Commodities

Wall Street Silver: This Is Why Gold Is Not Performing… Yet!

Investors have been looking for ways to protect their portfolio from inflation. Over the past few years, supposed inflation hedges like precious metals have failed to live up to their potential in that regard.

The metal is slightly down for 2022. The returns have been slightly better than the stock market. Even better, the metal has held up better than other potential inflation hedges, such as cryptocurrencies. But there may be factors that could cause precious metals like gold to move higher.

Gold has broken out near the end of the year, moving from around $1,660 to $1,800 in just a few weeks. That’s a notable run for the metal. However, the run is missing a few key confirmations.

That includes the lack of a breakout in silver, which tends to move higher with gold. And the S&P 500 also isn’t confirming the breakout. That suggests that the metal isn’t moving higher, but is simply retesting its old high.

One reason for that may be the slowing economy. Investors have become increasingly concerned over slow economic growth as inflation has finally started to show signs of a decline.

Over the past year, precious metals have continued to make lower lows. That’s in spite of the occasional jump higher like the move in recent weeks.

It will take a change in market conditions for precious metals to start moving higher. Once that happens, however, precious metals have a chance of substantially outperforming the market.

 

To listen to the full podcast, click here.

Income investing

Dividendology: 3 Dividend Stocks Near a 52 Week Low!

Investors often consider dividend stocks for a number of reasons. The first is that a dividend is a cash payment. That’s outside the uncertainty of volatile price movements.

The second is that dividend stocks tend to represent companies with a stable business. There are predictable cash flows that can create some relative certainty. And while the underlying company may no longer be a big growth stock, they can grow the dividend with small and steady growth over time.

Right now, a number of dividend-paying companies are trading near 52-week lows.

These companies have been hit by the market selloff. Meanwhile, they’ve been hit by a slowing economy. That may be creating a good buying point for patient investors.

However, some companies may also be in bigger trouble and could face a dividend cut. So, it’s important investors know what to look for before buying a company for its dividend.

For example, chipmaker Intel (INTC) has seen shares slide nearly 50 percent this year. That’s pushed the dividend yield up to over 5 percent right now.

While that’s a high yield, the stock’s payout ratio is at about 44 percent. That means that the company is paying out just under half of its earnings to shareholders. For a slower-growing chip company, that’s a sustainable dividend.

 

To discover the other two dividend stocks near 52-week lows, click here.

 

Personal finance

Blackrock: Rebuilding Resilience in 60/40 Portfolios

Most investors haven’t been all-in on stocks. There tend to be other assets in the mix, such as bonds. That tends to provide solid diversification, as well as lower portfolio volatility overall.

Yet 2022 saw the first year since the 1930s where both stocks and bonds dropped at the same time. And both did so by a sizeable amount. For investors with a traditional mixed portfolio of 60 percent stocks and 40 percent bonds, diversification proved ineffective.

Typically, bonds and stocks tend to move in opposite directions. When high-flying stocks start coming back to earth, investors tend to invest more in stable investments like bonds.

However, interest rates also play a role. The rapid rise in interest rates has led to a lowering of bond prices. Meanwhile, it’s led to a lower valuation for many companies out there today.

How can investors avoid this challenge in the future? There are a few different strategies that can work. One is to recognize that bonds may perform well in a slowing economy, but not an inflationary one.

Another factor is to diversify into alternative investments, such as real estate or rarities like artwork. These alternatives will diversify a portfolio best with their low correlation and high return potential.

The goal isn’t to outperform the market on the way up, but rather to hold onto your gains during a market decline.

 

To read the full blog, click here.

Economy

A Wealth of Common Sense: How Often is the Market Down in Consecutive Years?

The stock market is on track for a double-digit decline this year. That’s the 12th time such a move has occurred in 95 years, or about 13 percent of the time. In other words, while unpleasant, this year’s selloff hasn’t been too abnormal.

In the meantime, the stock market is up about 55 percent of the time in the next calendar year following a loss.

That may sound a little better than a coin toss, but it also reflects that markets often take time to recover from a big drop.

However, looking at the long-term data, it’s clear that just 9 percent of the time, markets are down for two consecutive years in a row. That’s a much lower likelihood.

That data includes 4 down years in a row from 1929-1932. The last such performance was in the 2000-2002 bear market. And the market went from 1975 to 2000 without a single double-digit down year.

So investors worried about another down year should recognize the exceptional circumstances that tend to occur around such a drop.

Even better, there’s never been a period of two consecutive down years for both stocks and bonds at the same time. With bonds down heavily in 2022, it’s clear that either bonds or stocks are statistically likely to rally in the coming year.

 

To read the full blog, click here.

Stock market strategies

Elliott Wave Trader: PPI Report: Inflation Still High!

Inflation remains a top concern for investors. Fortunately, it’s starting to come down. The latest report for producer price inflation (PPI), showed a 0.1 percent increase for November compared to the prior month. On the more important year-over-year basis, however, it declined.

The market initially treated the data as good news. However, that bullish sentiment proved short-lived as stocks gave up most of their gains on Tuesday. Why? Technical indicators may hold a clue.

So far this year, the stock market has been trending down. But it hasn’t been a straight line. There have been weeks or even periods of a month or more where stocks have gained back some of those losses. Nevertheless, the losses have continued.

Now, it appears that stocks are being rejected at their long-term downtrend line once again. That’s a sign that the market isn’t done selling off yet. Amid a backdrop of still-high inflation and rising interest rates, that makes sense.

It will likely take more interest rate increases, and more months of declining inflation data for the Fed to stop hiking rates.

From there, the economy can better adjust. In time, the economy will be better off if inflation is brought back down to historical levels, rather than allowed to linger at above-average rates for years.

That move applies beyond the stock market as well, indicating further risks to bonds, cryptocurrencies, and other assets in the months ahead.

 

To watch the full video, click here.

 

 

Income investing

The Dividend Guy Blog: You’re Losing Money If You Don’t Sell These Stocks

Investing is often thought of as an exercise in finding what to buy. There are many ways to do this, from chasing momentum to finding values in the market. But one way to think about investing is with the concept of inverting.

That could mean rather than looking at what stocks to buy, looking at what stocks to sell. With thousands of stocks to invest in, most investors look at what to buy.

But looking at stocks that shouldn’t be owned at all can provide valuable insights. Many popular stocks may be poor choices for investors. That’s because popularity can drive up prices, without a corresponding increase in value.

While many investors may not want to hear about a potentially dangerous stock, avoiding a disaster of an investment is crucial for long-term wealth-building.

For instance, investors looking at dividend stocks can often find some companies with incredibly high yields. But if that payout is more than earnings, it can’t be sustained. And if a company is going into debt to sustain it, shares could be in for a massive repricing down the road.

And investors who buy into a company for a specific thesis, like the aging of America, can still be disappointed. Any company can play to an investment idea. But if they don’t execute well, others can come in and grab market share. That could lead to a permanent impairment of the company’s value as a business.

 

To listen to the full podcast, click here.

Commodities

Asset Strategies International: On the Move Webinar

With 2022 nearly over, investors are looking towards opportunities for the markets in 2023. With interest rates still rising, the outlook may not be ideal for those expecting the market to immediately rebound.

That’s also being compounded by the level of debt in the financial system today. Rising rates are causing an explosion in debt financing costs. That’s true across the spectrum, from individual investors to corporations to governments.

For heavily leveraged companies, rising rates could mean corporate bankruptcies could rise. If that occurs, companies and individuals who invested in a company’s debt can make out fairly well. But those who own the equity in the company could see some major – if not total – losses.

It may be prudent for investors to look for companies with reasonable debt loads. Or to invest with financial players that are taking debt positions rather than equity investments right now.

Those looking for a safe-haven could find it in some natural resource companies. Natural gas has been a strong winner, and the winter heating season is already well underway.

Natural gas exports from the US to energy-strapped Europe may not move as quickly as many expect. But that could prove a source of potential growth for the space for years to come.

 

To watch the full webinar, click here.

Personal finance

Bigger Pockets: How to Plan for (and CRUSH) Your 2023 Goals

The end of one year and the start of a new one is a crucial time for investors to think about setting goals. It’s also a good time to review the prior year’s goals. That allows someone to determine what worked out, what didn’t, and how things could have been different.

For those ready to start setting goals, there are a few different strategies. And it may be more important to set goals and break down how to move towards them then actually achieving them.

Ultimately, the purpose of setting goals is to decide what you want your life to look like. While setting goals may be simple, that doesn’t make it easy.

Especially when thinking about the steps required to achieve those goals and how to break down big goals into manageable chunks.

Knowing the difference between big goals, medium goals, and small goals can be crucial. And so can the concept of pivoting. When working towards a goal, new information many lead to a necessary shift.

Part of the process is to review prior goals. Those goals may have been specific – like doubling an investment account – or general, like beating the market.

Overall, setting goals that are aggressive but achievable may work best. And picking the right goals can be even harder than hitting them. But it’s a valuable exercise to set a yardstick for financial or personal achievement in the year ahead.

 

To listen to the full podcast, click here.

 

Stock market strategies

Game of Trades: We Are not Even Close to Real Bear Market Capitulation

There are a number of ways to determine how the market is being valued. One measure is to look at market breadth, specifically the allocation that investors have to the stock market.

That allocation peaked at over 70 percent last year, and has now aggressively declined to nearly 60 percent. That may be a sign that retail traders have gone elsewhere – possibly out of investment markets entirely.

But that gauge also shows that the speculation that goes with it is also gone. So last year’s frothy market has now come off of much of its excesses.

That’s the good news. But it’s not all good news. With a read of 60 percent, we’re back to usual bull market levels. But a bear market level sees a drop closer to 50 percent.

In some cases it may be even lower. In the latter half of the 2008-2009 market drop, investor breadth dopped to nearly 40 percent.

So we’re arguably only halfway to capitulation for retail investors at best. And typically in a bear market, most of the losses happen towards the end, not at the initial selloff.

Once that capitulation happens, markets are set up for a massive, multi-year rally. But investors could be in for some more pain until that happens. Ironically, if they give into that pain and sell off, they’ll help fuel the final drop that clears the stage for the next rally.

To watch the full analysis, click here.

Economy

The Reformed Broker: Value Creation

Investing is all about creating value. That turns an invested dollar into more than a dollar. How much depends on the risk of an investment, the holding period, and other factors such as market performance.

Value creation can be built during any market. But during a bear market, the process can be accelerated, as investors are able to buy stocks, bonds, and other assets at a discount.

With the market touching on a 25 percent peak-to-trough drop in 2022, investors who cash out now are taking a big loss.

And they’re destroying the ability to compound their wealth. That’s because they’ll likely miss out on the start of a new bull market. They’ll only get in after a big run higher, because that’s when investing feels safe.

The past year has caused stocks to move from 24 times earnings on average to 15. And cash went from yielding 0 percent to 4 percent. In other words, there’s less risk in the market, but there’s also a better return on staying on the sidelines.

Either way, that points to a better investment environment today than a year ago. It may get even better in the months ahead. But for those with time ahead of them, now would be an opportune moment to start investing or get back into the market.

 

To read the full blog, click here.