Well, the market sure fell out of bed at the start of April. At least on Thursday it appears to be mostly flat.
I think the media coverage around the crisis has been very irresponsible. So, I’d like to set the record straight on that.
We remain in a bear market; no getting around that. But even so, there’s fair and balanced reporting on market trends, and then there’s using the bears to spook you. That’s what’s going on now.
If you watch CNBC, you probably saw Bill Ackman of Pershing Square Capital on there a couple weeks ago. He was all dire about Hilton Worldwide (HLT), but his hedge fund was adding to the position and made a lot of money!
The guy they’re promoting now is Jeffrey Gundlach of DoubleLine Capital. MarketWatch has been featuring his comments that the market is “dysfunctional” and that the March 23 lows “will get taken out.”
I just want to tell you a little bit about Jeffrey Gundlach. He’s a bond guy. He made a lot of money buying bonds at the right time after 2008.
But this time around, the bond market is not doing so good. Corporate yield spreads have widened; municipals haven’t been fully functional. Anytime credit spreads widen, bond investors get nervous.
So, instead of sticking to what he’s supposed to do – figure out the best bonds to buy – Gundlach is out trying to scare people out of stocks!
I’ll be debating Gundlach this in July in Las Vegas. But my broader point is that the bears are being used by the media to sensationalize things. They use these surrogates, like Jeffrey Gundlach, like Bill Ackman, who don’t mind that their TV appearances manipulate the markets – as long as they have profitable trades.
For a bond investor, the hope now is that people will flee from stocks…and retreat to bonds. But Treasury yields have broken down so much that there’s no incentive for you to do that. You just can’t have a 0.6% yield on the 10-year Treasury. That’s where we’ve gotten to, though – and the S&P and Dow are still yielding five to seven times that, even after notable dividend cuts from companies like Ford Motor (F).
So, when the stock market yields more than anywhere else you can go, then stocks are your best bet.
I have yet to sound the “all-clear signal” for growth investors to rush in with new money…as I want to see corporate earnings and analyst revisions first. And that is still my stance.
But there’s a few other “green shoots” I’m starting to see here in April, too. None of this bearish sensationalism on TV is mentioning that:
- History is on our side in April.
The folks at Bespoke released data that showed a market dip on the first day of the quarter actually bodes well for the rest of April and the quarter. In fact, according to Bespoke, when the S&P 500 has dropped 2% or more on the first day of the quarter, the median return for the rest of the month is 4.64%. And the median return for the rest of the quarter is 7.14%.
So, if history repeats, the market is going to bounce.
- Asian markets are starting to provide opportunities.
The Chinese government is out there on an economic propaganda campaign – I’m not talking about that. I’m talking about the scans I use to pick stocks, and the fact that specific Asian stocks are earning a “Buy” rating in Portfolio Grader. We’ll take a look at that tomorrow, as I’ve started to share the best opportunities in my Growth Investor service.
- Countries ahead of us in the coronavirus cycle are looking to get back to work.
Every region is different. Italy, which had been hardest hit with almost 14,000 deaths to date, has picked April 14 to restart the auto plants and get back to work, as infection rates have started to peak. In the United States, Washington State will peak sooner than other regions, because those were the first outbreaks. New York and New Orleans will also peak sooner than, say, California, because cases are happening later there.
Obviously, some places, like Virginia, are going to remain shut down longer, based on what’s happening in their unique areas. But the fact that people are eager to get back to work – and that governments may decide to cut more checks in the meantime – is a light at the end of this tunnel.
But the Treasury yield breaking down so dramatically is the most encouraging event of all, from my perspective.
You may recall that the big problem during the March selloff was that Treasury yields were rising when the stock market was falling, which is not normal. Rather, it’s indicative of a “dash to cash” to liquidate everything and anything.
Then, once central banks intervened, bond yields dropped – and ignited a massive, two-week rally in dividend stocks.
Are dividend stocks going to perform every single day? No; Wednesday’s session was a good example of that. But remember, many dividend payers are represented in market indexes. And whenever people flee their index funds, all the stocks in them get hit, too.
The bottom line is, that’s all the more reason to own high-quality dividend stocks directly. In a volatile, no-yield market, Elite Dividend Payers like the ones I recommend at Growth Investor stand to benefit. Those are the select few that earn strong ratings in both my Portfolio Grader AND Dividend Grader.
Last Friday, in my April Issue of Growth Investor, I did cut one of my Elite Dividend Payers from the team. Not because I was retreating into bonds, as some would have us do…but because the stock had an uncertain future, in terms of both merger activity and the dividend payout.
On the other hand, three of my other Elite Dividend Payers are looking especially compelling now. Full details are waiting for you in the April Issue if you give Growth Investor a try now.
A good example is Ares Management Corporation (ARES), an asset manager that’s helping clients navigate these volatile markets. Understandably, analysts are upbeat on ARES right now – they anticipate 23% earnings growth and 25% revenue growth in the first quarter!
Note: I even made an all-new recommendation for Growth Investor this month. Once I see the signals I’m looking for – earnings reports (and how stocks respond), analyst news, and a decline in coronavirus cases – there could be a lot more where that came from.
In the big picture, my broader themes remain intact. That includes the 5G wireless revolution, which is just starting to come into its full potential. Go here for my free briefing and secure your copy of my 5G investing guides.