Author: Andrew Packer

Commodities

Data Driven Investor: Precious Metals About to Break Out?

Posted on by Andrew Packer

Gold has been hitting new all-time highs. And not just in the U.S. dollar, but when compared to other currencies also. While the price movement hasn’t been as exciting as the stock market or cryptocurrencies, it could still trend higher.

Several factors are coming into play that are bullish for precious metals, particularly gold. As these trends play out, the next big multi-year move higher could be ahead.

The biggest factor is simply supply and demand. New gold finds have been light in recent years, and haven’t been enough to meet demand. Inventories are declining.

Even without a big surge in demand, gold prices may continue to trend higher.

Next, globally, inflation has come down from the past two years. But it’s still higher than average. And fully getting inflation out may not be politically feasible.

Gold tends to work best as an inflation hedge, and ongoing inflation could continue to push prices higher. 

Meanwhile, emerging market economies have been stockpiling gold for some time. A few countries such as China and Russia have even increased their allocation to the metal.

Finally, with prices trending higher, investors may add to precious metals holdings to play the momentum. With the big rally in other assets, buying some precious metals creates a non-correlating diversified asset.

In short, gold may have further moves ahead, even at all-time highs.

 

To read the full analysis, click here.

Income investing

Dividend Growth Investor: Five Dividend Growth Companies Increasing Dividends Last Week

Posted on by Andrew Packer

After rallying for nearly five months without a major break, the market is starting to pause. Investors who have ridden growth stocks may want to take some profits and look elsewhere. While stocks can head higher, there’s some sign of rotation.

One place investors can go is into dividend-focused stocks. That’s because these companies tend to provide steadier returns. And many are still a value play, as higher interest rates have kept their prices down.

Even better, investors who buy dividend growth companies can get a solid starting yield today. But that can be combined with increased cash payout over time.

And as the payout increases, the share price is likely to increase. That means the potential for big capital gains.

For instance, consumer goods company Colgate-Palmolive (CL) just increased its quarterly dividend payout by 4.2%. That’s the 61st consecutive year the company has raised its payout for investors.

While the starting dividend is low at 2.26%, continued dividend growth will lead to higher returns over time.

Another company increasing payouts now is UDR (UDR). They’re a multifamily real estate investment trust. They’re required to pay out 90% of income to investors. That gives them a higher yield of 4.6% right now.

Typically, because of the high payout requirement, REITs offer little, if any, dividend growth. But UDR just raised the payout by 1.2% and increased its payout for the 14th consecutive year.

 

To read the full list of companies increasing their dividend payouts now, click here.

Personal finance

Michael Bordenaro: 100’S of Thousands of Real Estate Agents Going Broke!

Posted on by Andrew Packer

Last week, the National Association of Realtors (NAR) settled a lawsuit for $418 million. The lawsuit will also prevent future buyer’s agent commission offerings starting in July.

Most view this as the potential end of the 6% commission offered in the real estate market. That commission is split between a buyer’s agent and seller’s agent. While the commission has been factored into home sale prices, the end of commissions may cause havoc in the real estate market.

That’s because realtors provide services such as preparing comparables, staging homes for sale, and using networking connections to bring together buyers and sellers.

Some may balk at massive commissions on the sale of multi-million-dollar properties. However, the fact remains that a home sale entails considerable work.

Once the new rule takes effect in July, real estate agents without a listing will effectively lose significant visibility to potential clients. And it will likely be a race for the bottom, as agents agree to lower and lower commissions simply to land deals. 

Yes, keeping prices low is desirable. However, the lowest priced commission may not provide the best service for a potential buyer or seller.

The end result will be lower prices, but also lower quality service. And many real estate agents will likely go out of business.

 

To watch the full analysis, click here.

Income investing

Meet Kevin: The Fed’s Big Lie

Posted on by Andrew Packer

Markets soared following the Fed’s interest rate decision on Wednesday. The central bank held rates steady for the fifth consecutive meeting.

Plus, the bank committed to lowering interest rates later in the year. The much-followed “dot plot” indicated three interest rate cuts by the end of the year. But the fact of the matter is that the Fed may be about to get more hawkish than investors expect. If that’s the case, stocks could finally see a big test to their rally.

That’s because the Fed has been supporting the market. Earlier this month, a one-year program to shore up the balance sheets of smaller banks ended. The goal was to prevent a repeat of last year’s collapse of Silicon Valley Bank.

Next, while the Fed sees the end in sight for inflation, the most recent data points suggest that inflation is sticky.

It’s likely that if that trend continues, the Fed may continue to push off cutting interest rates. Market makers betting on rate cuts may prove less bullish as that plays out.

In short, despite the market’s interpretation, the Fed is indicating that things may not be as strong as they seem. And that keeping interest rates higher is necessary to keep inflation down.

Investors can still invest wealth into short-term assets such as U.S. Treasury bonds. These bond yields are off their highs, but still offer relatively strong, risk-free returns.

 

To watch the full video, click here.

Stock market strategies

FX Evolution: Is This the Beginning of Something Big…

Posted on by Andrew Packer

Markets are starting to show signs of slowing down. Yes, some traders are buying call options aggressively on big-cap stocks like Nvidia (NVDA). However, the overall market momentum has noticeably slowed over the past week.

The likely reason is macroeconomic factors. Inflation remains high, and has now been sticky for several months of data. Investors are starting to pick up on this fact, as indicated by the rising yields on U.S. Treasury bonds once again.

As bond yields move higher, bond prices move lower. Typically, stocks and bonds move opposite each other. But with interest rates still at 15-year highs, a market breather here may make some sense.

The past few months has seen some market rotation. While semiconductors have performed well over the past three months, it’s slowed over the last month.

And over the last month, gold, energy, and defensive stocks have fared better. If that trend continues and we get a bigger market rotation, those stocks should continue to do well.

Meanwhile, in the tech space, investors are still focused on companies that are earning a profit.

More speculative tech names continue to underperform. With interest rates looking to stay higher for longer, they will likely continue to underperform.

In short, the market may look to slow in the coming weeks, and may even face a small pullback. But it may not become a full-blown correction.

 

To watch the full analysis, click here.

Cryptocurrencies

Data Driven Investor: This Year’s Bitcoin’s Halving is Better Than Past Halvings

Posted on by Andrew Packer

Cryptocurrencies are in a bull run, and ahead of schedule. Bitcoin typically makes new all-time highs in the six to nine months after it goes through a halving. This year, however, bitcoin is already making new all-time highs, trending over $73,000 this week.

Other cryptocurrencies have started to move as well. Ethereum, the second-largest crypto by market cap, is over $4,000. Meanwhile, the halving trend could push bitcoin and then other cryptos substantially higher from here.

The halving process cuts the reward for mining bitcoin in half. Miners produce less bitcoin.

This year, this drop in supply will be met with the rising demand for bitcoin. That’s because the SEC approved 11 ETFs that hold bitcoin.

It took the first gold ETF two years to get $10 billion in assets. BlackRock’s bitcoin ETF alone hit this milestone in just two months.

In a similar vein, gold ETFs helped push the demand for gold higher. That led to rising gold prices in the mid-2000s.

But gold mining tends to produce steady supplies each year.

This puts bitcoin in uncharted territory. And it’s likely that prices have much higher to go in the months ahead.

Investors should ensure that they’re allocated where they want to be in crypto as soon as possible. That will allow them to get the best pricing ahead of the next big move.

 

To read the full analysis, click here.

Retirement investing

Lead-Lag Report: Christine Benz on Mastering Investment Strategies and Navigating Retirement Planning Challenges

Posted on by Andrew Packer

Investors can make a number of mistakes that cost them money. One of the biggest mistakes is to chase a hot stock, sector, or market. By waiting to jump into an asset after a big runup, the chances of a pullback are much higher.

At the wrong point in an economic cycle, it can also mean getting in at the top before a big drop. That could lead to poor returns that take years to recover from.

That’s why investors need a way to analyze investments that are on the rise. It’s important to know if an investment has further upside.

Looking at predictive models can help determine if there’s a long-term trend in place or if investors are simply chasing prices higher.

Plus, investors can lower their risk by adopting a rebalancing strategy. That involves taking profits in assets that have taken off, and using the proceeds to invest in assets that have underperformed.

So an investor with a 25 percent allocation to growth stocks may periodically take some profits to keep that allocation at 25 percent. And the funds could be used to shore up another position that is under its allocation level.

These moves can help lower risk, smooth out performance, and keep investors ready for any market uncertainty.

 

To listen to the full interview, click here.

Income investing

Dividendology: 5 Dividend Stocks Just Bought By Super Investors

Posted on by Andrew Packer

Every quarter, professional money managers file a 13-F form with the SEC. It discloses their holdings and any additions or sales.

Some investors, such as Warren Buffett or Ray Dalio, are widely followed. And the disclosure of a new holding can mean a move in the stock as retail investors file in. Recently, many large investors have been adding to positions focused more on safety and dividends, rather than outright growth.

Some companies are low payers, such as Microsoft (MSFT). The tech giant pays a low 0.75 percent yield. However, over the past 10 years, Microsoft has increased its dividend by an average of 10 percent.

And they have a low payout ratio of about 33 percent of their cash flow. So Microsoft can continue to raise its dividend for years, especially if it continues to increase earnings.

Another stock that big money is buying now is Visa (V). The credit card network also pays a low dividend of 0.75 percent. But they’ve grown their payout by 22 percent on average over the past five years.

And their payout ratio is less than 20 percent of earnings. That allows Visa to continue growing the payout over time with no risk of a dividend cut.

Dividends can offer investors current income now, and the right dividend stocks can show increasing income well into the future.

 

To see the other three stocks seeing major investor interest now, click here.

Stock market

The Compound: The Recession We Deserve

Posted on by Andrew Packer

The Federal Reserve started raising interest rates in 2022. At the time, investors thought the central bank would make only a few small increases. Instead, the Fed increased until mid-2023, going from zero percent to 5.5 percent.

Now, the bank has been hinting at interest rate cuts later this year. That suggests that interest rates may have peaked. As a rising interest rate environment helped the stock market decline in 2022, interest rate cuts may be bullish.

But some sectors may fare better than others. Many investors may see the value of interest-rate sensitive stocks such as utilities or real estate.

History suggests that the biggest beneficiaries may be growth stocks and small caps. These are companies that typically have to pay up for financing compared to large institutions.

As these companies are able to secure funding more cheaply, they could take off. And they could see rising demand as lower interest rates spur growth in general.

These companies tend to benefit during the initial rate cut stage.

Later on, larger companies and growth stocks can still continue to trend higher. But their returns are usually lower.

Investors will have a number of options available to benefit from interest rates being cut later in the year.

And for now, investors can continue to benefit from the current bull market, but may want to shift to rate-sensitive sectors in the coming months.

 

To watch the full video, click here.

Economy

Game of Trades: I Was Wrong

Posted on by Andrew Packer

History is being made. For over a year now, the yield curve on U.S. Treasurys has been inverted. That means that shorter-duration debt has a higher annualized yield than higher-duration debt.

Typically, the opposite is the case. Investors demand higher yields for holding debt for longer periods of time. When the yield curve is inverted, it signals an imminent recession. However, that has not played out this time.

Economic indicators show that the economy is expanding overall. However, the inverted yield curve shows that we should be contracting.

What’s different this time? The past four years have seen a shutdown of the economy over a pandemic, massive money printing, and soaring interest rates to tamp down inflation.

Meanwhile, corporate earnings have continued to grow. That’s helped push up stock market valuations overall.

Plus, jobless claims are still near historic lows. A rise in jobless claims would indicate a higher chance for an economic downturn.

Today, there seems to be no catalyst for a change in that current trend. However, many business cycle changes often appear to have no catalyst at first.

Meanwhile, the media has adopted the “soft landing” narrative. In the past, increases in the term soft landing have occurred well before more significant downturns.

For now, the markets are trending higher. But if that trend changes, investors may want to take some profits and get more cautious.

 

To view the full analysis, click here.