All three major indexes ended Tuesday in negative territory, with the S&P 500 slipping 1.6%, the Dow Jones Industrial Average falling 1.84% and the Nasdaq dropping 0.95%.
Mercifully, the first quarter has come to an end, so we can start to put the post-Feb 19th carnage into some context.
The Dow has plunged 23.2% since the start of the year, it’s worst first-quarter performance in history, and single worst overall quarter since the fourth-quarter of 1987 when it plunged 25.3% during the Black Monday crash.
The S&P 500 is down 20% so far this year, it’s largest quarterly decline since the 2008 financial crisis. It’s also the first time in more than a decade that the index started the year losing ground in each of the first three calendar months. The S&P was down 0.2% in January, 8.41% in February and 13.1% in March. That’s only happened seven other times in the indexes’ 63-year history.
The Nasdaq closed out the quarter down 14% since the start of the year.
Stock weren’t the only investments getting pummeled, oil turned in a particularly gruesome report card for the quarter as well.
Prices for West Texas intermediate crude (WTI) futures saw their largest single-quarter decline in history to start the year, with prices dropping more than 65%. In March alone the number of oil contracts fell 54%, also a record for a single-month.
While nearly all of this volatility in stocks is a result of the coronavirus outbreak (oil’s decline is also due to a price war between Saudi Arabia and Russia), the fallout from the pandemic is expected to dramatically affect our country’s gross domestic product (GDP) in the coming quarters.
Yesterday Goldman Sachs said that the second-quarter U.S. economic decline would be much greater than it had previously forecast. The bank says it expects higher than anticipated unemployment figures and “sky-high jobless claims numbers” because of the coronavirus pandemic.
It’s also forecasting a real GDP sequential decline of 34% for the second quarter on an annualized basis, significantly higher than its earlier estimate of 24% drop. Also concerning is that the bank now sees the unemployment rate hitting 15% by mid-year compared to its earlier estimates of 9%.
When the market is volatile like it has been for the last month or so, it’s often hard to imagine brighter days ahead.
But when you look at the market’s historical performance immediately following a significant decline like we are seeing right now, there are reasons to be optimistic.
According to Dow Jones Market Data, after the Dow has turned in a quarter as brutal as the one we just went through, the index returns 11.88% and 8.49% in the following two quarters.
And over the course of the following year, the Dow returns 22.75% on average.
For the S&P 500, the two quarters following a massive decline return 12% and 15.8%, and a year later the index is up 27.79% on average.
And the Nasdaq returns 3.79% and 5.57% over the next two quarters and 9.54% over the following year.
So while nothing is guaranteed, it appears we can look forward to better returns ahead.
Need Income? Here Are 8 Safe Stocks That Yield More Than 2.5%
With interest rates at all-time lows, it is becoming increasingly difficult for investors to earn a decent yield in today’s environment. Savings accounts pay a little more than 1% and Treasurys pay even worse.
For seniors or retirees looking for income, there are a handful of companies that have been paying a consistent dividend for more than 100 years that also have a yield higher than 2.5%.
Here are eight companies to take a look at:
Dividend Yield: 3.6%
Coca-Cola is the newest addition to the list, with 2020 marking the 100th year that the company has paid a dividend. The company also announced in February that it was increasing the quarterly dividend, making it 58 straight years where the payout has increased. Even with health trends shifting away from sugary drinks, the company has a robust product lineup. It has also been expanding into new beverage lines like coffee and energy drinks.
Dividend Yield: 2.9%
Chubb is an insurance company based in Switzerland that primarily writes policies for property and casualty, accident, health, life and reinsurance and is the largest publicly traded property and casualty company in the world. In addition to paying a dividend for more than 100 years, the company has also raised its payout to shareholders for 27 consecutive years.
Dividend Yield: 3.2%
You probably recognize General Mills’ brands every time you head to the grocery store. They own brands like Cheerios, Wheaties, Betty Crocker, Pillsbury, Haagen-Dazs and many more. The company has been paying out a dividend for more than 120 years and have increased that payout for 15 straight years.
Dividend Yield: 2.5%
Another company with plenty of household brand recognition, Colgate-Palmolive owns brands like Colgate, Palmolive, Speed Stick and Tom’s of Maine. The company has paid out dividends for 125 years and has raised its dividend consistently for the last 57 years.
Procter & Gamble
Dividend Yield: 2.8%
The company owns iconic brands like Pampers, Tide, Bounty, Charmin, Gillette, and Head & Shoulders. It has been paying a dividend for more than 100 year and has raised that dividend every year for the last 63 years.
Dividend Yield: 3.6%
Based in Cork, Ireland, the company provides fire, HVAC and security systems for buildings. The company has been paying a dividend to shareholders since just after it was founded in 1887, a streak of 133 years.
Dividend Yield: 4.3%
Starting way back in 1823 as the New York Gas Light Company, Consolidated Edison provides gas, electric and steam power to New York City and Westchester County, NY. The company has a long history of paying dividends to shareholders dating all the way back to 1885, a streak of 135 years.
Dividend Yield: 7.7%
The massive energy company started as two spinoffs of John D. Rockefeller’s Standard Oil company, Exxon and Mobil. The two companies merger in 1998, but investors in the companies have been receiving consistent dividend payments since way back in 1882.
Mark Cuban Proposes ‘Use it Or Lose It’ Debit Cards to Boost Recovery
Mark Cuban hasn’t been shy about voicing his ideas to get our country back on the road to recovery. His latest proposal is that the government issue debit cards to US households to help businesses by boosting consumer spending. The caveat to Cuban’s plan is that the debit cards have a “use it or lose it” feature.
“… I think we need to do a debit card program where we give money literally to each household and make it ‘use it or lose it,’ whether it’s $1,000, or $1,200, or whatever that number is, every couple of weeks and say, ‘You have X number of days to use this debit card, or you lose the money that’s been deposited on there.’”
Cuban came up with the plan. As he said, “we’ve got to get to a scenario where consumers have enough confidence to go out there and spend money… the primary reality is no business can survive without sales. And two-thirds of the economy is consumer-generated demand.”
Without an increase in business, many businesses can’t afford to re-hire their employees. Even if they could, some are receiving more money from their unemployment benefits than they are from working.
Cuban says his plan is a “perfectly timed stimulus program” and “…by doing that, and timing it right, that’s going to create demand for these companies so they can afford to bring their employees back after they’re off of all that unemployment CARES enhancement.”
The CARES Act became law in March. It added an extra $600 weekly payment on top of the amount someone receives under state law. Those additional benefits will end in July unless the government extends it.
Cuban has also proposed that the government start a federally-guaranteed jobs program. He said these should give people “confidence in their jobs” and help start the rehiring process.
“We’re going to have to have a transitional, not permanent transitional federal jobs program,” he said. He also included jobs like the ones created during the pandemic to track and treat COVID-19 patients.
“And so we’re going to need to hire people, millions of people, you know, preferably for testing, tracing, tracking, supporting vulnerable populations, long-term care, you know, giving people jobs that they know, are stable, because that gives them the impetus to spend money,” Cuban added.
While Cuban’s plan would absolutely boost consumer spending, Scott Baker, an associate professor of finance at the Kellogg School of Management at Northwestern University says it won’t help every industry.
“Some industries you won’t be able to stimulate this way,” said Baker. He also said that the plan cant help the tourism industry. He said this because, even with extra money in their pockets, Americans aren’t travelling.
Baker also says that during economic uncertainty, most Americans will delay durable goods purchases, like electronics, appliances and vehicles.
Cuban, who has become more vocal about his ideas to help the country recover from the coronavirus pandemic, also hasn’t officially ruled out a 2020 presidential run.
- Ackman’s Hot Streak Continues, Dumps Berkshire, Says ‘We Can Be More Nimble’2020
- USDA to Provide $1B in Loan Guarantees for Rural Businesses and AG Producers
- Study: Staying Unemployed Means More Money Than Heading Back to Work
Ackman’s Hot Streak Continues, Dumps Berkshire, Says ‘We Can Be More Nimble’
Bill Ackman’s hot streak continues. This comes after he announced that his Pershing Square hedge fund has returned an average of 25% this year. It also trounces the average hedge fund return of -7%. Additionally, this reveals that it sold its $1 billion stake in Warren Buffett’s Berkshire Hathaway. The fund first invested in Berkshire less than a year ago and only weeks took a larger stake in the conglomerate.
Completely exiting the Berkshire position surprised many on Wall Street, as Ackman has long admired Buffett as a mentor. He recently said that Buffett had built Berkshire “to withstand a global economic shock like this one.”
It appears that Ackman, like many, may have felt frustrated by the lack of activity from Berkshire during the recent market downswing. Berkshire’s cash balance has ballooned to $137 billion. Many, including Ackman, had likely expected a portion of that cash to be used to scoop up bargains during the late-February selloff. The said selloff took markets down nearly 30%.
Instead, Berkshire stood pat, and that appears to have been enough for Ackman to pull the plug on his investment. While discussing the exit, Ackman said that due to Pershing’s smaller size compared to Berkshire, “we can be much more nimble… and so our view was generally we should take advantage of that nimbleness, preserve some extra liquidity in the event that prices get more attractive again.”
Pershing Square’s success over the last two years had thrust Ackman back into the spotlight. This, perhaps, turned the chapter on a period where he became more famous for his misses than his home runs.
He was invested in Valeant Pharmaceuticals as it collapsed. He also famously squabbled on live TV with fellow billionaire Carl Icahn over Herbalife. Then, he gave a nearly 3-hour-long presentation explaining why he thought the company runs as a pyramid scheme. He finally exited his $1 billion short position at a loss.
Ackman’s current hot streak started last year, when Pershing Square returned 58.1%. This is its best annual return since the hedge fund was founded in 2004. After years of letting others make the firm’s investment decisions, Ackman took back the reins in 2018 with a back-to-basics strategy he learned from Buffett.
He returned the fund to a strategy that invests in simple, predictable, cash flow positive companies. He said, “It’s very hard to lose money by buying great businesses if you pay a fair price. For a while there, we forgot that our main job was to make money, so we woke up, and now we’re back in the money making business.”
Making money is exactly what Ackman did earlier this year. He did so with “the single best trade of all-time,” as what many calls it. He correctly predicted that the coronavirus would wreak havoc on our economy. Because of this, Ackman made a $27 million bet that netted his firm a $2.6 billion profit in less than two months as the markets crashed.
Now, his war chest is full again. It appears that Ackman is ready to buy should asset prices come down again.
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