By John Persinos
Stocks rallied in April and now many investors are betting that the coronavirus crash has bottomed out. But trying to time the market is like playing roulette in Las Vegas. It's exciting but chances are, you'll lose money.
I am not a fan of casino gambling. The odds are always with the house. But I am a fan of investing, especially when I have the edge. A top expert at Investing Daily has perfected a methodology that allows you to beat the Wall Street casino at its own game. More about that in a minute. First, let's look at the investment risks posed by the pandemic.
U.S. stocks fell Thursday, but locked in their double-digit percentage gains for April. The Dow Jones Industrial Average yesterday shed 1.17%, the S&P 500 fell 0.92%, and the NASDAQ Composite slipped 0.28%. For the month, the Dow rose 11.1%, the S&P was up 10.9%, and the NASDAQ gained 15.5%.
Stocks gained ground in April, for their best month in 30 years. But investors remain jittery. The Fear Of Missing Out that helped drive gains last month could quickly give way to just plain fear.
As of this writing Friday morning, the three main U.S. stock indices were trading deeply in the red, as investors digested dismal economic data and earnings.
After the closing bell Thursday, Apple (NSDQ: AAPL) reported an earnings beat for its fiscal second quarter but revenue growth was flat and the tech giant withdrew near-term profit guidance. Apple is a barometer not just for the technology sector but also for the global economy. Uncertainty over the company's operating results spooked investors.
The unease is mounting. U.S.-based equity mutual funds shed $2.5 billion in the week ended Wednesday, the first outflow in five weeks, according to data from Refinitiv Lipper. U.S. taxable bond funds attracted $4.0 billion, the third consecutive weekly inflow, while money market funds drew $83.0 billion, the ninth weekly inflow in a row. The 10-year Treasury note yield hovers at 0.64%, as economic fears keep the bond market anchored.
In another ominous sign, dozens of companies suspended or cut their dividends in recent weeks to shore up their balance sheets. We're likely to see many more dividend cuts in the days ahead, in a variety of sectors.
Notably, energy supermajor Royal Dutch Shell (NYSE: RDS.A) on Thursday cut its dividend for the first time since 1945, slashing its payout by two-thirds. Chaos continues to reign in the energy market, with oil prices in a severe bear market. Last week, the May contract of U.S. West Texas Intermediate plunged below $0 to trade in negative territory for the first time in history.
Hard times in the heartland…
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Economic pain continues to bedevil American households. The U.S. Labor Department reported Thursday that nearly 3.8 million people filed for unemployment benefits for the first time in the most recent week.
The five-week total of initial jobless claims exceeds 30 million and consumer spending has cratered, in the worst economic downturn since the Great Recession of 2007-2009. U.S. gross domestic product in the first quarter fell 4.8%. This economic hardship comes on top of a record wave of farm bankruptcies this year due to the Sino-American trade war (the trade war hasn't ended, by the way).
Furthering dampening investor moods, the White House is reportedly drafting retaliatory measures against China for its lack of transparency about the COVID-19 outbreak.
Read This Story: Your Investment Survival Guide for the Pandemic
First-quarter corporate earnings results so far have been mixed, with nearly half of the companies in the S&P 500 having reported quarterly results.
According to the latest data from research firm FactSet, the blended earnings per share (EPS) decline for the S&P 500 is -15.8%. If -15.8% turns out to be the actual decline for Q1, it will represent the largest year-over-year decline in EPS reported by the index since Q2 2009 (-26.9%). For Q2 2020, analysts are projecting an earnings decline of -31.9%.
The utilities (100%), health care (90%), and information technology (81%) sectors boast the highest percentages of companies reporting earnings above estimates, while the energy (20%) and financials (38%) sectors have the lowest percentages of companies reporting earnings above estimates. The following chart shows the outperformance of the utilities sector:
April was a good month for the stock market but we could be living in the eye of the storm. It's hard to see how stocks can continue rising, within the context of brutal economic and earnings data.
Steep declines probably await us in May, but keep calm and make sure your portfolio is properly positioned. Increase your exposure to defensive sectors such as utilities and health care, the stellar earnings performers so far of Q1. For our list of the best high-yielding utilities stocks, click here now.
Meanwhile, if you're looking for ways to consistently win at the investment game, turn to my colleague Nathan Slaughter, chief investment strategist of The Daily Paycheck and High Yield Investing.
Nathan Slaughter is an expert at pinpointing investment opportunities in corporate takeovers, a lucrative area that's dominated by insiders.
Nathan has developed a proprietary screen that uncovers how Wall Street rigs certain stocks that are involved in takeover activity…so you can jump in before these stocks shoot up in price. Nathan's trading system allows average investors to seize the same advantage enjoyed by the financial big shots.
Nathan is ready to reveal his latest winning stock trade. Do you want in? Watch our presentation.
John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com
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