Stock Market Today: Wall Street Rallies Around Reassuring Retail Data

The stock market enjoyed a broad rebound Tuesday as fresh economic data suggested the U.S. consumer is still shopping strong.

The U.S. Census Bureau said today that April retail sales improved by 0.9% over March. Though that was slightly less than the 1.0% expected, there was a show of strength in the significant upward revision to March’s numbers, to 1.4% growth from 0.5% originally.

“To the extent that markets are worried about a growth slowdown, this is good news, but it is also a further catalyst for the Fed to raise rates even higher to get inflation under control,” says Chris Zaccarelli, chief investment officer for registered investment advisor Independent Advisor Alliance.

While Zaccarelli joins other names in believing a recession is unlikely in 2022, “the Fed is going to need to raise interest rates to a point where they are likely to cause a recession in 2023 or 2024, and that gives us cause for concern,” he says.

Despite the promising retail data, success in retail stocks wasn’t a gimme.

Walmart (WMT, -11.4%) plunged after delivering a mixed quarterly report. Revenues improved 2.4% year-over-year to $141.6 billion to easily top expectations, and Walmart lifted its full-year sales outlook. However, that windfall is coming from cost-conscious consumers flocking to its grocery aisle, which has lower margins than its other offerings. This, as well as supply-chain problems and other headwinds, caused Walmart to report profits of $1.30 per share that were well short of estimates, and to lower its income forecast for 2022.

Home Depot (HD, +1.7%) fared better, however, after delivering record fiscal first-quarter sales and upgrading its full-year outlook. 

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“Walmart’s report this week basically confirmed all the negative scenarios that you would expect given inflationary pressures and rising interest rates,” says David Keller, chief market strategist at StockCharts.com. But he added that “Home Depot’s report had a much more encouraging tone as consumers fueled a strong earnings win for the company.”

Other pockets of strength Tuesday included airline stocks such as American Airlines (AAL, +7.7%) and Delta Air Lines (DAL, +6.7%), which were boosted by United Airlines’ (UAL, +7.9%) higher second-quarter revenue outlook. Semiconductor stocks including Micron Technology (MU, +5.7%) and Qualcomm (QCOM, +4.3%) also rallied around Piper Sandler’s upgrade of Advanced Micro Devices (AMD, +8.7%).

The Nasdaq Composite was tops among the major indexes Tuesday, up 2.8% to 11,984. The S&P 500 delivered a 2.0% gain to 4,088, while the Dow Jones Industrial Average improved 1.3% to 32,654.

stock chart for 051722stock chart for 051722

Other news in the stock market today:

  • The small-cap Russell 2000 surged 3.2% to 1,840.
  • U.S. crude oil futures slumped 1.6% to $112.40 per barrel.
  • A retreat in the U.S. dollar helped gold futures tick 0.3% higher to $1,818.90 per ounce.
  • Bitcoin improved by 1.7% to $30,058.48. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • Twitter (TWTR, +2.5%) made some gains despite a potential deal with Tesla (TSLA, +5.1%) CEO Elon Musk looking increasingly unlikely. Musk insisted today that he would back out of his $44 billion bid to buy the social platform unless Twitter proved that fewer than 5% of its users are bots. He tweeted that “20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher” without providing proof. Numerous analysts have now said they believe Musk’s sudden interest in Twitter’s bot numbers is either an attempt to escape his deal, or lower the $54.20-per-share price tag.

Buffett’s Latest Buys Are In!

A number of other stocks were driven higher Tuesday by their newfound inclusion into a prestigious order: the equity portfolio of Warren Buffett’s Berkshire Hathaway.

Berkshire filed its quarterly Form 13F with the SEC yesterday afternoon, revealing that after more than a year of heavy selling, Warren Buffett was finally eager to buy. Paramount Global (PARA, +15.4%) and Celanese (CE, +7.5%) were just two of the eight new positions Berkshire entered during the first quarter, and among the top beneficiaries of earning Buffett’s seal of approval.

We recently mentioned that inflation has been a major driver of many of Buffett’s purchases of the past few months, but it’s not the only story.

Read on as we explore each and every one of Buffett’s 22 moves from the first quarter of 2022, including what likely drew the Oracle of Omaha (or his lieutenants) to the position.

Kyle Woodley was long AMD as of this writing.

Source: kiplinger.com

The 10 Best Stocks for a Bear Market

Bear markets are an inevitable if particularly unpleasant part of the market cycle. But investors who hold the best stocks to buy for bear markets can mitigate at least some of the damage.

No, the S&P 500 isn’t in a bear market – a 20% decline from its peak – just yet. It has, however, been flirting with one for some time. The Nasdaq Composite, for its part, fell into a bear market a while ago. 

Either way, 2022 has been a dismal year for equities with no clear end in sight. Bottoms are hard to call in real time anyway, and, besides, stocks can trade sideways for as long as they feel like it. 

And so if this is how things are going to continue, investors might want to arm themselves with the best stocks they can find. And right now, those stock picks should focus on resiliency during deep downturns.

The best bear market stocks tend to be found in defensive sectors, such as consumer staples, utilities, healthcare and even some real estate equities. Furthermore, companies with long histories of dividend growth can offer ballast when seemingly everything is selling off. And, of course, low-volatility stocks with relatively low correlations to the broader market often hold up better in down markets.

To find the best stocks to buy for bear markets, we screened the S&P 500 for stocks with the highest conviction consensus Buy recommendations from Wall Street industry analysts. We further limited ourselves to low-volatility stocks that reside in defensive sectors and offer reliable and rising dividends. Lastly, we eliminated any name that was underperforming the broader market during the current downturn.

That process left us the following 10 picks as our top candidates for the best stocks to buy for a bear market.

Share prices, price targets, analysts’ recommendations and other market data are as of May 17, courtesy of S&P Global Market Intelligence and YCharts, unless otherwise noted. Stocks are listed by conviction of analysts’ Buy calls, from weakest to strongest.

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10. Berkshire Hathaway

A Berkshire Hathaway (ticker: BRK.B) signA Berkshire Hathaway (ticker: BRK.B) sign
  • Market value: $694.1 billion
  • Dividend yield: N/A
  • Analysts’ consensus recommendation: 2.25 (Buy) 

Warren Buffett’s Berkshire Hathaway (BRK.B, $314.81) gets a consensus recommendation of Buy with only modest conviction, but then a mere four analysts cover the stock.

One pro rates it at Strong Buy, one says Buy and two have it at Hold, per S&P Global Market Intelligence, which means the latter two analysts believe Buffett’s conglomerate will only match the performance of the broader market over the next 12 months or so.

That’s a reasonable assumption if stocks do indeed avoid falling into bear-market territory. BRK.B, with its relatively low correlation to the S&P 500, tends to lag in up markets. 

By the same token, however, few names generate outperformance as reliably as Berkshire does when stocks are broadly struggling. That’s by design. And Buffett’s wisdom of forgoing some upside in bull markets to outperform in bears has proven to be an incomparably successful strategy when measured over decades. 

Indeed, Berkshire’s compound annual growth (CAGR) since 1965 stands at 20.1%, according to Argus Research. That’s more than twice the S&P 500’s CAGR of 10.5%.

As one would expect, BRK.B is beating the broader market by a wide margin in 2022, too. The stock gained 5.2% for the year-to-date through May 17, vs. a decline of 14.2% for the S&P 500. 

If we do find ourselves mired in a prolonged market slump, BRK.B will probably not go along for the ride. That makes it one of the best bear market stocks to buy.

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9. CVS Health

A standalone CVS Health (ticker: CVS) businessA standalone CVS Health (ticker: CVS) business
  • Market value: $130.3 billion
  • Dividend yield: 2.1%
  • Analysts’ consensus recommendation: 1.92 (Buy) 

The healthcare sector is a traditional safe haven when markets turn south. Where CVS Health (CVS, $99.60) stands out is that few sector picks possess its unique defensive profile.

CVS is probably best known as a pharmacy chain, but it’s also a pharmacy benefits manager and health insurance company. Analysts praise the company’s multi-faceted business model for both its defensive characteristics and long-term growth prospects.

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“We are bullish on CVS tied to its unique set of assets, robust clinical capabilities and expanding presence in the attractive Medicare business,” writes Truist analyst David MacDonald, who rates the stock at Buy. “We view CVS’ integrated pharmacy/medical benefits as well positioned. Significant scale across its business lines, a strong balance sheet and robust cash flow generation provide dry powder for ongoing capital deployment activities over time.”

MacDonald has plenty of company in the bull camp. Nine analysts rate CVS at Strong Buy, nine call it a Buy and seven have it at Hold. Meanwhile, their average target price of $118.82 gives the stock implied upside of about 27% in the next 12 months or so.

Investors can also take comfort in the stock’s low volatility. Shares have a five-year beta of 0.77. Beta, a volatility metric that serves as a sort of proxy for risk, measures how a stock has traded relative to the S&P 500. Low-beta stocks tend to lag in up markets, but hold up better in down ones.

That’s certainly been the case with CVS stock this year. Shares were off 3.7% for the year-to-date through May 17, but that beat the S&P 500 by nearly 11 percentage points. Such resilience makes the case for CVS as a top bear market stock to buy.

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8. Coca-Cola

Cans of Coca-Cola (ticker: KO) in iceCans of Coca-Cola (ticker: KO) in ice
  • Market value: $285.2 billion
  • Dividend yield: 2.6%
  • Analysts’ consensus recommendation: 1.88 (Buy) 

Few names in the defensive consumer staples sector can match Coca-Cola (KO, $65.79) when it comes to blue-chip pedigree, history of dividend growth and bullishness on the part of Wall Street analysts.

Coca-Cola’s blue-chip bona fides are confirmed by its membership in the Dow Jones Industrial Average. But the company also happens to be an S&P 500 Dividend Aristocrat, boasting a dividend growth streak of 60 years and counting.

Oh, and Coca-Cola also enjoys the imprimatur of no less an investing luminary than Warren Buffett, who has been a shareholder since 1988. At 6.8% of the Berkshire Hathaway equity portfolio, KO is Buffett’s fourth-largest holding. 

Coca-Cola’s more immediate prospects are bright too, analysts say. It’s an unusually low-beta stock, for one thing, and that has been very helpful during this dismal 2022. Shares in KO have gained more than 11% for the year-to-date through May 17, beating the broader market by more than 25 percentage points.

True, KO was hit hard by pandemic lockdowns, which shuttered restaurants, bars, cinemas and other live venues. But those sales are now bounding back. Analysts likewise praise Coca-Cola’s ability to offset input cost inflation with pricing power. 

“We think KO’s strong fourth-quarter results reflect its brand power and ability to thrive in an inflationary environment, as top line improvement was entirely driven by price and mix,” writes CFRA Research analyst Garrett Nelson (Buy). 

Most of the Street concurs with that assessment. Twelve analysts rate KO at Strong Buy, six say Buy, seven have it at Hold and one calls it a Sell. With a  consensus recommendation of Buy, KO looks to be one of the best bear market stocks to buy.

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7. AbbVie

A picture of an AbbVie (ticker: ABBV) buildingA picture of an AbbVie (ticker: ABBV) building
  • Market value: $273.5 billion
  • Dividend yield: 3.5%
  • Analysts’ consensus recommendation: 1.88 (Buy) 

Pharmaceutical giant AbbVie’s (ABBV, $155.30) defensive characteristics stem from it being part of the healthcare sector, as well as a low-volatility Dividend Aristocrat. 

But the Street is outright bullish on the name for other reasons as well. 

High on analysts’ list are ABBV’s growth prospects and its pipeline. AbbVie is best known for blockbuster drugs such as Humira and Imbruvica, but the Street is also optimistic about the potential for its cancer-fighting and immunology drugs.

“After the recent weakness in ABBV, we revisited the model, and we came away even more confident regarding the growth prospects and pipeline,” writes Wells Fargo Securities analyst Mohit Bansal, who rates AbbVie as his Top Pick. “We think the consensus forecast significantly underestimates post-2023 growth. There are multiple pipeline catalysts in the 2022 to 2023 timeframe which are not in consensus models.”

At Truist Securities, analyst Robyn Karnauskas (Buy) largely agrees with that view. Although ABBV is suffering with the expected erosion of sales of Humira, newer drugs such as Rinvoq and Skyrizi are rapidly gaining momentum, the analyst says.

The bottom line is that bulls outweigh bears on this name by a comfortable margin. Twelve analysts rate ABBV at Strong Buy, four say Buy, seven call it a Hold and one says Sell.

AbbVie also stands out as a top bear market stock to buy because of a half-century of annual dividend increases. Same goes for ABBV’s low beta. The latter indicates relatively low correlation to the S&P 500, and is evidenced by ABBV stock gaining 14% for the year-to-date through May 17. That beat the broader market by 28 percentage points.

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6. Medtronic

A Medtronic (ticker: MDT) glucose monitorA Medtronic (ticker: MDT) glucose monitor
  • Market value: $142.6 billion
  • Dividend yield: 2.4%
  • Analysts’ consensus recommendation: 1.85 (Buy) 

Medtronic (MDT, $106.39) is another low-volatility healthcare stock with a long history of dividend growth that analysts say remains poised for even more market-beating returns.

Shares in one of the world’s largest manufacturers of medical devices gained nearly 3% for the year-to-date through May 17, a period in which the S&P 500 shed more than 14%. Even better, with an average price target of $123.18, the Street gives MDT implied upside of 17% in the next 12 months or so.

That’s why analysts’ consensus recommendation stands at Buy, with fairly high conviction. Of the 26 analysts surveyed by S&P Global Market Intelligence covering MDT, 13 rate it at Strong Buy, four say Buy and nine call it a Hold.

Part of MDT’s appeal stems from its reasonable valuation. Shares change hands at 18.8 times analysts’ 2022 earnings per share (EPS) estimate. And yet MDT is forecast to generate average annual EPS growth of nearly 10% over the next three to five years.

“We see this as an attractive valuation,” notes Argus Research analyst David Toung (Buy), adding the company “has solid post-pandemic growth opportunities from both current and soon-to-be-launched products.”

Indeed, the Street singles out MDT’s strong portfolio of existing products, as well as promising new ones under development.

“We believe Medtronic’s deep product pipeline should drive improving revenue growth and enable margin improvement resulting in high single-digit EPS growth and multiple expansion,” writes Needham analyst Mike Matson (Buy).

The best stocks to buy for bear markets often return cash to shareholders, too. And MDT’s history in that regard is as solid as they come. This Dividend Aristocrat has increased its payout annually for 44 years and counting.

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5. General Dynamics

An F-16 Fighting Falcon, made by General Dynamics (ticker: GD)An F-16 Fighting Falcon, made by General Dynamics (ticker: GD)
  • Market value: $64.3 billion
  • Dividend yield: 2.1%
  • Analysts’ consensus recommendation: 1.81 (Buy) 

Shares in defense contractor General Dynamics (GD, $232.02) benefit in down markets both from their relatively low volatility and dependable dividends. That alone makes GD worth considering as one of the better bear market stocks to buy.

What puts General Dynamics over the top, however, is its robust long-term growth forecast and potential for high share-price appreciation, analysts say.

GD’s defensive characteristics have certainly been well documented so far in 2022. Shares gained 11% for the year-to-date through May 17, a period in which the S&P 500 fell more than 14%. 

And the Street sees more outperformance ahead. Of the 16 analysts issuing opinions on the stock tracked by S&P Global Market Intelligence, nine call it a Strong Buy, two say Buy, four have it at Hold and one calls it a Sell.

Analysts forecast General Dynamics to generate average annual EPS growth of 11.6% over the next three to five years. And, notably, their average target price of $266.07 gives GD implied upside of about 15% in the next 12 months or so.

“Over the long term, GD management is focused on driving growth through modest sales increases, margin improvement, and share buybacks,” writes Argus Research analyst John Eade (Buy). “The company also aggressively returns cash to shareholders through increased dividends (most recently with a hike of 6%).”

If we do find ourselves slogging through a bear market – or just a sideways market – 15% price upside would be outstanding. And as a Dividend Aristocrat with 31 consecutive years of payout increases to its name, shareholders can at the very least count on GD for equity income.

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4. Iron Mountain

An Iron Mountain (ticker: IRM) datacenter against a white backgroundAn Iron Mountain (ticker: IRM) datacenter against a white background
  • Market value: $15.6 billion
  • Dividend yield: 4.6%
  • Analysts’ consensus recommendation: 1.71 (Buy) 

Iron Mountain (IRM, $53.99) is a real estate investment trust (REIT) with a twist. While the company is growing out a more modern datacenter arm, its legacy business is to store, protect and manage documents. In some cases that means it merely shreds them. The good news is that when corporate customers do indeed store paper documents, they tend to do so for very long periods of time.

That sort of predictability not only helps Iron Mountain maintain a generous dividend, but it allows IRM stock to trade with relatively low volatility. No wonder analysts particularly like Iron Mountain as one of the best bear market stocks to buy. 

“We view IRM as a defensive stock in the current environment, with significant valuation discounts to more traditional REITs (storage and data centers), an improving organic revenue growth story, and the very strong likelihood that the dividend will start to be raised at a 5% to 7% annual pace starting in 2023,” writes Stifel analyst Shlomo Rosenbaum (Buy).

Only seven analysts cover the stock, per S&P Global Market Intelligence, but their consensus recommendation comes to Buy with fairly high conviction. Four pros rate IRM at Strong Buy, two say Buy and one has it at Sell. Meanwhile, their average target price of $61.67 gives IRM implied upside of nearly 20% in the next year or so. 

Such returns would be extraordinary in a bear market, but then, IRM has been holding up its end of the bargain on defense so far. Shares have improved by 2.3% for the year-to-date through May 17 to beat the S&P 500 by about 12 percentage points.

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3. Mondelez International

A stock of Oreo cookies made by Mondelez International (ticker: MDLZ)A stock of Oreo cookies made by Mondelez International (ticker: MDLZ)
  • Market value: $91.0 billion
  • Dividend yield: 2.1%
  • Analysts’ consensus recommendation: 1.67 (Buy) 

Consumer staples giant Mondelez International (MDLZ, $65.45) is one of the best stocks for a bear market for many of the same reasons that it’s one of the best stocks to stave off sizzling inflation. 

The company’s vast portfolio of snacks and foods include Oreo cookies, Milka chocolates and Philadelphia cream cheese, to name a few. Sales of such consumer favorites tend to hold up well amid rising prices thanks to fickle palates and brand loyalty. 

Where MDLZ stands out among analysts, however, is in its ability to handle higher input costs thanks to a longstanding hedging program. The company also has been successful in passing higher costs on to consumers.

“We hold a strong growth outlook for Mondelez as its sales growth continues to outperform our expectations driven by strong market share performances and strong category growth rates,” writes Stifel analyst Christopher Growe (Buy). 

Nine consecutive years of dividend increases and a stock that trades with much lower volatility than the S&P 500 should also serve investors well in a tough market. Indeed, MDLZ was essentially flat for the year-to-date through May 17, vs. a decline of more than 14% for the broader market. 

Stifel is in the majority on the Street, which gives MDLZ a consensus recommendation of Buy, with high conviction. Twelve analysts rate it at Strong Buy, eight say Buy and four have it a Hold. 

Pricing power, market share gains and low volatility all help make the case for MDLZ as one of the best bear market stocks to buy.

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2. UnitedHealth Group

UnitedHealth Group (ticker: UNH) signUnitedHealth Group (ticker: UNH) sign
  • Market value: $462.1 billion
  • Dividend yield: 1.2%
  • Analysts’ consensus recommendation: 1.63 (Buy) 

Blue-chip stocks in defensive sectors such as healthcare tend to hold up better in bear markets, which is why it’s no surprise to see UnitedHealth Group (UNH, $492.93) make the cut.

This Dow Jones stock is the market’s largest health insurer by both market value and revenue – and by wide margins at that. But UNH’s sheer size alone is hardly a reason to hold it through a market downturn.

Shareholders can also take comfort in 13 consecutive years of dividend increases, a stock that’s historically been much less volatile than the broader market, and an outsized profit-growth forecast.

Analysts praise UNH on a number of fronts, with contributions from the Optum pharmacy benefits manager business being a regular highlight. A steep decline in hospitalizations due to COVID-19 is also a welcome relief.

“We maintain our Strong Buy rating on UNH as we believe shares continue to offer an attractive risk-reward tradeoff, and expect management to execute on its mid-teens EPS growth target,” writes Raymond James analyst John Ransom. 

The Street, which gives the stock a consensus recommendation of Buy with high conviction, expects the company to generate annual EPS growth of nearly 14% over the next three to five years. 

Lastly, this low-vol stock is performing as expected in 2022. It is off less than 2% for the year-to-date through May 17. That’s better than the S&P 500 by 12 percentage points.

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1. T-Mobile US

T-Mobile (ticker: TMUS) storeT-Mobile (ticker: TMUS) store
  • Market value: $161.2 billion
  • Dividend yield: N/A
  • Analysts’ consensus recommendation: 1.55 (Buy) 

Telecommunications stocks have always been favored for dividends and defense, and those are good attributes to have in a bear market. Where T-Mobile US (TMUS, $129.00) stands out is that shares in the wireless carrier have tremendous price upside too, analysts say.

You can chalk TMUS’s bright future up to the company’s $30 billion merger with Sprint. The deal closed two years ago, but the benefits have been escalating ever since. 

That’s because the “trove” of mid-band spectrum Sprint brought to TMUS allowed the telco to rapidly build out its next-generation 5G mobile wireless network, notes Argus Research analyst Joseph Bonner (Buy). The high-speed network, in turn, gave the company a competitive advantage over Verizon (VZ) and AT&T (T).

“The success of the company’s service plan innovations has been evident in its robust subscriber acquisition metrics,” Bonner writes. “T-Mobile remains the best positioned of the national carriers to take market share.”

T-Mobile’s clear advantages over peers is key to the Street’s consensus recommendation on the stock, which stands at Buy, with high conviction. It also factors into analysts’ average price target, which, at $167.55, gives TMUS implied upside of 30% in the next year or so.

With a five-year beta of 0.51, TMUS can kind of be thought of as being half as volatile as the S&P 500. That low-vol character has paid off handsomely so far this year. TMUS is up nearly 11% for the year-to-date through May 17, a period in which the broader market has fallen more than 14%. 

If the recent past is prologue, TMUS will prove itself as one of the best bear market stocks to buy.

Source: kiplinger.com

5 Expert Tips for Protecting Yourself from the Next Crypto Crash

If you’re investing in cryptocurrency, it needs to be part of a balanced portfolio that meets your goals. For most people, this means allocating no more than 5% of your portfolio to a risky investment like crypto.
Possibly the most important thing for investors to remember is don’t panic. Cryptocurrency is a highly volatile investment and these types of price swings are to be expected.
— Cody Lachner, certified financial planner and director of financial planning at BBK Wealth Management
Most investors are seeing a broad pull back in all their investments right now, including stocks. There’s not much investors can do in such situations except to keep their portfolios balanced and diversified.
The machine worked great — until it didn’t.
The collapse of terra and luna erased some billion in market capitalization in a week. Experts say that money is unlikely to return. The fallout sent ripples across the entire crypto ecosystem, causing bitcoin and ethereum to hit lows not seen since December 2020.
The crash in crypto has reminded us why a long-term investment strategy is so important. The crypto community has even come up with the phrase HODL which means “hold on for dear life.”
Source: thepennyhoarder.com
In the months and weeks ahead, cryptocurrencies will face the same challenge as other major asset classes — rising interest rates — which tend to negatively impact the value of risky investments.
Sometimes people only look at the upside when investing. They think “Wow, I could have made a lot of money if only I had invested in this or that.”
— Chris Brooks, co-founder of Crypto Asset Recovery
But why did investors sink so much money into these tokens?
By May 12, the stablecoin once pegged at was trading for less than a penny.
When investing for the long-term, you understand that corrections are part of a normal market. That makes it easier to ride out the lows and wait for the eventual recovery.
Terra’s value is meant to stay at . But it wasn’t backed by real-world assets. Instead, the two tokens were tied in value to one another like a seesaw. One token would be automatically created or destroyed based on the supply and demand of the other.

How To Protect Your Portfolio From Another Crypto Crash: 5 Experts Weigh In

A portrait of Robert Persichitte
Photo courtesy of Robert Persichitte

1. Don’t Go All in

Ready to stop worrying about money?
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Eventually, trust will re-enter the market and you’ll get another shot.
— Lance Elrod, a certified financial planner with Next Step Financial Transitions

This is a portrait of Erik Goodge who is wearing an eye patch while sitting in a green office chair.
Photo courtesy of Erik Goodge

2. Read the Fine Print

— Robert Persichitte, a tax accountant and certified financial planner at Delagify Financial
Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.
New York Magazine described the system “as a perpetual wealth-creation machine, a way to always make money through the magic of code and financial engineering.”
Terra’s algorithm eventually broke — there’s still some confusion and debate over why — and its value started nosediving May 8. As investors sold off UST, the supply of luna ballooned, causing its price to plummet. From there, UST and luna locked arms in a death spiral race to the bottom.

3. Be Safe, Be Secure

By May 16, bitcoin traded at around ,000 — more than a 50% decline in value from its all-time high of roughly ,000 five months ago.

This is a portrait of Chris Brooks.
Photo courtesy of Chris Brooks

Cryptocurrency investors are reeling and wondering what comes next after a massive market shakeup sent the price of bitcoin plummeting to its lowest level in 17 months last week.
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A portrait of Lance Elrod.
Photo courtesy of Lance Elrod

4. Play the Long Game

One positive that can occur during a correction like this is a tax-loss harvesting opportunity: You can sell certain assets to capture losses and offset capital gains tax you may owe next year.
Many cryptocurrency investors are now wondering what comes next and how to safeguard their portfolios. After all, it’s not just cryptocurrency that’s suffering — the entire U.S. economy is sluggish. Inflation is high, interest rates are rising, stocks are down (the S&P 500 has lost 16% of its value so far in 2022) and many experts are forecasting a recession in the next six to 12 months.
But few terra/luna investors paused to realize they were stacking risk on top of risk on top of more risk.

A portrait of Cody Lachner, certified financial planner and director of financial planning at BBK Wealth Management.
Photo courtesy of Cody Lachner

5. Buy and Hold (on for Dear Life)

— Erik Goodge, a certified financial planner and president of uVest Advisory Group
No one has perfect foresight. That’s why it’s so important to diversify with other assets.
Employ best practices in diversity, securing your private keys and don’t over-leverage yourself. Know that while this is a setback, it’s a temporary one.
We sat down with five experts who offered insight into navigating these uncertain times — and the best ways to protect your portfolio from a future crypto crash.

The phrase reminds us that investing in crypto is anything but a smooth ride. <!–

–>


A scheme known as the Anchor protocol promised crypto investors annual returns of nearly 20% in exchange for lending out their terra holdings. With cryptocurrency markets relatively stagnant since December, the lure of 20% returns seemed too good to pass up.

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

Walmart Q1 Earnings Likely Boosted By Inflation

The latest consumer price index (CPI) released last week indicates inflation remained sky-high in April. And while rising prices were a headwind for most companies in the first three months of 2022, they likely served as a tailwind for mega-retailer Walmart (WMT, $147.48).

Wall Street will find out this week, with WMT an early entrant on the earnings calendar; WMT will report its first-quarter results ahead of the May 17 open. 

The consumer staples stock has shown resilience amid the recent market volatility, up roughly 2% for the year-to-date compared to a more than 17% decline for the broader S&P 500.  

WMT beat on both the top and bottom lines in its fourth quarter thanks in part to its ability to keep prices competitive in a high-inflation environment. And this trend probably continued in Q1, despite a challenging backdrop, says UBS Global Research analyst Michael Lasser (Buy).

“With low prices as its core value proposition, WMT is uniquely positioned to benefit from rising inflation,” the analyst adds. “Its scale helps give it the ability to keep healthy price gaps versus its peers, which can help it achieve further share gains in the grocery channel.  

While Lasser admits there will likely be some “moving pieces” in the report – including unpredictability related to macro headwinds – components such as U.S. same-store sales and full-year guidance will be good.

“We view WMT’s shares as compelling as they offer more certainty than others in this uncertain backdrop,” the analyst says.

Amid tough year-over-year (YoY) comparisons that include last year’s stimulus-related pop, consensus estimates are for Walmart to report a 12.4% drop in earnings to $1.48 per share. Revenue is expected to arrive at $138.8 billion (+0.4% YoY).

Lowe’s Faces Tough Comps in Q1

First-quarter earnings from Lowe’s (LOW, $191.70) are due out before Wednesday’s open. Similar to Walmart, the home improvement retailer is facing hard comparisons from Q1 2021. 

As such, analysts, on average, are calling for a slim 0.9% YoY rise in earnings to $3.24 per share. And revenue is projected to be flat at $23.8 billion.

Still, Lowe’s entered 2022 with momentum following a solid fourth-quarter print, says UBS Global Research analyst Michael Lasser (Buy). 

Sign up for Kiplinger’s FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

Additionally, the consumer discretionary name raised its full-year guidance in February. This reflects an inflation tailwind due to LOW’s “prudent pricing power” that will likely last for at least a few more quarters, the analyst adds. 

“We believe LOW is building a track record of solid execution with every passing quarter,” Lasser says. “Plus, it has several unique drivers to propel its results in the next few years independent of the market growth.”

Kohl’s Top and Bottom Lines Probably Contracted in Q1

Kohl’s (KSS, $47.51) will report its first-quarter earnings ahead of the May 19 open. 

The department store chain ended 2021 with record adjusted earnings of $7.33 per share and year-over-year revenue growth of 21.8% to $19.4 billion.

And Deutsche Bank analyst Gabriella Carbone (Buy) thinks the company is just getting started. “KSS has laid the groundwork for growth along with improving profitability, and is a more nimble company today than it was pre-pandemic,” Carbone says.

Included in the company’s plans to drive growth are goals for Kohl’s to reach $2 billion in sales from its partnership with beauty company Sephora and expand its operating margin to a range of 7% to 8%.

Carbone adds that these goals “may prove to be prudent as management has greatly considered a number of headwinds,” including supply-chain woes and a tight labor market.

As for the retail stock’s first-quarter results, analysts, on average, expect earnings to arrive at 72 cents per share (-31.4% YoY) and revenue to land at $3.7 billion (-0.5% YoY).

In addition to the company’s financial results, Wall Street will be looking for additional updates on the company’s strategic initiatives. Last Wednesday, shareholders voted on Kohl’s new slate of directors, rejecting an attempt from Macellum Advisors to add its nominees to the board. The activist investor has been pushing KSS to make changes, including unloading some of its real estate and putting itself up for sale.

Source: kiplinger.com

Is Recession Coming? Watch These Signs

recession market scare crash downturn stock business men
By Andrey Burmakin / Shutterstock.com

There’s no time stamp on when recessions pop up, or how long they last. Our last recession was two months long at the onset of the COVID-19 pandemic in 2020, making it the shortest on record.

The one before that was the Great Recession starting in 2007 and lasting 18 months, the longest downturn since World War II.

If the stock market and economy are keeping you on the edge of your seat, you can look for signs of a recession before it hits. That can help you determine whether you should start preparing for a recession, and the act of getting your finances ready for a possible downturn should give you some peace of mind.

An inexact science

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Stock-Asso / Shutterstock.com

Before we dive into the possible warning signs of a recession, it’s worth noting that predicting a recession is not an exact science.

So, while the following warning signs historically have served as indicators that a recession might be on the horizon, that doesn’t mean they are foolproof. The economy is dynamic, and there is no list of indicators that have preceded every past recession.

Still, the following indicators tend to be a good place to start looking if you’re worried about whether a recession lies ahead.

Sign No. 1: The yield curve inverts

Positive yield curve
hafakot / Shutterstock.com

Typically, long-term bonds pay more than short-term bonds, as illustrated above. This makes sense: If you agree to tie up your money for longer periods, you should be paid more for your trouble. This is why a five-year certificate of deposit (CD) pays more than a one-year CD.

Rarely, however, the reverse is true: Long-term bonds start paying less than short-term bonds. When that happens, a recession often follows. In fact, this situation, known as an inverted or negative yield curve, has proven a highly accurate recession predictor.

Why would long-term bonds ever pay less than short-term bonds? The nation’s central bank, the Federal Reserve — or “the Fed” for short — controls short-term rates, but the market controls the rates on longer-term securities.

The Fed can raise short-term rates, which is exactly what they started doing in March 2022, for the first time since 2018. But if investors start thinking things don’t look so good in the economy, they keep their powder dry by buying long-term bonds. The more they buy and bid up the price, the lower the rates on these securities go.

The yield curve did dip into negative territory in late March 2022. It quickly recovered, but it’s worth noting that it was the first time the yield curve turned negative since 2019 and, before that, 2006.

What to watch: You can find Treasury yields on the U.S. Treasury Department’s website. CNBC also tracks in real time the spread, or difference, between the yields on two-year and 10-year Treasurys.

Sign No. 2: The Leading Economic Index slips

Jenga game at risk of slipping
88studio / Shutterstock.com

The Conference Board’s Leading Economic Index (LEI) is one predictor of global economic health. The Conference Board, a nonprofit research group, describes the index as one of “the key elements in an early warning system to signal peaks and troughs in the global business cycle,” with the LEI specifically anticipating turning points in the business cycle.

Monthly dips in the Leading Economic Index aren’t alarming. However, year-over-year drops in the benchmark have been followed by recessions in the past.

The LEI increased by 0.3% from February to March, and by 1.9% over the six months leading up to March, so there’s no reason for concern based on this indicator right now.

What to watch: Keep an eye on Conference Board press releases or media coverage of the index.

Sign No. 3: Interest rates rise

Federal Reserve
Orhan Cam / Shutterstock.com

Government monetary policy can be another economic bellwether. We’ll explain what to watch, but first, a quick refresher on how it works.

The Federal Reserve influences the economy by using a couple of tools. One of those tools is control over short-term interest rates via the target federal funds rate. If the economy is in the doldrums, it can lower the federal funds rate to encourage consumers and businesses to borrow, buy and invest, which stimulates the economy. That’s why this rate was kept near zero for years following the Great Recession that began in December 2007.

On the other hand, if the economy is growing too fast, that can lead to rising prices, otherwise known as inflation. To cool things down, the Fed raises the federal funds rate, which serves to put the brakes on the economy by discouraging both consumers and businesses from borrowing and spending as much.

While interest rates don’t directly affect the stock market, if businesses have to pay more in interest, that hurts their profits, which will ultimately be reflected in a lower stock price.

Also, as rates rise, investors often sell stocks, driving prices lower. Why do they sell? Think about it: If you can earn high interest from insured bank accounts or guaranteed Treasury bonds, why take a chance on stocks?

Again, the Fed resumed raising the federal funds rate in March 2022, marking the first rate hike since 2018. The hike in May — a half-point — was the largest increase since 2000.

What to watch: The Federal Reserve’s Federal Open Market Committee posts statements, which include any votes to change the federal funds rate, after each of its regularly scheduled meetings. The meetings are also widely covered by the financial media.

Sign No. 4: Consumer sentiment falls

Upset shopper at a grocery store
C.Snooprock / Shutterstock.com

Another economic indicator published by the Conference Board, the Consumer Confidence Survey, monitors everything from Americans’ buying intentions and vacation plans to their expectations for inflation, stock prices and interest rates.

After an uptick in March, consumer confidence fell slightly in April. The Consumer Confidence Index was at 107.3 for the month, down from 107.6. During the recession at the beginning of the COVID-19 pandemic, the index was less than 90.

Fluctuation is normal, especially as economic conditions shift. The pandemic, the rising costs of products and the war in Ukraine can change how people feel about the economy from month to month. But if consumer confidence continues to drop, that could be a sign of a looming recession.

What to watch: The Consumer Confidence Survey is updated monthly. Track press releases for it on the Conference Board’s website. The survey is also widely covered in the media.

Sign No. 5: Business confidence cools

Upset businessman holding his head at his computer
Rido / Shutterstock.com

Like consumer confidence, business confidence can shed light on the direction of the economy.

The Conference Board’s Measure of CEO Confidence remained in positive territory — 57 — in the first quarter of 2022. (The board considers measures of more than 50 points as positive, and lower readings as negative.) But this measure marked the third consecutive quarter of decline.

CEOs’ assessment of the current general economic conditions, and their expectations for the near future, also declined.

The outlook of small-business owners isn’t any rosier, according to the National Federation of Independent Business’ Small Business Optimism Index.

In March, inflation overtook labor quality as the top problem among small businesses. In fact, the share of owners raising their average selling prices reached its highest level in the survey’s 48-year history.

Moreover, the share of owners who expect better business conditions over the next six months fell to its lowest level in the survey’s history.

What to watch: Business confidence gauges like the Measure of CEO Confidence and CFO Survey are updated quarterly. The Small Business Optimism Index is updated monthly.

Sign No. 6: Vanguard’s risk forecast worsens

Vangaurd
Casimiro PT / Shutterstock.com

Vanguard is one of the biggest asset management firms in the world, so its economic outlooks can help paint a picture of how to monitor fluctuation in the economy.

Before the recession that started in late 2007, Vanguard’s six-month forecast had said the probability of a recession in six months was greater than 40%, according to The New York Times.

The firm’s forecast for 2022 — subtitled “Striking a better balance” — was overall optimistic, if cautiously so:

“While the economic recovery is expected to continue through 2022, the easy gains in growth from rebounding activity are behind us. We expect growth in both the U.S. and the euro area to slow down to 4% in 2022.”

In March, however, Vanguard downgraded its 2022 estimated growth for the U.S. from 4% to 3.5% — which is where it remained going into May.

What to watch: Vanguard posts its monthly market perspectives on its “Our Insights” webpage and issues press releases about its annual outlooks.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

Corporate Social Responsibility (CSR), Explained

Corporate social responsibility, or CSR, is a type of self-regulation that a business uses to enhance the well-being of communities and society through ethical, environmental, and social measures.

By investing in companies that practice CSR, investors have the opportunity to use their own wealth-building strategies to make a positive impact on the world.

What is Corporate Social Responsibility?

Corporate social responsibility (CSR) refers to a company’s dedication to establishing business decisions that positively impact society. Usually, these business decisions support socially responsible movements, like environmental sustainability, ethical labor practices, and social justice initiatives.

Ideally, CSR strategies work in tandem with the traditional business objectives of hitting revenue and profit goals, and other metrics investors may find on a financial statement.

There is no codified set of standards that explain corporate social responsibility. Companies choose to enact CSR policies on their own initiative. It can take many forms depending on a company or an industry, but generally, CSR policies promote economic, social, and environmental sustainability.

However, the International Organization for Standardization (ISO) released guidelines for corporate social responsibility in 2010. Known as ISO 26000:2010 , these guidelines are suggestions, not requirements, that can help put companies on track to further CSR principles.

Why CSR Is Important

Corporate social responsibility is important because companies can use their financial position and operations to build more ethical business models and a better world. When the companies enact socially responsible policies prosper, those practices become more commonplace and widespread.

Additionally, investors increasingly focus on more than traditional business valuation methods when making investment decisions. Investors want to put money into companies that support socially responsible movements, so they may be attracted to companies with CSR policies.

In other words, investing in companies that practice corporate social responsibility gives investors the chance to vote with their wallets on how they want the companies around them to behave.

Recommended: What is ESG Investing?

4 Types of Corporate Social Responsibility

Corporate social responsibility is an umbrella term that captures a wide array of policies that a company can enact. CSR-focused companies may target their efforts on one or more specific social, economic, or environmental areas of concern. The following are some of the most common areas of CSR:

1. Environmental Sustainability

Companies are increasingly focusing on environmental sustainability when making business decisions. With climate change threatening to cause severe impacts worldwide, companies are committing to creating sustainable production methods, distribution, and overall business practices to reduce carbon footprints.

For investors, sustainable investing could mean seeking out companies that promise to hold to sustainable business practices—and doing the research to ensure they’re keeping that promise in real life. Additionally, it could mean focusing on companies that are specifically involved in creating the products that allow for environmental sustainability in the long term, such as renewable energy, biofuels, or hybrid cars.

Recommended: How to Invest in EV Stocks

2. Philanthropy

One of the ways large companies might align themselves with CSR values is by supporting philanthropic efforts. By donating money, products, or services to nonprofit organizations and social causes, a company can show the public what it values and how its furthering causes.

Recommended: How to Make End-of-Year Donations

3. Ethical Labor Practices

Corporations that commit to ethical labor practices, such as focusing on diversity and inclusion or having a zero-tolerance policy on sexual harassment, may garner more favor among investors looking to support a socially responsible company.

Recommended: How to Combine Financial Well-Being and Diversity and Inclusion Initiatives

4. Volunteering

Another way almost any business can get in on CSR might be to support local volunteering efforts by sending out their representatives or fundraising for other volunteering organizations and movements.

Companies might also support volunteerism by offering their employees paid time off specifically for that activity. Some companies provide employees several days off per year, which they can use to participate in any volunteering effort they choose.

Recommended: 34 Charities To Support This Year

Examples of CSR

Many companies have enacted corporate social responsibility initiatives, and the trend is growing. According to one study, 92% of companies in the S&P 500 published sustainability in 2020, up from 20% in 2011. Here are a few examples of CSR policies at large corporations:

•   Starbucks (SBUX): The coffee giant has committed to hiring a diversified workforce, including hiring thousands of veterans, refugees, and disadvantaged youth.

•   Levi Strauss (LEVI): The apparel maker launched the Levi’s® Music Project, an initiative that looks to provide young people with music education and community resources.

•   Ford Motor Company (F): The carmaker is pushing to have 50% of its global sales be electric vehicles (EV) by 2030 to help address climate change.

•   Salesforce (CRM): The software company says it has given about $240 million in grants, 3.5 million hours of community service, and provided donations to more than 39,000 nonprofits and education institutions.

•   The Coca-Cola Company (KO): The beverage company is focusing on water conservation, saying it will push to responsibly use water in its production process and advocate for smart water policies.

Benefits of Corporate Social Responsibility

There are many reasons for a company to adopt and execute corporate social responsibility policies. First and foremost, CSR practices help promote a relatively better society and environment. By following socially responsible protocols, companies could have the opportunity to make significant social, economic, and ecological changes. As noted above, investors are increasingly looking to put money into companies that adhere to CSR.

Beyond these direct positives, CSR policies can also boost a company’s competitiveness by benefiting the firm in the following ways:

•   Stronger brand image: Corporate social responsibility policies can help create a positive image for a company, attracting consumers, employees, and other stakeholders.

•   Employee retention: Talented employees may stay with a company longer when they feel they are working for a business that has strong CSR policies. Additionally, this reputation can help attract new employees.

•   Reduced regulatory burden: A comprehensive CSR policy can help a company navigate relationships with regulatory bodies, especially as governments establish more rules around sustainability.

The Takeaway

Corporate social responsibility is one of several business models companies are using to navigate a changing world. By investing in companies that support those practices, investors could have the opportunity to positively impact the world while also potentially building their nest eggs.

However, it can take a lot of work for investors to determine what companies have the best CSR policies and what companies are truly adhering to their initiatives. So if you want to invest in companies that support CSR policies, it may be best to start small rather than build a whole portfolio around CSR stocks.

SoFi Invest® allows you to start investing today and build a portfolio with whatever strategy you desire. With active investing, you can trade stocks of brands you know and believe in and discover new opportunities based on your interests along the way.

Get started today with SoFi Invest.


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8 Facts You Must Know About Bear Markets

There are few things scarier than a bear market, but steep and sustained drawdowns in stocks are an absolute fact of investing life. Markets go through cycles; always have, always will. 

It’s also true that despite being inevitable and unpleasant, bear markets are not entirely all bad. An irony of bear markets is that they’re one of the exceedingly rare times when long-term retail investors can actually have an advantage over the pros.

Traders and tacticians are under constant pressure to do something, even as a receding tide lowers all boats. Contrast that with retail investors, who are luxuriously free from clients yelling at them all day. Normies can just sit back and dollar-cost average into stocks at increasingly cheaper prices.

Most importantly, a patient long-term investor who is diversified in accordance with his or her age, stage in life and risk tolerance can not only wait out a bear market, but profit from it. Remember: The market can be miserable at times, but its long-term trend is always to the up and right.

A familiarity with the basics of bear markets should help investors better cope with the next one. To that end, we’ve compiled the following eight facts you must know about bear markets.

1 of 8

Why Is It Called a Bear Market?

what is a bear marketwhat is a bear market

It has nothing to do with the way bears sneak up on their prey and attack suddenly, in the same way that bear markets feast on investors. Neither is it because bears are notorious for ransacking campsites and stealing provisions, in the same way bear markets can destroy your financial well-being.

Though both would be fitting.

Believe it or not, the term “bear market” originates with pioneer bearskin traders. The country’s early traders would sell skins they’d not yet received – or paid for. Because the traders hoped to buy the fur from trappers at a lower price than what they’d sold it for, “bears” became synonymous with a declining market.

There is, however, an alternative explanation, according to Wall Street lore: A bear attacks by swiping its claws downward, similar to the downward trend of a declining market.

2 of 8

What Is a Bear Market, Anyway?

A 3D rendering of S&amp;P 500 stocks heading lowerA 3D rendering of S&amp;P 500 stocks heading lower

First, let’s look at what a bear market is not.

It’s not when stock prices end lower in the majority of trading days within a 90-day period. Neither is it a condition proclaimed by the National Bureau of Economic Research. And it is certainly not when at least two major business publications proclaim a bear market on their magazine covers.

Rather, a bear market is when a broad market index, such as the S&P 500, falls 20% or more from its peak.

There still is some debate among market watchers about whether the downturn that lasted from July 16 to Oct. 11, 1990, was officially a bear. The S&P fell 19.9% during that period. And the 2018 correction that lopped 19.8% off the S&P 500 was within rounding distance of a bear market. Since 1929, S&P 500’s average bear-market decline stands at 33.5%, according to Dow Jones Market Data. The median drawdown comes to 33.2%.

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How Often Do Bear Markets Occur?

bear hiding in tall grassbear hiding in tall grass

Since 1932, bear markets have occurred, on average, every 56 months (about four years and eight months), according to S&P Dow Jones Indices.

The Nasdaq Composite index entered a bear market on March 7, when it closed 20% below its Nov. 19, 2021, high. The S&P 500, for its part, set a high of 4,976.56 on Jan. 3. Thus, any close at 3,837.25 or lower puts the benchmark index into an official bear market.

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What Is Least Likely to Cause a Bear Market?

Tank against Ukraine flagTank against Ukraine flag

A number of events can lead to a bear market: higher interest rates, rising inflation, a sputtering economy, military conflict or geopolitical crisis are among the usual suspects. But which is the rarest?

Fortunately, military or geopolitical shocks to the market have been mostly fleeting. Two of the longest downturns followed the attack on Pearl Harbor in 1941 (308 days) and Iraq’s invasion of Kuwait in 1990 (189 days).

But the average time to the market bottom after such events, which also include the terrorist attacks on the U.S. in 2001 and the North Korean missile crisis of 2017, is 21 days, with a full recovery in 45 days, on average.

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Bear Markets Don’t Automatically Equal Recessions

what is a bear marketwhat is a bear market

There are actually two types of bear markets: recessionary and non-recessionary. 

Bear markets often precede or coincide with economic downturns, which is part of what makes them so scary. Happily, there are almost as many instances of past bear markets in which stocks tanked but the economy did not. 

Since 1928, 14 bear markets heralded or happened during recessions, notes Ben Carlson, director of institutional asset management at Ritholtz Wealth Management. However, another 11 bear markets since 1928 had nothing to do with recession. 

Surprise, surprise: Bear markets that occur outside of recessions tend to be shallower and shorter. 

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What Was the Worst Bear Market of All Time?

what is a bear market in stockswhat is a bear market in stocks

Contrary to popular belief, the worst bear market on record was not the 2007-09 crash when the financial crisis ushered in the Great Recession.

Neither was it the tech wreck of 2000 when dot-com stocks collapsed.

The drawn-out decline from the start of 1973 through the fall of 1974 – during which the Arab oil embargo sent oil prices soaring, the so-called Nifty-Fifty stocks sank, and Richard Nixon resigned the presidency – doesn’t take the cake either.

Rather, the bear market that began just ahead of Black Monday that precipitated the Crash of 1929 was the worst one to date.

The bear market from September 1929 to June 1932 resulted in an 86.2% loss for the S&P. Those other historical examples aren’t even close, with losses of 56.8% in 2007-09, 49.1% in 2000-02 and 48.2% in 1973-74.

Indeed, it took the market more than two decades to recover from the 1929-32 slump. Stocks didn’t regain their prior peak until 1954. 

7 of 8

How Long Do Bear Markets Last?

Calendar and hourglass on office desk table. With copy space. Shot with ISO64.Calendar and hourglass on office desk table. With copy space. Shot with ISO64.

Ask a random sample of investors and some folks might guess that it’s a year or less. Others will figure it’s a minimum of two years. Regardless of duration, a bear market usually feels like it lasts forever.

And yet the average length of a bear market since 1929 is just 9.6 months, according to Ned Davis Research. True, those months will be agonizing, but consider the bright side: bears don’t live as long as bulls. Indeed, since 1929, the average lifespan of a bull market is 2.7 years.

8 of 8

Good and Bad Investments for Getting Through a Bear Market

Wall Street sign bear market Wall Street sign bear market

What’s the best investment for a bear market? Is it U.S. Treasury bonds? Or perhaps gold or gold funds? How about classically defensive plays including utilities, consumer staples companies and healthcare companies? Or perhaps the highest-growth stocks with the broadest following?

When stocks are in free fall and worries about the economy abound, there’s nothing more soothing than the full faith and credit of the U.S. government. And a “flight to quality” often leads to gains in U.S. Treasury bonds. In 2008, the Bloomberg Barclays US Aggregate Bond Index – a broad-based, high-quality fixed-income benchmark – gained 5%, making it the only U.S. financial asset in the black that year.

Defensive stocks will lose ground in a bear market, but tend to lose less than average, supported by steady demand for their products and, often, generous dividends. Gold, which Kiplinger recommends as a portfolio diversifier only in small amounts, often zigs upward when stocks zag downward.

As for the worst place to hide out in a bear market, it’s the highest-growth stocks with the broadest following. Indeed, these stocks can be among the worst performers in a bear market if their popularity led them to have outsized gains before everything collapsed. The higher they fly, the harder they fall.

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.

stock chart for 051322stock chart for 051322

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

Could Musk’s Twitter Buyout Hit the Skids?

Anyone who expected turbulence amid Elon Musk’s quest to acquire Twitter (TWTR) got precisely what they anticipated Friday morning, when the Tesla (TSLA) CEO tweeted that the Twitter deal was “temporarily on hold.”

TWTR shares plunged roughly 15% in Friday’s premarket trade following Musk’s tweet, which linked to a May 2 Reuters story about Twitter’s recent statement that “the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our [monetizable daily active users] during the quarter.”

Musk later tweeted that he is “still committed to acquisition,” which helped cut into the losses somewhat, though another seed of doubt was already sown. 

“[Musk] is clearly intent in querying the company’s estimate that spam accounts make up less than 5% of active daily users – a key metric given that establishing an accurate number of real tweeters is considered to be key to future revenue streams via advertising or paid for subscriptions on the site,” says Susannah Streeter, senior investment and markets analyst for U.K. firm Hargreaves Lansdown.

But she also raises the possibility of an ulterior motive.

“There will also be questions raised over whether fake accounts are the real reason behind this delaying tactic, given that promoting free speech rather than focusing on wealth creation appeared to be his primary motivation for the takeover,” Streeter says. “The $44 billion price tag [of the Twitter deal] is huge, and it may be a strategy to row back on the amount he is prepared to pay to acquire the platform.”

That price tag might seem like even more of a stretch now than when Musk first got involved with Twitter.

“I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced,” Musk said in April when he declared his bid for the social media platform.

Since then, the S&P 500 and the communication services sector have both declined by double digits, with many high-priced technology and tech-esque shares plunging precipitously.

Twitter, to be fair, is roughly flat since then. But this latest hurdle puts his once seemingly imminent Twitter deal even further in doubt among investors and analysts alike.

TWTR stock chartTWTR stock chart

The market has yet to price TWTR shares at the $54.20 per share Musk offered in April. Not even after Musk revealed earlier this month that backers such as Andreessen Horowitz, Sequoia Capital and Oracle (ORCL) founder Larry Ellison were lined up to help provide more than $7 billion in financing.

As of Thursday’s close, TWTR shares were trading 15% below Musk’s $54.20-per-share bid. In Friday’s premarket trade, that number was nearly 30%.

Wall Street’s pros appear mildly skeptical the Twitter deal closing, too. According to S&P Global Market Intelligence, the 27 analysts who currently cover Twitter have an average price target of $51.50 and collectively consider the stock a Hold.

Source: kiplinger.com