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Stock Market Looking Up Amid Some Trade-Related Optimism

Key Takeaways:

  • Fed’s Bullard says U.S. manufacturing appears to be in recession
  • China lowers its benchmark lending rate
  • U.S., China set to conclude second day of lower-level talks today

Welcome to quadruple witching day. It happens every quarter on the day when futures and options on indices and stocks all expire on the same day.

Maybe it’s not as ominous as its name might suggest, but these remain days when investors might want to exercise special care as there could be some heightened volatility as people unwind baskets of stocks or futures.

On Wall Street, investors this morning seem to be a bit upbeat, heartened by developments on the trade front and by yet another major economy cutting interest rates.

Today In: Money

China cut its one-year lending rate, joining the Federal Reserve and the European Central Bank in dovish steps designed to help stimulate economies by reducing borrowing costs. The moves come amid rising worries about global economic growth as the trade war between the United States and China drags on. (See more below.)

On the trade front, China and the United States are scheduled today to conclude two-day negotiations that began yesterday, seemingly with the aim of paving the way for higher level discussions next month.

The discussions come as there has been a bit of a thaw recently in the chilly trade relationship between the world’s two largest economies. Among recent developments, the Trump administration has excluded hundreds of Chinese items from a 25% tariff.

Resistance Near Record Highs

We’ve been talking for a while about how the U.S.-China trade war seems to be creating a cap that the stock market may not be able to meaningfully breach until the dispute between the world’s two largest economies comes to some sort of definitive conclusion.

That narrative seemed to be in play Thursday with stocks near all-time highs but losing momentum throughout the day. The S&P 500 Index (SPX) closed above 3000 after making it above 3,020. But without a catalyst to push stocks into record territory, this area between 3000 and the all-time high of 3027.98 looks to be an area of resistance.

True, the Fed didn’t give market participants much to get really excited about this week when the central bank delivered an as-expected rate cut. But it seems like the unresolved trade issue could be the bigger weight here.

While optimism around the two-day negotiations may have helped boost the market early Thursday, that sentiment may have been tempered by comments from a White House adviser in a media report that the United States could escalate the trade conflict if a deal isn’t reached soon. Meanwhile, a tweet from the editor of the official newspaper of the Communist Party of China said that “China is not as anxious to reach a deal as the U.S. side thought.”

Reading the Fed Tea Leaves

With mixed signals on the trade front, the market was left to scratch its head about what the Fed might do after its latest rate cut—not exactly a recipe for a rip-roaring day of gains in equities.

It’s arguable that the Fed has left the market in a holding pattern as investors seem unconvinced that the current central bank trajectory is as pro-growth as they want it to be.

But even though there seems to be wariness about the Fed’s language when it comes to interest rates, there could be some percolating excitement about a different type of stimulus that the central bank might have up its sleeve.

Still, without clear direction or conviction, investors seem to be holding off from making a big rotation into any one style of equities, leaving cyclicals still in play even as market participants may also be eyeing defensive sectors.

Today, investors and traders are likely looking to a slate of Fed speakers to try to gain some clarity on the central bank’s thinking. Additionally, Federal Reserve Bank of St. Louis President James Bullard posted a note explaining his dissent in the Fed’s recent decision to cut its key rate by 25 basis points. Bullard had wanted a 50-basis-point cut, citing expected slowing U.S. economic growth, trade policy uncertainty, rising recession probability estimates, and a U.S. manufacturing sector that “already appears in recession.”

Next week could offer the market further direction on the economy as investors and traders are scheduled to see data releases on consumer confidence and sentiment, new home sales, personal spending, and durable goods orders, as well as the government’s third estimate of gross domestic product.

A Firming Foundation: It’s been a pretty good week for housing market data. Yesterday, figures on existing home sales for August came in at a seasonally adjusted annual rate of 5.49 million. That was up from 5.42 million in July and beat a Briefing.com consensus of 5.36 million. That came after figures showing August housing starts and building permits came in above expectations. Briefing.com pointed out that lower mortgage rates were behind the strength in existing home sales. “The August sales strength cut the inventory of homes for sale,” Briefing.com said. “That will keep upward pressure on home prices, which in turn is likely going to necessitate the need for mortgage rates to stay down to drive ongoing sales growth.”

Will King Consumer’s Crown Stay Shiny? With the health of the U.S. consumer one of the top issues on the minds of investors and traders along with the trade war and Brexit, market participants are likely to be eyeing next week’s reports on consumer confidence and consumer sentiment with some interest. From the data we’ve been seeing, the U.S. consumer has been helping the economy continue to power along. GDP isn’t going gangbusters, but it’s still pretty solid, and the consumer has a lot to do with that. This could be a comforting sign to investors even as the trade war continues to drag on. If prices at the retail level move up due to tariffs and other cost pressures, consumer resilience could help cushion the U.S. economy.

Global Economic Outlook Darkens: While the U.S. consumer has been one of the backstops to the domestic economy, worries about the global economy in the face of the continued trade war are ratcheting up. The OECD is projecting that the global economy will expand by 2.9% this year and 3% next year, which would be the weakest annual growth rates since the financial crisis. And downside risks continue to mount, the group said Thursday. “Escalating trade conflicts are taking an increasing toll on confidence and investment, adding to policy uncertainty, aggravating risks in financial markets, and endangering already weak growth prospects worldwide,” the OECD said.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

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I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.

Source: Stock Market Looking Up Amid Some Trade-Related Optimism

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It was a big week for the bulls as optimism for a new trade deal gained steam. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Brian Kelly, Dan Nathan and Guy Adami.

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Sell Stocks And Pay Off Your Mortgage

It’s hard to borrow yourself rich—especially when you can’t deduct the interest.

A friend from Connecticut tells me she and her husband were recently inspired to sell some securities and pay off their mortgage. She figures the market is due for a correction.

A clever move, I say, and not just because stocks are richly priced. Mortgages, even though rates are at near-record lows, are expensive. And there’s a tax problem.

The tax angle relates to what went into effect last year—something Trump called a tax cut, although it raised federal taxes for a lot of people in high-tax states like Connecticut. For our purposes what matters is that the law made mortgages undesirable.

Used to be that people would say, “I took out a mortgage because I need the deduction.” That doesn’t work so well now. The new law has a standard deduction of $24,400 for a couple, and you have to clear this hurdle before the first dollar of benefit comes from a deduction for mortgage interest.

Today In: Money

Most middle-class homeowners aren’t itemizing at all. For them, the aftertax cost of a 4% mortgage is 4%.

If you are still itemizing, your interest deduction may not be worth much. You are probably claiming the maximum $10,000 in state and local taxes. (If you aren’t, you are living in an igloo in a state without an income tax.) That means the first $14,400 of other deductions don’t do anything for you.

A couple with $2,400 of charitable donations and $15,000 of interest is in effect able to deduct only a fifth of the interest. The aftertax cost of the mortgage depends on these borrowers’ tax bracket, but will probably be in the neighborhood of 3.7%.

Before 2018, your finances were very different. You no doubt topped the standard deduction (which was lower then) with just the write-off for state and local taxes (which didn’t have that $10,000 cap). So all of your mortgage interest went to work in reducing federal taxes. You could do a little arbitrage.

If your aftertax cost of a 4% mortgage was 2.7%, an investment yielding 3% aftertax yielded a positive spread. You’d hold onto that investment instead of paying off the mortgage. It was quite rational to sit on a pile of 3% tax-exempt bonds while taking out a 4% mortgage to buy a house.

Now that sort of scheme doesn’t make sense. The aftertax yield on muni bonds is way less than than the aftertax cost of a mortgage. This is true of corporate bonds, too: Their aftertax return, net of defaults, is less than the cost of a mortgage today.

So, if you have excess loot outside your retirement accounts, and it’s invested in bonds, you’d come out ahead paying off a mortgage.

What about stocks? Should you, like my friend, sell stocks held in a taxable account in order to pay off your mortgage? This is a trickier question. If your stocks are highly appreciated, perhaps not. You could hang onto them and avoid the capital gains.

If they are not appreciated, or if you have a windfall and you’re deciding whether the stock market or your mortgage is the place to use it, the trade-off changes.

Stock prices are, by historical measures, quite high in relation to their earnings. The market’s long-term future return is correspondingly less.

Financiers

In the short term, stocks are entirely unpredictable. Neither my friend, nor I, nor Warren Buffett can tell you whether there will be a crash next year to vindicate her decision or another upward lurch that will make her regretful.

For the long term, though, you can use earnings yields to arrive at an expected return. I explain the arithmetic here. A realistic expectation for real annual returns is between 3% and 4%. Add in inflation and you’ve got a nominal return not much more than 5%.

From that, subtract taxes. You’ve got a base federal tax of 15% or 20% on dividends and long-term gains. There’s also the Obamacare 3.8% if your income is above $250,000. You have state income taxes, no longer mitigated by a federal deduction for them (because you’ll probably be well above the $10,000 limit no matter what).

Add it all up, and you can look forward to an aftertax return from stocks of maybe 4%. That is, your expected return could be only a smidgen above the aftertax cost of your mortgage. Worth the risk? Not for my friend. Not for me.

What if I’m wrong about the market, and it’s destined to deliver 10%? Or what if you are a risk lover, willing to dive in with only a meager expected gain? Mortgages are still a bad way to finance your gamble.

You don’t have to borrow money at a non-tax-deductible 4%. I can tell you where to get a loan at slightly more than 2%, with the interest fully deductible.

The place to go is the Chicago Mercantile Exchange. Instead of buying stocks, buy stock index futures.

When you go long an E-mini S&P 500 future you are, in effect, buying $150,000 of stock with borrowed money. You don’t see the debt; it’s built into the price of the future. The reason the loan is cheap is that futures prices are determined by arbitrageurs (like giant banks) that can borrow cheaply. The reason the interest is in effect deductible is that it comes out of the taxable gains you report on the futures.

Futures contracts are taxed somewhat more heavily than stocks. Their rate is a blend of ordinary rates and the favorable rates on dividends and long-term gains. Also, futures players don’t have the option of deferring capital gains. Even so, owning futures is way cheaper than owing money to a bank while putting money into stocks.

One caveat for people planning to burn a mortgage: Stay liquid. Don’t use up cash you may need during a stretch of unemployment.

But if you have a lot of assets in a taxable account, it’s time to rethink your mortgage. Debt is no longer a bargain.

I aim to help you save on taxes and money management costs. I graduated from Harvard in 1973, have been a journalist for 44 years, and was editor of Forbes magazine from 1999 to 2010. Tax law is a frequent subject in my articles. I have been an Enrolled Agent since 1979. Email me at williambaldwinfinance — at — gmail — dot — com.

Source: Sell Stocks And Pay Off Your Mortgage

In many situations, paying off your mortgage early could potentially be costing you hundreds of thousands of dollars…and I’ll run the numbers to show this based off real world examples. Enjoy! Add me on Snapchat/Instagram: GPStephan Join the private Real Estate Facebook Group: https://www.facebook.com/groups/there… The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c This is one of those subjects that’s not intuitive for most people – you would think that paying off your mortgage early would be a really good idea. But this isn’t always the case. The reason people think this way is because they haven’t really looked at the true cost of ownership, what their money is really worth, and they only focus on the end number. On our $400,000 loan example, your payment is $1956 per month and you wind up paying $304,000 in interest over 30 years. But there are three very important considerations here: 1. The first is the mortgage interest tax write off – this is what makes real estate extremely appealing, and why keeping a mortgage helps long term.For the average person in a 23% tax bracket, with a 4.2% interest rate, after you factor in your write offs, your ACTUAL cost of interest is only 3.23%. 2. The second factor is Inflation. Because the bank is holding the entire loan over 30 years and you get to pay bits and pieces of it over time, it should be safe to assume a 2% AVERAGE inflation rate over 30 years. This means that even though you’re paying a NET interest rate now of 3.23%, if we subtract 2% annually for inflation, this means that you’re really only effectively paying 1.23% in interest after tax write offs and inflation. 3. Finally, the third factor is opportunity cost. Can you make MORE than a 1.23% return ANYWHERE ELSE adjusted for inflation? The answer is pretty much always yes. This means that if you INVEST your money instead of paying down the mortgage, mathematically over the term of the loan you’d come out ahead than if you just paid off the loan early. So with these points above, we’ll take two scenarios. In scenario one, you have a 30-year, $400,000 loan at a 4.2% interest rate that you pay off in half the time – you increase your payments from $1956 to $3000 per month in order to make this happen. Then once the loan is paid off, you invest the full amount in the stock market for another 15 years. After an additional 15 years, that works out to be just over $1,000,000. So you now have a paid of house plus a million dollars. But what happens if you kept the 30-year mortgage and instead of you paying it off in half the time by increasing your payments to $3000/mo, you just invested the extra $1050 per month instead? Because you didn’t pay down your mortgage early and you invested that extra money instead, at a 7.5% return in an SP500 index fund…at the end of 30 years, you’ll have a paid off home PLUS $1,433,000.. This means that over 30 years, that’s a difference of $433,000…by NOT paying down your mortgage early, and instead investing the difference. Although keep in mind, if you have a really high interest rate on your loan, above about 6%, it’s probably better to pay it off. This is because the upside to investing gets smaller and smaller the higher your mortgage interest rate is. But the biggest advantage of paying it off early is that with the above example, we assume the person will actually invest the money rather than pay off their loan early. In order for this calculation to work, the person needs to be disciplined enough to actually invest the different and not spend it. But for anyone with the discipline to actually stick with an investing plan instead of paying down the mortgage, statistically and mathematically, you can often make more money paying it off slowly than paying it off early. For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness@gmail.com Suggested reading: The Millionaire Real Estate Agent: http://goo.gl/TPTSVC Your money or your life: https://goo.gl/fmlaJR The Millionaire Real Estate Investor: https://goo.gl/sV9xtl How to Win Friends and Influence People: https://goo.gl/1f3Meq Think and grow rich: https://goo.gl/SSKlyu Awaken the giant within: https://goo.gl/niIAEI The Book on Rental Property Investing: https://goo.gl/qtJqFq Favorite Credit Cards: Chase Sapphire Reserve – https://goo.gl/sT68EC American Express Platinum – https://goo.gl/C9n4e3

ONEX Is Coming Back & Its Actually Perfect For Investing

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The Week Recession Talk Grew Very Loud

Topline: Recession fears—which have gone up and down and back up just in the past nine months—suddenly seem here to stay for the foreseeable future, as global growth slows to a crawl amid trade war fears. Here’s what happened this week, along with key reactions:

  • Goldman Sachs issued a note Monday saying a trade deal between the U.S. and China is not expected to be made before the 2020 presidential election.
  • On Tuesday, Trump walked back planned tariffs on China, delaying some until after holiday shopping, his first acknowledgment that tariffs impact U.S. shoppers.
  • On Wednesday, Germany’s economy was reported to have shrunk as it contends with Trump’s tariffs and trade war with China.
  • Trump also blasted the Federal Reserve Wednesday on Twitter, as he blamed the central bank for dragging down the U.S. economy and returns on government bonds.
  • Then Wednesday’s close registered the worst stock performance of 2019, as investors were spooked by Germany, China and the much-discussed inverted yield curve.
  • China responded on Thursday by promising a retaliation, threatening “necessary countermeasures.”
  • Global markets responded, with the Nikkei and FTSE 100 closing down over 1% Thursday.
  • By Friday, the Dow rebounded 300 points before closing bell, while the S&P recovered 40 points and the tech-heavy NASDAQ bounced almost 130. But the Dow still lost 1.5% for the week, while the S&P edged slightly down at 0.3%.
  • Globally, the FTSE 100 regained 50 points, while the Nikkei recovered 13 Friday, but both indexes ended the week lower than where they started.
  • Analysts pegged the stock market’s slight Friday recovery to an increase in government bond yields.

Key background: The yield curve is the difference in interest rates (or returns) between short-term and long-term bonds. Usually, investors get more money when they invest in 10-year bonds over three-month short-term bonds. The yield curve is also a pretty accurate historical predictor of recessions, so when it happens, economists and investors alike get worried. This year, the yield curve inverted in March and May, and it happened again Wednesday, contributing to the stock market’s tumble.

Further reading:

Why Trade War Plus Yield Curve Equals Recession (John T. Harvey)

Markets Panic For The Second Week In A Row (Milton Ezrati)

Fed Poised To React Swiftly To Persistent Yield Curve Inversion, With More Rate Cuts (Pedro Nicolaci da Costa)

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I’m a New York-based journalist covering breaking news at Forbes. I hold a master’s degree from Columbia University’s Graduate School of Journalism. Previous bylines: Gotham Gazette, Bklyner, Thrillist, Task & Purpose, and xoJane.

Source: The Week Recession Talk Grew Very Loud

 

Stocks Making The Biggest Moves After Hours: Cisco NetApp and Vipshop

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Cisco fell nearly 8% in after-hours trading after announcing better than expected fourth-quarter earnings and weaker-than-expected guidance. The enterprise technology company reported adjusted fourth-quarter earnings per share of 83 cents on revenue of $13.43 billion. Analysts had expected adjusted earnings per share of 82 cents on revenue of $13.38 billion, according to Refinitiv.

For the first quarter, Cisco said it anticipates adjusted earnings per share between 80 cents and 82 cents. The company said it expects flat to 2% revenue growth. Those figures are below analyst projections for earnings of 83 cents per share and revenue growth of 2.5%, according to Refinitiv consensus estimates.

Cisco CEO Chuck Robbins said the company’s business in China dropped 25% amid the U.S.-China trade war and early signs of macro shifts that didn’t occur in the previous quarter.

Shares of NetApp jumped nearly 4% after the data services and management company reported promising first-quarter earnings. The company reported adjusted earnings per share of 65 cents on revenue of $1.24 billion. Analysts had expected earnings per share of 58 cents on revenue of $1.23 billion, according to Refinitiv. NetApp CEO George Kurian said gross margin and cost structure improvements will help the company “navigate the ongoing macroeconomic headwinds”

Vipshop soared 8% after announcing higher-than-expected earnings for the second quarter. The Guangzhou, China-based company reported adjusted second-quarter earnings per share of $1.58 yuan on revenue of $22.74 billion yuan. Analysts had expected earnings per share of $1.01 yuan on revenue of $21.52 billion yuan, according to Refinitiv. Eric Shen, chairman and chief executive officer of Vipshop, cited the company’s growing numbers of active users and acquisition of Shanshan Outlets.

Pivotal Software shares skyrocketed nearly 70% in extended trading after VMware said it will acquire all outstanding Class A shares at $15 in cash. That price represents an 80% premium on  Pivotal’s closing price of $8.30 per share.

By : Elizabeth Myong

Source: https://www.cnbc.com/

 

Three Reasons Recession Fears Have Suddenly Increased

Topline: Falling stocks, trade wars and an inverted Treasury yield curve are three signs that analysts say are predicting a U.S. recession—the only problem, however, is that no one can definitively tell when (or if) one will actually happen.

  • The White House announced Tuesday it would delay some China tariffs from September 1 until December 15, causing the Dow Jones Industrial Average to zoom up nearly 500 points by mid-morning.
  • Stocks fell Monday and were predicted to decline Tuesday, as uncertainty mounts for a China trade deal and global economic health.
  • After Trump surprised the world with more tariffs on Chinese goods, Goldman Sachs analysts estimate a new trade deal will not materialize before the 2020 election.
  • In the bond market, an inverted Treasury yield curve—long used by economists as a recession predictor—is nearing the same level it had reached before the 2007 recession.
  • Bank of America analysts said the odds of a recession happening in the next year are greater than 30%.
  • And Morgan Stanley analysts predict a recession in the next nine months if the trade war between the U.S. and China continues to escalate.
  • Overall, economists cannot accurately forecast recessions, but they suggest de-escalating the trade war with China could soothe fears—and help Trump’s reelection chances.

Surprising fact: Analysis by the New York Times found that recent economic downturns occur in late summer. August of 1989, 1998, 2007, 2011 and 2015 all saw slowdowns.

Key background: One of the Trump’s key platforms is a strong economy, and the stock market has reached historic highs since he assumed office. The President has often used Twitter to demand economic changes, like interest rate cuts and trade deals, and the markets tend to respond to the president’s Twitter proclamations, but it remains to be seen if the economy will continue to grow.

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I’m a New York-based journalist covering breaking news at Forbes. I hold a master’s degree from Columbia University’s Graduate School of Journalism. Previous bylines: Gotham Gazette, Bklyner, Thrillist, Task & Purpose, and xoJane

Source: Three Reasons Recession Fears Have Suddenly Increased

 

More Selloff Strategies: Cramer’s ‘Mad Money’ Recap

When investors encounter tough days in the stock market, they need a game plan for how to respond, Jim Cramer told his Mad Money viewers Friday. That means knowing what type of selloff you’re dealing with and how best to navigate it. Fortunately, history can be your guide in identifying those inevitable moments of weakness and keep you from panicking.

Stocks finished down Friday, as Donald Trump’s recent threat to levy 10% tariffs on an additional $300 billion of Chinese imports overshadowed the latest U.S. jobs data.

The Dow Jones Industrial Average, which hit a session low of 334 points, finished down 98 points, or 0.37%, to 26,485. The S&P 500, which saw its worst week of the year, fell 0.73% and the Nasdaq dropped 1.32%. The Dow had its second worst week of the year as it fell 2.6%.

Cramer told his viewers that the U.S. stock markets have only seen two truly horrendous selloffs since he began trading in 1979. Those were the Black Monday crash in October 1987 and the rolling crash of the financial crisis from 2007 through 2009. But while both of these declines saw huge losses, they were in fact very different.

Many investors don’t remember Black Monday, where the Dow Jones Industrial Average lost 22% in a single day. Even fewer remember that the market lost 10% during the week prior, and continued its losses on the Tuesday after. While it wasn’t known at the time, this crash was mechanical in nature, caused by a futures market that overwhelmed the ability to process the flood of transactions. In the confusion, buyers stepped aside and prices plunged.

The carnage wasn’t stemmed until the Federal Reserve stepped in with promises of extra liquidity. But in the end, the economy was strong. There was nothing wrong with the underlying companies, the market just stopped working. That’s why it only took 16 months to recover to their pre-crash levels.

Investors witnessed similar mechanical meltdowns in the so-called “flash crash” of 2010 and its twin in 2015. On May 6, 2010 at precisely 2:32 p.m. Eastern, the futures markets again overwhelmed the markets, only this time machines were doing most of the trading. The crash lasted for a total of 36 minutes, during which time the Dow plunged 1,000 points from near the 10,000 level.

In August of 2015, another flash crash occurred at the open, with the Dow again falling 1,000 points in the blink of an eye. In the confusion, traders couldn’t tell which prices were real and which ones were pure fantasy. Only those with strong stomachs risked trading at the heart of the decline, but those traders were rewarded handsomely.

In all of these cases, Cramer said, the machinery of the markets was broken. Even the circuit breakers put in place after 1987 were not able to stem the declines and in fact, did very little to even slow them down. But for those investors who were able to recognize what was actually happening, these declines were a once- (well, twice-) in-a-lifetime gift.

Cramer and the AAP team are making three more trades as they reposition on this week’s selloff, including Burlington Stores, (BURLGet Report) and Home Depot (HDGet Report) . Find out what they’re telling their investment club members and get in on the conversation with a free trial subscription to Action Alerts Plus.

The Great Recession

The Great Recession was a totally different animal. The market began falling in October 2007, but didn’t bottom until March 2009, almost two years later. Afterwards, it took until March of 2013, four years later, for the markets to get back to even. Cramer said this kind of decline is the most dangerous, but fortunately, it’s truly a once-in-a-lifetime event, only occurring every 80 years or so.

The Great Recession was caused by the Fed raising interest rates 17 times in lock step, trying to cool an already cooling economy. The recession could have been avoided had the Fed done their homework and actually talked to CEOs, as Cramer did at the time.

Cramer recalled talking to the CEOs of banks, all of whom told him that defaults on mortgages were on the rise in a fashion none of them had seen before. Cramer’s famous “They know nothing” rant on CNBC stemmed from those conversations, as the Fed did nothing until the first banks began to collapse. The market fell 40% before finally finding its footing.

How can investors identify this type of devastating decline? Cramer said investors can ask whether the economy is on a solid footing. Is business declining? Is employment falling? Are interest rates still rising even as cracks are appearing? If big companies are unable to pay their bills, the problem could be a lot deeper than you think.

On Real Money, Cramer keys in on the companies and CEOs he knows best. Get more of his insights with a free trial subscription to Real Money.

Today’s Market

Today’s market is not like 2007, however, Cramer said. Business is stronger, our banking system is stronger and there’s still time for the Fed to take their foot off the brakes and wait for more data before proceeding.

So you’ve just spotted a mechanical breakdown in the market, what should you buy? Cramer said he’s always been a fan of accidental high-yielders, companies whose dividend yield is spiking because their share prices are falling with the broader averages.

He said that these stocks are always among the first to rebound, as their dividends help protect them. He advised always buying in wide scales as the market declines. That way, if the rebound is swift, you’ll still make a little money, but if it’s a larger, multiday sell off, you’ll make even more.

Cramer reminded viewers that when the Fed is cutting interest rates, almost every market dip is a buying opportunity. But when it’s raising rates, things get tricky. Not every rate hike causes a crash, however, only ones that push rates high enough to break the economy.

During these times, it’s important to remember that stocks aren’t the only investment class out there. You can also invest in gold, bonds or real estate to stay diversified.

It’s Not Just the Fed

The Fed isn’t the only reason why the market declines, and Cramer ended the show with a list of the other common culprits.

The first sell-off culprit are margin calls. Too often, money managers borrow more money than they can afford and when their bets turn south, they are forced to sell positions to raise money. We saw this happen in early 2018 when traders were betting against market volatility by shorting the VIX. When volatility returned, these traders lost a fortune and the whole market suffered.

There are also international reasons for the market to sell off, including crises in Greece, Cyprus, Turkey and Mexico, among others. Cramer said in these cases, it’s important to ask whether your portfolio will actually be impacted by these events. Usually, the answer is no.

Then there’s the IPO market. Stocks play by the laws of supply and demand after all, so when tons of new IPOs are hitting the markets, money managers often have to sell something in order to buy them. Declines can also stem form multiple earnings shortfalls as well as, yes, political rhetoric coming from Washington.

Cramer said many of these declines happen over multiple days. The key is to watch if the selling ends by 2:45 p.m. Eastern. If so, it may be safe to buy. But if not, there will likely be more selling the following day and it will pay to be patient.

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Source: More Selloff Strategies: Cramer’s ‘Mad Money’ Recap

 

Cisco, Tilray, Aurora Cannabis, Alibaba, Trade Talks – 5 Things You Must Know

Here are five things you must know for Wednesday, May 15:

1. — Stock Futures Lower Amid Subsiding Trade War Worries

U.S. stock futures were lower Wednesday though sentiment was lifted by a softening of the rhetoric from Donald Trump in the U.S.-China trade war and suggestions that talks could resume in the coming weeks.

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Markets also were soothed by weaker-than-expected economic data from China that pointed to not only slowing growth in the world’s second-largest economy but also a weakening bargaining position in Beijing’s trade standoff with Washington.

With Trumps describing the dispute with China as “a little squabble” on Tuesday, as well as confirmation from the U.S. Treasury that Secretary Steven Mnuchin will soon travel to Beijing to resume trade talks, markets were happy to add risk following Tuesday’s gains on Wall Street.

Contracts tied to the Dow Jones Industrial Average fell 85 points, futures for the S&P 500 declined 8.70 points, and Nasdaq futures were down 23 points.

The economic calendar in the U.S. Wednesday includes Retail Sales for April at 8:30 a.m. ET, the Empire State Manufacturing Survey for May at 8:30 a.m., Industrial Production for April at 9:15 a.m., and Oil Inventories for the week ended May 10 at 10:30 a.m.

2. — Cisco, Alibaba and Macy’s Report Earnings Wednesday

Alibaba Group Holding (BABAGet Report)  posted stronger-than-expected fiscal fourth-quarter earnings as consumer growth on its online marketplace surged and its tie-up with Starbucks (SBUXGet Report) , the world’s biggest coffee chain, helped boost revenue and its cloud computing sales surged.

Macy’s (MGet Report)  earned 44 cents a share on an adjusted basis in the first quarter, higher than estimates of 33 cents. Same-store sales rose 0.7% in the quarter vs. estimates that called for a decline of 0.6%.

Earnings reports are also expected Wednesday from Cisco Systems (CSCOGet Report) and Jack in the Box (JACKGet Report) .

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3. — Tilray Rises After Revenue Beat, Aurora Cannabis Slumps

Tilray  (TLRY) shares were rising 4% to $50.71 in premarket trading Wednesday after the Canadian cannabis company posted stronger-than-expected first-quarter sales, while its domestic rival Aurora Cannabis (ACBGet Report) slumped after revenue missed analysts’ forecasts amid caps on retail store growth in the Canadian market.

Tilray said first-quarter revenue rose 195% from a year earlier to $23 million, as sales in Canada surged following the country’s decision to legalize cannabis for recreational use. The adjusted loss in the quarter was 27 cents a share, wider than analysts’ estimates, after a 5.7% drop in the average price per kilogram sold.

CEO Brendan Kennedy also said Tilray was looking to further its partnerships with U.S. and international companies as the potential $150 billion global market for cannabis undergoes a generational change in both regulation and consumer acceptance.

“We’ve been inundated with contacts from Fortune 500 companies who are interested in exploring partnerships with Tilray,” Kennedy told investors on a conference call late Tuesday. “And it’s a range of companies from a broad variety of industries.”

“We’re also starting to have conversations with U.S. retailers who are interested in carrying CBD product in the second half of this year,” he added.

Aurora Cannabis, meanwhile, was tumbling 4.7% to $7.99 in premarket trading after its fiscal third-quarter revenue of C$75.2 million missed Wall Street forecasts of C$77.2 million and consumer cannabis sales were just under C$30 million as provincial regulators limited the number of retail outlets.

The company reported a loss attributable to shareholders in the quarter of $C158 million said Aurora Cannabis said it was “well positioned to achieve positive EBITDA beginning in fiscal Q4.”

Aurora Cannabis is in TheStreet’s Stocks Under $10 portfolio. To find out more about how you can profit from this investing approach, please click here.

4. — Walmart Considering IPO for U.K. Unit Asda

Walmart (WMTGet Report) is considering an initial public offering for its U.K. grocery subsidiary Asda, a listing that that could value the company at as much as an estimated 8.5 billion pounds ($11 billion), Bloomberg reported.

The news comes just weeks after U.K. antitrust regulators blocked a planned merger between Asda, Britain’s fourth-largest supermarket, and rival J Sainsbury.

“While we are not rushing into anything, I want you to know that we are seriously considering a path to an IPO,” Judith McKenna, the company’s international chief, told employees at an event in Leeds, according to a summary of the event provided by Asda. Any preparations for going public would “take years,” she said, Bloomberg reported.

5. — Nelson Peltz’s Trian May Wage Activist Campaign at Legg Mason – Report

Nelson Peltz’s Trian Fund Management may wage an activist campaign at Legg Mason (LMGet Report) and push the mutual fund company to improve its flagging results, The Wall Street Journal reported, citing people familiar with the matter.

It would be the second time in 10 years that Trian has targeted the mutual fund company, according to Reuters.

Trian recently has held discussions with Legg Mason about the need to cut costs and improve profit margins, the people told the Journal. The two sides may still negotiate a settlement that sidesteps a proxy fight, the sources added.

On a conference call with analysts Monday, Legg Mason CEO Joseph Sullivan said the company was moving to slash expenses.

“While there is much work to be done, we now have increased visibility into and have gained even greater confidence in our ability to deliver $100 million or more of annual savings now within two years,” he said.

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Source: Cisco, Tilray, Aurora Cannabis, Alibaba, Trade Talks – 5 Things You Must Know

Crypto Investment App Abra to Restrict Service for US Users Over Regulatory Uncertainty

Cryptocurrency investment app Abra has revealed it’s set to restrict services for users in the United States over continued regulatory uncertainty.

According to a blog post the company published. It’ll adjust its offering in the country in an effort to “continue to be compliant and cooperative with US regulations as they currently exist.” This means Abra users in the US will see the firm restrict its services.

The blog post reads:

As a part of this effort we are migrating any synthetic assets to a native hosted wallet solution. On Abra, these are defined as anything other than Bitcoin (BTC), Ether (ETH), Litecoin (LTC) and Bitcoin Cash (BCH).

As such, users in the US will no longer be able to hold QTUM, bitcoin gold (BTG), Status (SNT) and OmiseGO (OMG) on the platform after August 29. Those who have positions in these cryptocurrencies are advised to withdraw their funds before said date, as any remaining balances will be automatically converted to BTC.

Those in New York will be more affected than others, as they will no longer to able to use wire transfers, bank Automated Clearing House (ACH), Or American Express cards to deposit and withdraw funds from Abra’s app.

Users outside of the country will reportedly not be affected by the changes. The move comes months after Abra launched a service that allows users to gain exposure to some of the most popular stocks and exchange-traded funds (ETFs) in the world using bitcoin.

The service also allows users to gain exposure to indexes like the S&P 500 and the Russell 2000. This won’t, however, give them ownership of the assets themselves, meaning those who use the app to invest won’t, for example, receive dividends from stocks.

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Stock Market Correction – 4 Crucial Steps To Position Your Watch List And Portfolio

Many investors are scratching their heads when it comes to positioning the portfolio in the stock market correction. However, we think that there are four crucial steps that every investor should take into an account. Without further ado, let’s see these steps.

Table of Contents

Stock Market Correction – 4 Crucial Steps To Position Your Watch List And Portfolio

Analyze the Stock Market

Before anything, you should analyze the stock market conditions. The reason for this is that many stocks tend to move in the same direction as the stock market. A stock market correction by the vertical violation or slice below the 50-day line tend to have a very high failure rate for the follow-through day.

Furthermore, the market is, for the big part, driven by news. The investors should always have their mind opened for the new stock market uptrend.

Hedge Your Portfolio

You should manage your trades like a portfolio. After the market turn in the Q4 2018 market correction, IBD’s team added ProShares UltraPro S&P 500 (UPRO). Thanks to this decision, the risk levels were managed against the S&P 500. Let’s not forget that UPRO, when converted to an ETF, corresponds to three times the daily performance of the S&P 500.

Utilize Swing Trading

IBD is constantly scanning for new ideas for its SwingTrader platform. This can be quite an efficient method. For example, we had seven names on the IBD’s swing trading list in September 2018. But, by the end of the month, there weren’t any quality stocks. If the pickings are slim, the general rule is that stock market conditions are weakening.

Make a Watchlist

Finally, make your own watchlist. You need to be able to spot the top stocks and then add them to the watchlist. When you do that, you’ll be able to monitor your selected stocks and carefully choose which one to invest in.

Source: https://www.investors.com/how-to-invest/stock-market-correction-watchlist-portfolio/

Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.

Source: Stock Market Correction – 4 Crucial Steps To Position Your Watch List And Portfolio – stock market correction 2019, stock market correction 2018

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