflation Frequently Asked Questions (FAQs)

If you keep seeing stories about inflation in the news, you may have some other questions about how it works. For instance, you may wonder:

What Is Hyperinflation?

Hyperinflation is more than just high inflation. It’s a wage-price spiral gone mad, sending prices soaring out of control. As noted above, the usual definition of hyperinflation is an inflation rate of at least 50% per month — more than 12,000% per year. However, some economists use the term to refer to an inflation rate of 1,000% or more per year.

What Is Disinflation?

Disinflation is a fall in the rate of inflation. This is what the Federal Reserve and other central banks try to achieve through their monetary policy, such as raising interest rates.

Disinflation is not the same as deflation, or falling prices. During a period of disinflation, prices are continuing to rise, but the rate at which they rise is slowing down.

What Is Transitory Inflation?

When the first signs of a post-COVID-19 inflation spike appeared, Federal Reserve chair Jerome Powell described it as “transitory.” By this, he meant that the rise in prices would be short-lived and would not do permanent damage to the economy. 

However, in November 2021, Powell declared it was “time to retire that word.” Based on the growth in prices, he had concluded that inflation was more of a long-term trend. The Federal Reserve responded by planning to fight inflation harder, buying more bonds and plotting out a series of interest rate hikes.

What Is Core Inflation?

Measuring inflation can be tricky because prices for some products fluctuate more than others. Food and energy prices, in particular, can shift a lot from month to month. Including these products in the CPI can lead to sharp, but temporary, spikes or dips in the inflation rate.

To adjust for this, the CPI and PCE have a separate “core” version that doesn’t include food or energy prices. This core inflation measure is more useful for predicting long-term trends. The  main versions of the CPI and PCE, known as the “headline” versions, give a more accurate picture of how prices are changing right now.

What Is the Consumer Price Index (CPI)?

As noted above, the Consumer Price Index, or CPI, is the main measure of inflation in the United States. The BLS calculates it based on how much prices have risen for an imaginary basket of goods and services that many Americans buy.


Final Word

A little inflation in an economy is normal. It can even be a good thing, because it’s a sign that consumers are spending and businesses are earning. The Fed generally considers an annual inflation rate of 2% to be healthy.

However, higher inflation can cause serious problems for an economy. It’s bad for savers whose nest eggs, including retirement savings, shrink in value. It’s even worse for seniors and others on fixed incomes whose purchasing power has fallen. And it often requires strong measures from the central bank to correct it — measures that risk driving the economy into a recession.

If you’re concerned about the effects of inflation, there are several ways to protect yourself. You can adjust your household budget, putting more dollars into the categories where prices are rising fastest. You can stock up on household basics now, before the purchasing power of your dollars falls too much. 

Finally, you can choose investments that do well during periods of inflation. Stock-based mutual funds and real estate investment trusts are both good choices. Just be careful with inflation hedges like gold and cryptocurrency, which carry risks of their own.

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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.

Amy Livingston is a freelance writer who can actually answer yes to the question, “And from that you make a living?” She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

Source: moneycrashers.com

Historic Old Hollywood Charm: See Inside Vanessa Hudgens’ Luxurious Los Feliz Estate

After searching for five years, Vanessa Hudgens found the perfect Georgian colonial estate in Los Feliz, Calif. to call home. Find out how the High School Musical star transported an old Hollywood home into her “French” and “vibey” dream house.

Nicknamed “The Little DeMille,” iconic Hollywood filmmaker Cecil B. DeMille built the stunning Los Feliz house for his mistress in 1922.

And now, the Princess Switch star, 32, is opening up the doors of the updated home to Architectural Digest for an exclusive tour.

From her DIY remodel in the kitchen, to her “obsession” with candlesticks and vintage books, to the “sexy” and “cave-like” bathroom, here’s the full scoop on Vanessa Hudgens’ luxe Los Angeles home.

An historic Hollywood home transformed into the perfect “escape” 

According to Daily Mail, Hudgens purchased the luxurious Los Feliz home from Academy Award-winning actor Gary Oldman. After a 5-year house hunt, Hudgens bought the home in December 2018 for just under $5 million. 

The 3,168 square foot Georgian colonial home retains many of its original features. 

Sitting on a half-acre, the stunning estate includes three bedrooms and four bathrooms with a separate one-bed, one-bath guesthouse that sits over a detached two-car garage.

Nestled in the Hollywood Hills, the historic Los Feliz home provides the perfect escape for the Tick, Tick…Boom! actress. 

“There were so many things about it that struck me,” Hudgens tells AD of her plush property.

She adds: “Walking through the gate and seeing this house covered in ivy, surrounded by olive trees, it was like I had been transported to France or Italy. It felt like such an escape.”

ivy-covered entrance to vanessa hudgens' house
Photo credit: Jenna Peffley for Architectural Digest

Sisters unite! Ashley Tisdale helped Hudgens with the DIY decor

BFF to the rescue!

While Hudgens always “wanted an old home,” there’s no escaping the upkeep and renovations with an older building.

After purchasing the house three years ago, Hudgens enlisted the help of her High School Musical costar and good pal Ashley Tisdale. 

“I got new marble, painted the cabinets, got new knobs and drawer pulls—I really wanted brass. My girlfriend Ashley Tisdale does interior design, and I got her advice on where to shop,” Hudgens says.

vanessa hudgens' lively kitchen
Photo credit: Jenna Peffley for Architectural Digest

Hudgens also hired Jake Arnold to help bring her overall vision together, including a vast collection of vintage books, colorful art pieces, the perfect lighting for all her house plants, and a wide selection of candlesticks. 

“I wanted it to be casual, relaxed and cozy,” she says of the interior design, adding, “I’m a big fan of candlesticks, so you will notice them everywhere.”

The luxe Los Feliz pad also has this “big selling point”

Amid the big plants, abstract art and witchy books, Hudgens couldn’t help but gush about the home’s fabulous floors.

“Oh and the floors!” she boasts.

The herringbone wood parquets “were a big selling point for me when I saw this house,” she shares. 

Made from 18th-century French oak taken from an old chapel in Europe, the floors were originally added by Oldman. 

exterior of vanessa hudgens' house and the outdoor pool
Photo credit: Jenna Peffley for Architectural Digest

Hudgens took on a pandemic project to improve her new home

Admitting that her kitchen looked “very different” when she moved in, the Powerless star remodeled it during the pandemic.

“I took it upon myself to have a project, and put it all together,” Hudgens says of the DIY project.

“I painted the cabinets, removed some cabinets, and put big oak beams for open shelving,” shares the actress.

kitchen cabinets revamped by actress vanessa hudgens herself
Photo credit: Jenna Peffley for Architectural Digest

Including eccentric wallpaper featuring mushrooms and dragons, Hudgens decorated the breakfast nook with designs from the House of Hackney.

“I figured, Why not? I did what I like to call a facelift to it,” Hudgens says of her kitchen renovations. 

The funky wallpaper rests above a custom booth, inspired from “the dopest place ever.”

“I had the booth made for this space,” says Hudgens. “I was really inspired by the restaurant Maison Premiere, this absinthe and oyster bar in New York. It’s the dopest place ever.”

The actress also added extra tile, made of Carrara marble, from the primary bath for the backsplash.

A look at the romantic, the sexy and the cave-like features throughout the plush property 

Hudgens invites fans into her “romantic” dining room, which features an Italian chandelier from 1stdibs. 

Admitting she doesn’t cook often, Hudgens says, “I’m normally a ‘Let’s get everyone over, have a drink or two, put on a playlist, and then we all figure out what we want to eat and I just order it’ type of host.”

Heading upstairs, the Grease: Live star shows off her bedroom that features feminine art and pops of orange.

“For some reason I just really fell in love with the idea of orange for my bedroom,” she shares.

Hudgens is all about body-positivity, and shows fans a nude painting in her bedroom. “I wanted the house to be super feminine, to celebrate women’s bodies, to be a kind of femme palace,” Hudgens says.

When in California, enjoy the sunshine! The beautiful backyard features a pool, pizza oven, fire pit and plenty of outdoor space for entertaining.

“I wanted a yard that felt like a park where I could run around with my friends, have space to play, and just feel safe,” Hudgens shares.

Saving the best for last, Hudgens shows off her Goth black bathroom which is one of her “favorite places in the house.”

actress vanessa hudgens inside her bathroom in her los feliz house
Photo credit: Jenna Peffley for Architectural Digest

Featuring marble countertops, black walls and an egg-shaped tub, Hudgens went for a cave-like aesthetic in the primary bathroom. 

“The bathroom is a sexy cave,” shares the actress.

See the luxurious LA home for yourself! From the ivy exterior, to the poolside murals, to the various Teen Choice Awards and the ghost-like painting of herself, check out the YouTube video for a full tour with the High School Musical star.

More celebrity homes

Zendaya Owns a $4 Million Home Fit for a Disney PrincessThe Story of Taylor Swift’s Holiday House — Home to “the Last Great American Dynasty”
From a Prince to a King: A Look at Will Smith & Jada Pinkett Smith’s Real Estate Portfolio
Everything We Know About Adam Levine’s House in Los Angeles

Source: fancypantshomes.com

Stock Market Today: Stocks Suffer Worst Losses of 2022

The major indexes wiped out yesterday’s relief-rally gains and then some Thursday in a market-wide rout as Wall Street took a more sober look at the investing landscape.

For one, most of the worries hanging over stocks haven’t disappeared, including on the interest-rate front. While Federal Reserve Chair Jerome Powell did dismiss the idea of a 75-basis-point hike yesterday, the expectation is for at least two more 50-basis-point hikes at the next two Federal Open Market Committee meetings – a still-considerable level of monetary tightening.

“We are still not out of the woods yet, as there is still too much uncertainty over how the Federal Reserve’s actions will tame inflation without causing a recession,” says Zach Stein, chief investment officer of climate change-focused investment manager Carbon Collective.

Indeed, the yield on the 10-year Treasury, which retreated yesterday, roared back to life Thursday to eclipse 3% once more. That weighed particularly hard on rate-sensitive growth places in tech and tech-esque stocks such as mega-caps Tesla (TSLA, -8.3%), Nvidia (NVDA, -7.3%) and Apple (AAPL, -5.6%).

Speculative assets such as cryptocurrency went heavily risk-off, too; Bitcoin, for instance, plunged 8.9% to $36,287. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)

Gene Goldman, chief investment officer of Cetera Investment Management, pointed to additional drivers for Thursday’s woes.

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“There is less optimism around the less hawkish Fed and the softish landing scenario,” he says. “We saw data this morning portraying more inflation and a weaker economy – labor costs surged in Q1, unemployment claims rose, and productivity was weaker than expected.”

Goldman also pointed to disappointing earnings reports from the e-commerce industry, which, because of high valuations to boot, were selling off particularly hard.

Shopify (SHOP), for one, plunged 14.9% after the e-commerce company reported lower-than-expected adjusted earnings and revenue in its first quarter (20 cents vs. 63 cents est.; $1.2 billion vs. $1.24 billion est.) and projected soft revenue guidance in the first half amid tough comparisons. SHOP also said it will buy San Francisco-based fulfillment startup Deliverr for $2.1 billion.

“Although e-commerce growth was below our view, SHOP is lapping pandemic figures, with comparisons to get more favorable exiting the calendar year,” says CFRA Research analyst Angelo Zino (Hold). “That said, we do think consensus expectations will need to be tempered, partly reflecting lower than expected merchant additions to start the year.”

eBay (EBAY, -11.7%) spiraled lower despite topping first-quarter estimates after it forecast second-quarter revenues of $2.35 billion to $2.40 billion and adjusted earnings of 87 to 91 cents per share, both under expectations for $2.54 billion and $1.01 per share, respectively. Etsy (ETSY, -16.8%), meanwhile, slightly beat revenue expectations but was merely in-line on profits and forecast Q2 sales of $540 million to $590 million, falling far short of the $627 million analyst mark. Amazon.com (AMZN) bled 7.6% in sympathy.

The result was the worst single-session performance of 2022 for both the Nasdaq Composite (-5.0% to 12,317) and Dow Jones Industrial Average (-3.1% to 32,997), while the S&P 500 (-3.6% to 4,146) was just a hair shy of outdoing its marginally larger decline April 29.

stock chart for 050522stock chart for 050522

How low could we go from here?

Well, a bear market (a 20% drop from highs) would mean about 3,850 for the S&P 500, and John Lynch, chief investment officer for Comerica Wealth Management, thinks the index could scrape that figure.

“Bear markets without recession tend to be short and shallow,” Lynch says. “It’s conceivable the S&P 500 needs to establish a bottom in this 3,850 to 4,000 range. Without recession in 2022, which is our base case, stocks can resume higher as equity investors discount cyclical recovery in an environment where monetary policy is no longer shepherding expensive growth and technology names at a multiple of sales.”

Other news in the stock market today:

  • The small-cap Russell 2000 dropped 4.0% to 1,871.
  • U.S. crude oil futures eduged up 0.4% to settle at $1081.26 per barrel.
  • Gold futures gained 0.3% to finish at $1,875.70 an ounce.
  • Booking Holdings (BKNG) was a rare splash of green today, adding 3.3% after the online travel company reported earnings. In its first quarter, BKNG reported earnings of $3.90 per share on $2.7 billion in revenue, more than the 85 cents per share and $2.5 billion analysts were expecting. The company also posted gross bookings of $27.3 billion, a record quarterly amount. “We have a favorable view of online travel companies, and particularly of BKNG given its focus on Europe, where it generates most of its gross profit,” says Argus Research analyst John Staszak (Buy). “BKNG is trading at a projected 2022 price-to-earnings ratio of 20.2, below the average for other online booking companies; however, we believe that it merits a higher multiple given the company’s strong earnings outlook.”

Warren Buffett Splashes More Cash

Warren Buffett is spending like there’s no tomorrow. A Wednesday evening regulatory filing from Berkshire Hathaway (BRK.B, -2.5%) revealed that the Oracle of Omaha’s holding company bought $350 million shares in energy firm Occidental Petroleum (OXY, +1.2%). 

The Berkshire Hathaway equity portfolio has plumped up on Occidental exposure in recent months – Buffett revealed a nearly 10% OXY stake in early March that now sits at 15.2%, and he also owns $10 billion worth of 8% preferred stock, as well as 84 million warrants to purchase OXY stock. The move is part of Buffett’s renewed buying interest in energy that has seen Chevron (CVX) become Berkshire’s fourth-largest holding.

All of this falls under an even larger underlying theme, which is that Buffett has gone from being a voracious seller in 2021 to buying everything that isn’t tied down this year. Part of that seems to be the Oracle taking advantage of a considerable dip in the market. But a closer look at what Buffett’s buying signals that he, like the rest of us, has rapidly rising prices on the brain.

We recently talked to noted Buffett expert David Kass about the Berkshire CEO’s recent binge, and how much of Warren Buffett’s activity has been connected to inflation.

Source: kiplinger.com

An Urgent Need for Cybersecurity Stocks

In June 2017, Russian hackers launched a malware attack on Ukraine called NotPetya. The attack, which locked users out of their own files unless they paid a ransom in bitcoin, was just one more tactic in the conflict between the two nations that had begun three years earlier. But viruses don’t respect borders, and this one spread far beyond Ukraine. 

It infected computers in Europe and the U.S., and even in Russia itself. Mondelez (MDLZ), the giant global food company headquartered in Chicago, was hit hard. NotPetya disrupted e-mail and logistics and caused $100 million in damage. The White House called it “the most destructive and costly cyber-attack in history.” Total international destruction: $10 billion. 

Nearly five years later, the Russians have invaded Ukraine and war is raging. Experts had been expecting more cyber devastation, but so far Russia has not knocked out Ukraine’s power grid or other important infrastructure.

“I think the biggest surprise to date has been the lack of success for Russia with cyberattacks against Ukraine,” Stephen Wertheim, a senior fellow at the Carnegie Endowment for International Peace, told Vox. 

It’s not from lack of trying. The U.S. government’s Cybersecurity & Infrastructure Security Agency issued an alert disclosing that leading up to its invasion, Russia “deployed destructive malware against organizations in Ukraine to destroy computer systems and render them inoperable.” 

Also surprising is that Russia has not successfully launched cyberattacks against the U.S., the U.K., Germany or other NATO allies. One reason is that NotPetya – as well as the WannaCry attack instigated the same year by North Korea – taught businesses and governments key lessons about protecting themselves.

Another is that the Russians know that the U.S. uses a strategy of deterrence, akin to its policy on the use of nuclear weapons, as a primary defense against a major attack. If Russia shuts down our power grid, or large parts of it, the U.S. has indicated it will respond massively, throwing the Russians into the cold and dark themselves, or worse. 

Cybersecurity Sector Booms as Demand Grows

There’s no reason for us to be smug, though.

Don’t forget that Colonial Pipeline, the largest fuel network of its kind in the U.S., was breached last year, shutting off operations. It was caused by a single compromised password and could have been prevented by multifactor authentication, a basic cybersecurity tool that can involve simply sending the user a text with a code number. Colonial paid the Russian hackers a ransom of $4.4 million.

A vulnerability called Log4j in free software has led to attacks from hackers in Russia, China, Iran and other antagonists of the U.S. The Wall Street Journal reports “10 million attempts to exploit the Log4j vulnerability per hour in the U.S.” The CISA’s website carries a gigantic banner at the top that says “SHIELDS UP,” a warning that times are perilous. 

In the cyber world, hackers always have the upper hand, but defenders are catching up. The companies that deploy the software, hardware, intelligence and training to thwart attacks have gotten better at what they do. Businesses know that they have to invest in cybersecurity or risk huge losses or outright failure.

As a result, the cybersecurity sector is booming. Gartner, the research firm, pegged global revenues at $150 billion in 2021, a 12% increase over 2020 and roughly double sales in 2017. Even before the Russian invasion, Fortune Business Insights was predicting spending would rise to $376 billion by 2029, an annual growth rate of 13%. 

Nearly all of the internet giants, including Alphabet (GOOGL) and Microsoft (MSFT), offer cyber protection programs. Microsoft’s security revenues last year were $15 billion – more than any other freestanding company’s. 

Pure Plays Among Cybersecurity Stocks

Among more focused opportunities, turn first to the largest such stock, Palo Alto Networks (PANW), with a market capitalization (shares outstanding times price) of $60 billion. Since NotPetya, revenues have tripled, and the company’s share price has more than quadrupled.

Palo Alto is known for its firewalls, which inspect internet traffic and protect against viruses, spyware and data leakage – as well as identify vulnerabilities. Like many cybersecurity stocks, Palo Alto is still unprofitable. But you’re buying a future in which what the company sells is an absolute necessity. (Stocks I like are in bold; data are as of April 8.)

Another larger cybersecurity company, Fortinet (FTNT), offers a wide range of tools, including intrusion-prevention and anti-malware software. Fortinet’s sales spiked 29% last year, and it made a small profit. Shares have risen nearly 20% since the war in Ukraine began, and the stock’s price-earnings ratio is 68, based on analysts’ forecasts for earnings for the year ahead. 

Also among the larger companies is CrowdStrike (CRWD), which is especially adept at protecting endpoints – that is, devices such as smartphones and workstations that communicate with broader corporate networks. CrowdStrike’s revenue, nearly all of it from recurring subscriptions, soared 66% for the fiscal year ending January 2022. The stock has risen accordingly, but it is still worth a close look. 

A recent update of the cybersecurity industry by securities firm Needham & Co. identifies Tenable Holdings (TENB) as the best way to play the convergence of information technology and operational technology.

For many firms, information technology, housed in the firm’s own computer systems or in the cloud, drives operational technology, or the functioning of its machines and other physical assets. This convergence is great for business, but it also leaves a company open to catastrophic attack. Tenable is unprofitable, and its market cap is more than 10 times its sales. But I view the risk as worth taking.

Tenable is also a potential takeover candidate in a sector that is consolidating. NortonLifeLock (NLOK), a powerhouse on the consumer side of cybersecurity, is awaiting regulatory approvals to complete its merger with Avast, a firm based in the Czech Republic that focuses on protecting small businesses. Norton has a solid franchise and provides good balance to faster-growing, more-expensive companies in the sector. Norton trades at a P/E of just 14. 

Other companies I like (all have a market cap between $4 billion and $6 billion) include KnowBe4 (KNBE), whose shares are still about one-third below their all-time high; SailPoint Technologies Holdings (SAIL), which specializes in identity security; and Qualys (QLYS), with sales up nearly 50% over the past three years. 

Among exchange-traded funds, consider Global X Cybersecurity (BUG), with an expense ratio of 0.5%. In 2020, its first full year, it returned 70.8%, and it gained another 13% in 2021. It’s breaking even so far in 2022. Palo Alto, Fortinet, CrowdStrike, Tenable, NortonLifeLock and Qualys are holdings, so the ETF provides a handy way to buy some of my favorites.

list of cybersecurity stocks and ETFslist of cybersecurity stocks and ETFs

James K. Glassman chairs Glassman Advisory, A public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. Of the stocks mentioned, he owns Microsoft. reach him at [email protected]

Source: kiplinger.com

Choppy Market Impacting Your Retirement Income Plan?

In response to the wild market swings caused by inflation and Russia’s attack on Ukraine, most investment advisers are publishing articles about staying the course during volatile times. I’ve found one problem with these suggestions, particularly when it comes to investors near or in retirement: The advice is focused on your investment allocation, when your own focus most likely will be on your income, now and in the future. You don’t want a small — or worse yet, a large — market correction to wipe out your plans for income along with what you want to spend it on.

So, my question is: How much of your current and future retirement income should be dependent on the stock market — no matter whether it is heading up or down at any given point?

Answer: Design a plan for retirement income and you’ll find your safe harbor.

How to think about market volatility in a plan for retirement income

People like you who are thinking a lot about retirement generally fit into three stages:

  • Planning to retire in five to 10 years and wondering about whether and how to reposition your savings during the homestretch.
  • About to retire and ready to implement the final pieces of a plan that looked pretty good over the past few years.
  • Already retired with a plan that has done well for the past several years — but nervous about the effects of the latest market volatility.

When you put together your own plan for retirement income you want your income to: (a) meet your current needs, (b) grow over time, and (c) last your lifetime. And you may want to leave a specific legacy at your passing. Finally, while often not discussed, you want a plan with a long-term view that will also reduce the anxiety that comes with stomach-churning drops in the market.

In retirement, the No. 1 concern is running out of money, so although you want the potential upside of the market, you also want to avoid big gambles. The result should be a plan that includes stocks, while also relying on income from safe sources to balance out the markets’ rough rides.

A Strategy to Weather Market Crashes

The goal is simple: You don’t want to be forced to change your lifestyle because of a downturn in the market, or even from a large, unexpected expense. Cutting back during retirement feels just like it does when you were employed: rotten. So, here’s our recommended approach to building a plan for retirement income that can weather the storms:

  1. Create a plan that is built around income. Understand what happens to income when market volatility occurs.
  2. Make sure that a large percentage of that income is safe and not impacted by market swings.
  3. Soften the impact of market gyrations by making sure any income that is based on a withdrawal/sale of investment is from a balanced portfolio of stocks and bonds
  4. Actively manage your plan so that if there is that market correction you are able to make minor adjustments to your planning objectives going forward.

What about that safe income?

Safe income includes:

  • Social Security and pensions. You can count on both for the rest of your life. Social Security is adjusted for inflation, as are some — but not all — pensions.
  • Dividends from a portfolio of high-dividend companies. No company is immune from market shocks, but you or your portfolio managers can select stocks that have demonstrated consistent and increasing dividends.
  • Interest from a high-quality bond portfolio. Look for a diversified portfolio of corporate and municipal bonds.
  • Annuity payments from income annuity contracts. Select from contracts that begin payments immediately as a foundation for your plan with deferred income annuity contracts used to create a ladder of increasing income.

Although “safe” income does not include IRA withdrawals managed as part of your overall income stream, a balanced portfolio of stocks and bonds smooths out the sharp ups and downs of market corrections.

A Case History

Let’s look at a retirement income plan designed for a 70-year-old woman who has $2 million in savings. You can see in the chart below that annuity payments are the foundation of her plan. Dividends and interest provide additional income, and IRA withdrawals are also a significant part of her income. (This particular strategy is designed to improve after-tax income and her legacy.)

Allocation of Income by Source

Bar chart shows the allocation of income a 70-year-old's $2M savings, divided between withdrawals, dividends, interest and annuity payments.Bar chart shows the allocation of income a 70-year-old's $2M savings, divided between withdrawals, dividends, interest and annuity payments.

Now compare her income projections with and without immediate or deferred income annuity (DIA/QLAC) payments, and before and after a 20% market correction.

A table compares a retirement plan with annuity payments and without. The annuity plan has a greater cash flow and the same legacy at 95.A table compares a retirement plan with annuity payments and without. The annuity plan has a greater cash flow and the same legacy at 95.

As you see, before the market correction, our investor has a starting income of about $100,000 for a plan that includes annuity payments, and about $94,000 a year in a plan without annuity payments. Both plans are designed to produce a legacy of $2 million at her passing at age 95.

What happens if we compress a market correction of 20% into the day she implements each of these new plans? (Corrections of this magnitude have occurred but often take weeks if not months.)

  1. The plan without annuity payments feels the impact of the market correction much more dramatically, and while the income falls in both plans, the advantage for the plan with annuity payments is now $92,000 in annual income vs $79,000 for the traditional plan.
  2. Further, the plan with annuity payments can get back to the original income through a replanning process by assuming either a higher return as part of a market recovery, or a lower inflation rate.
  3. While not always correlated with stock market corrections, higher interest rates would make any small incremental purchases of annuity payments more attractive and further close the income gap.
  4. And despite the higher income, the plan with annuity payments would have lower taxable income because of the favorable tax treatment of annuity payments. (Learn more about how annuity payments reduce your taxable income by reading How to Lower Your Retirement Tax Rate to Less Than 10%.)

Today we face inflation and uncertainties caused by war in Europe. Tomorrow, it will be another storm. No matter what questions you have about the future, a good plan for income provides peace of mind as it guides you through rough waters.

If you are ready to start building a Retirement Income Plan for your specific circumstances, visit Income Allocation Planning a Go2Income. We will ask a few easy questions so you can design a plan that meets your objectives. Whether I have fully convinced you about the value of annuity payments or not, why not research on your own? Click annuity info to compare your annuity payment and tax benefits with our investor’s results in the article.

President, Golden Retirement Advisors Inc.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.

Source: kiplinger.com

This Car Comparison Spreadsheet Will Help You Find a Deal

But don’t slam that laptop shut just yet. Your computer (or smartphone) is your biggest asset when buying a car in 2022. Not only can you do all your vehicle research online, but you can also utilize your favorite spreadsheet software (Excel, Google Sheets, LibreOffice, etc.) to craft your own car comparison spreadsheet that puts all the data that matters to you in one easy, digestible place.
You can use this spreadsheet to compare new cars or used cars. The data points you measure and compare will differ for each (more on that below). After you’ve compiled all the data in one easy-to-read format, you can then compare your top choices across the criteria that matter to you and come to a decision.

A Note on Car Shopping in Pandemic Times

If shopping for a new vehicle, you can build and customize it directly on the automaker’s site. Common car manufacturers include Ford, Subaru, Toyota, Honda, Kia, Chrysler, Hyundai and Chevy. You can use these automakers’ (and others’) sites to find new vehicle costs, features and specifications. Many automakers have built-in comparison functions that let you compare their models against competitors.
That said, there are some standard features to consider when shopping for a new vehicle. Here are some of the top ones to look out for:
If you’re willing, you can drive elsewhere in your state (or even across the country) to find the specific used vehicle you want. Rather than browsing every possible dealership website, you can scour used car websites like CarGurus, Cars.com, Autotrader and CarsDirect that compile listings for specific models from various dealerships and private sellers.

How to Use Our Car Comparison Spreadsheet

Because of supply chain shortages (remember the whole steel and computer chip ordeal?) and soaring inflation, both new and used car prices are at all-time high. Vehicles are a precious commodity, and there suddenly aren’t enough to go around. You can expect to get more out of your trade-in (or to sell for a higher price privately), but plan to sink those additional earnings right back into the cost of whatever new car you purchase.
Building a vehicle comparison spreadsheet is super helpful for processing the mountains of data you should be compiling if doing your due diligence when shopping for a new or used car. But if you’re not savvy with spreadsheet programs, you can use our free template to compare cars.
If you plan to purchase from a dealership (rather than privately), look at the inventory of local dealers online. This is particularly helpful if shopping for a used vehicle: Any dealership can let you customize and special order the exact new vehicle you want on their site, but when shopping used, you’re beholden to the inventory they physically have on their lot.

Automaker Websites

But where do you collect the data points for your car comparisons? Here are a few key resources when shopping for a new or used car:

Review Sites

If you’re using our template to compare cars that had a previous owner, you’re going to compare some data points that you wouldn’t for new car comparisons. When shopping for new cars, you might be comparing cars from several different automakers, but when shopping for used cars, you might be looking at multiple versions of the exact same make and model. You’ll need to consider things like condition, price and vehicle history to decide between vehicles that have all the same features.
When browsing for used cars, remember to:

Dealership Websites

More dealerships have turned to an online ordering process, with some even delivering the vehicles to your driveway so you never have to set foot inside the dealership. Many shoppers are foregoing the traditional dealer experience altogether, with options like Vroom and Carvana offering an online alternative.

Used Car Websites

Source: thepennyhoarder.com

Vehicle History Reports

When comparing different cars from different automakers, keep these tips in mind:

Helpful Websites

What to Look for in a New Car

If you’re comparing used cars, get a true picture of what happened with previous owners. Vehicle history reports can tell you if a car was in an accident (and how many), its maintenance records, the number of previous owners and more.
The automotive market is likely different since your last car purchase due to the effects of COVID-19, specifically regarding purchase process and vehicle costs.

  • Price. New vehicles are struggling to differentiate from competitors now that driver-assist safety tech and smartphone integration (Apple CarPlay and Android Auto) are the norm across the industry. For many buyers, the cost (and how that evolves into a monthly payment) might be the deciding factor between two similar models from competing automakers.
  • Warranty. A new-car warranty isn’t the most exciting feature to consider, but when car manufacturers like Hyundai offer 10-year powertrain warranties, it’s a little harder to accept a car that is only under warranty for five years.
  • Fuel economy. Fuel prices were almost nonexistent at the start of COVID-19, but two years in (and with war raging in Europe), fuel costs are at an all-time high. It’s important to prioritize a vehicle that gets excellent gas mileage — or even a hybrid, plug-in hybrid or electric vehicle.
  • Safety scores. An increasing number of new vehicles come with a standard comprehensive suite of active safety technologies (blind spot monitoring, automatic emergency braking, lane-keep assist, etc.), so it’s more important to consider scores from NHTSA and IIHS to determine the safest model in the segment.
  • Cost to Own. It’s hard to predict what will happen five years out, but if you have it your way, you’ll still have your new car and it will be running smoothly. While nothing is a guarantee, KBB’s 5-Year Cost to Own is a good estimate on how much you’ll actually spend on maintaining your vehicle in its first five years.
Cars are lined up in parking spots.
Getty Images

Final Tips for Shopping for a New Car

Buying a car can be a stressful experience. It’s a big decision with a ton of little decisions roped in — new or used? Car or truck? Cloth or leather? gas or electric? Not to mention, there’s way too much information floating around on the internet, making it challenging to compare your options.

  • Compare equivalent trim levels. Don’t compare an entry-level Ford F-150 against a top-tier Chevrolet Silverado 1500. The F-150 will have far fewer features, but the Silverado will be way more expensive. Make sure your comparisons are apples to apples.
  • Always take a test drive. Online shopping is great, and you can compare metrics for cargo volume and horsepower all day. But until you’re behind the wheel, you won’t really get a grasp for seat comfort, acceleration, speaker quality and any other features that are important to you — and how they compare to other vehicles you are considering.
  • Don’t forget taxes and insurance. When thinking about how much your new car costs, you’ve probably been saving for your down payment and calculating your monthly payment in your head. But don’t forget to factor taxes, monthly insurance premiums and other fees into your budget when looking at the total cost.

What to Look for in a Used Car

The top features you’re looking for in a new car won’t be the same for every buyer. For example, parents might be more concerned with rear passenger capacity, cupholders, teen driver technology and in-car vacuums (yes, that’s a thing). Salespeople who visit and sometimes drive clients will want something flashy and sleek. Environmentalists (or even just Uber drivers) will want something with great fuel economy — maybe even a hybrid or an EV — while outdoor adventurers might need an SUV with enough towing power to haul their trailer or boat.
In particular, Kelley Blue Book (KBB) is a useful tool when shopping for used vehicles. This site can give you an understanding of what a specific used model should be selling for, based on features and condition. With KBB in your digital back pocket, you should be able to recognize when a used vehicle costs more than it’s worth.

  • Mileage
  • Number of previous owners
  • Vehicle history (flood damage, number of accidents, maintenance history, etc.)
  • Exterior condition
  • Interior condition

Final Tips for Shopping for a Used Car

Go to sites like Edmunds, Kelley Blue Book, Consumer Reports and JD Power for honest reviews. These sites review the newest vehicles released by car manufacturers, but they also have old reviews of dated models, which can be useful when used car shopping.

  • Always take a test drive — to a trusted mechanic. While you don’t want to pay for a vehicle inspection for every car that makes it onto your spreadsheet for consideration, you should take any vehicle that that you’re ready to make an offer on to a trusted mechanic for an independent inspection. If the mechanic raises any red flag that you’re not ready to invest in to fix, do not purchase the car (no matter how good the price).
  • Never skip the vehicle history report. Dealerships are held to a standard, especially when they are franchises of international brands like Toyota, Mazda and Chevy. Private sellers, on the other hand, are more likely to sell you a lemon. While we’re not preaching a “trust no one” mentality, do your due diligence by ordering a vehicle history report. You might even be able to convince the dealer or private seller to pay for it. Use the vehicle history report to compare models — and use it as leverage when haggling for a lower price.
  • Avoid dragging your feet. Buying a new car gives you the luxury of time. You can research as long as you want, sleep on the decision for days and then, when you’re finally ready, customize your dream car and have the dealership order it — without ever risking missing out on that vehicle. Used cars, however, are a finite commodity. If there is a specific car that you want and someone else swoops in before you, there’s no guarantee you’ll find another used car for sale just like it.

Our vehicle comparison spreadsheet has a special section specifically for used cars. Here, we encourage you to compare features like:
Timothy Moore covers banking and investing for The Penny Hoarder from his home base in Cincinnati. He has worked in editing and graphic design for a marketing agency, a global research firm and a major print publication. He covers a variety of other topics, including insurance, taxes, retirement and budgeting and has worked in the field since 2012.

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4 Car Stocks That Have the Pros Revved Up

The adoption of electric vehicles (EVs) in comparison to internal combustion engine (ICE) vehicles has increased exponentially, fueled by government incentives and a friendly regulatory environment. This has resulted in even legacy car stocks going electric in a big way.

This transition from fossil-fueled cars to going electric got a big boost in 2021 when President Joe Biden signed an executive order targeting 50% of all new passenger cars and light trucks sold in the U.S. should be electric by 2030.

But the industry has more recently been hampered by familiar pandemic woes, including supply-chain constraints impacting production and rising inflation being a key concern even as demand continues to be strong for these vehicles. 

If this was not enough, the Chinese government imposed strict lockdowns across major Chinese cities like Shanghai to contain a wave of COVID-19. This has led to production halts at many key plants for EV manufacturers, which is only compounding a pre-existing automobile chip shortage.

Despite these short-term hurdles, the long-term implications for these car stocks is evident. EV sales hit 6.75 billion units in 2021 – more than double what they did in 2020, according to electric vehicle data site EV-volumes.com. While the impressive growth rate was due in part to easy year-over-year comparisons, expectations are for nearly 41% more EVs to be sold this year compared to last.

But which car stocks are poised to capture this growth? To answer that question, we used the TipRanks database, which allows investors to evaluate stocks using a variety of criteria, including analyst ratings and price targets.

Here, we’ll look at four popular car stocks and see what the pros are saying about each one. Each of the names featured here boasts mostly Buy or better ratings from analysts and each offers significant upside potential to current levels based on their consensus price targets.

Data is as of April 17.

1 of 4

Rivian Automotive

Rivian logo on carRivian logo on car
  • Market value: $35.9 billion
  • TipRanks consensus price target: $73.31 (80.6% upside potential)
  • TipRanks consensus rating: Moderate buy

In early April, Rivian Automotive (RIVN, $40.59) announced first-quarter production data. For the first three months of 2022, the company produced 2,553 vehicles and delivered 1,227 vehicles – meeting its expectations.

The California-based EV maker added that it was “well positioned to deliver on the 25,000 annual production guidance” that it gave on its fourth-quarter earnings call in mid-March.

Mizuho Securities analyst Vijay Rakesh is upbeat about the company as he considers it a “strong early mover” in the EV market as it is focused on “higher-growth” sport utility vehicles (SUVs) with its R1S model and the light truck market with its R1T. The analyst also approves of RIVN’s deal with Amazon.com (AMZN) for commercial electric vehicles.

Rakesh is referring to a partnership between the two companies in which Amazon owns around 18% of Rivian in exchange for the supply of 100,000 electric delivery vans.

And while the analyst admits that near-term challenges remain – supply chain and logistics issues, for instance – he estimates that RIVN will deliver around 86,000 vehicles in 2023 with revenues of around $7 billion. 

Plus, RIVN is further “poised to benefit from improving costs with scale and a well-laid-out path towards further vertical integration giving more control to production and delivery of vehicles,” the analyst adds.

As far as car stocks go, Rakesh calls RIVN a Buy and sees shares hitting $95 over the next 12 months, representing implied upside of 134% to current levels. Here’s what other analysts have to say about RIVN shares.

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XPeng

XPeng car conceptsXPeng car concepts
  • Market value: $23.9 billion
  • TipRanks consensus price target: $45.16 (67.8% upside potential)
  • TipRanks consensus rating: Strong Buy

XPeng (XPEV, $26.93) is one of two U.S.-listed Chinese car stocks on this list. 

Shares of the EV maker have had a rough start to 2022, down 46.5% for the year-to-date. In addition to ongoing regulatory concerns facing Chinese stocks, COVID-related shutdowns across the mainland are sparking worries over more headwinds for an already strained supply chain. 

Still, XPEV’s fundamentals look solid, with the company selling more EVs than its other Chinese rivals Li Auto (LI) and Nio (NIO) in March 2022.

XPeng targets the mid- to high-end market segment in China with its G3 SUV and its P7 smart sports sedan. In March, Xpeng delivered 15,414 units, up 202% year-over-year and 148% month-over-month. And deliveries of the company’s P7 smart sports sedan crossed 9,000 for the first time, reaching 9,183 in March.

Plus, while Xpeng’s gross profit margin (GPM) declined 2.4 basis points (a basis point is one-one hundredth of a percentage point) sequentially in its most recently reported quarter, China Renaissance analyst Yiming Wang believes that price hikes should help stabilize this metric in the short term. 

The analyst – who is upbeat about the green energy stock with a Buy rating and $55.60 price target – also believes the automaker’s product mix will improve with the third-quarter launch of its G9 SUV. 

However, UBS Global Research analyst Paul Gong is sidelined on the stock with a Hold. Among electric car stocks, XPEV “remains most vulnerable on raw materials price hike and rising competition,” Gong wrote in a note, while lowering his price target to $34 from $48 (though this is still 26.3% higher than the stock’s current price).

By Gong’s estimate, battery cost makes up 30% of XPEV’s cars, much higher than competitors Nio (20%) and Li Auto (12%). “We think passing on cost inflation to price-sensitive customers may have adverse consequences for new orders,” the analyst adds.

Still, most of the pros following XPeng are in the bull camp, according to TipRanks. Of the 10 analysts who have sounded off on XPEV stock over the past three months, nine say it’s a Buy. TipRanks offers up a full analyst rundown of XPEV shares.

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General Motors

GM Suburban modelGM Suburban model
  • Market value: $58.3 billion
  • TipRanks consensus price target: $71.13 (77.3% upside potential)
  • TipRanks consensus rating: Strong Buy

Investors in General Motors (GM, $40.13) have a reason to be worried. Currently, the stock is trading near its 52-week lows, pressured by worries that higher commodity costs and supply-chain constraints could heavily impact GM and its fellow car stocks.

But are these concerns toward the stock justified?

Wells Fargo analyst Colin Langan believes that “GM should be a stand out in Q1 given better-than-expected production” as well as a strong product mix. However, the analyst thinks the automaker could lower 2022 guidance to reflect commodity headwinds in the second half of the year (though he believes this may already be priced in).

The analyst adds that solid production growth and a “positive mix” will likely drive a first-quarter beat for GM, production at Ford Motor (F) is “about flat and [its[ mix is much worse than expected,” which could drive a miss.

As a result, Langan is optimistic about GM with an Overweight (Buy) and a price target of $72 on the stock.

Even Goldman Sachs analyst Mark Delaney sees a “difficult [Q1] earnings season” ahead for the U.S. automobile sector. This is due to Russia’s war on Ukraine and higher commodity costs resulting in production downtime.

The analyst prefers General Motors over Ford because it “has no material exposure to Europe.” Delaney adds that GM had less units impacted in the first quarter by semiconductors than Ford, according to IHS Markit.

Out of 17 analysts covering GM in the past three months, 14 are bullish on the stock. Check out Wall Street’s average, highest and lowest price targets for GM on TipRanks.

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Nio

Nio ES8 SUV on showroom floorNio ES8 SUV on showroom floor
  • Market value: $35.9 billion
  • TipRanks consensus price target: $43.01 (118.9% upside potential)
  • TipRanks consensus rating: Strong Buy

Nio (NIO, $19.65) is the second of the Chinese car stocks featured here. Shares are down 38% for the year-to-date for many of the same reasons Xpeng is lower. A recent Bloomberg report detailed how the EV maker halted production of its cars and delayed deliveries as several of its suppliers have gone offline amid the widespread COVID-related shutdowns, including those in Jilin and Shanghai.

Moreover, bowing down to inflationary pressures, the company recently said it will raise prices on all of its SUVs, including the ES6, ES8 and EC6s, by 10,000 yuan, effective May 10. However, Nio does not expect to raise the prices of its sedans – the ET7 launched back in March, as well as the ET5, which is expected to be available in September.

Nio, which was founded in 2014, targets the Chinese premium EV market with its vehicles. While the company has already made a foray into Europe, it is expected that it will also begin selling its EVs in the U.S. at some point down the road.

Mizuho Securities analyst Vijay Rakesh is upbeat about NIO’s global expansion and views it as a “a meaningful contributor to future growth.” Plus, the analyst believes that the lockdowns in China are unlikely to impact the demand for cars.

As a result, Rakesh continues to be bullish on the stock with a Buy rating and a price target of $60. He sees “NIO’s value leadership in the premium EV segment with solid battery technology and ADAS [advanced driver assistance systems] roadmaps as drivers of growth.”

The analyst also thinks that NIO is at an advantage in China due to “regulatory support and market familiarity.”

Wall Street is plenty bullish in general, with 15 of the 17 covering analysts issuing Buy ratings on NIO over the past three months. See which other analysts are in the NIO Buy camp on TipRanks.

Source: kiplinger.com