The rising tide of the commission-free broker…
Yesterday there were a ton of articles about commissions ending. Before last week, Robinhood was the ‘free’ brokerage everyone talked about. Then announced Lite, which is theoretically commission-free.
Now everyone’s messaging me…
“This is such a great day!”
Just looking at the headlines … everyone’s excited to trade more.
Commission-Free Broker: Headlines Don’t Tell the Whole Story
This is a screwed up industry. Look, I get it. If I didn’t know this stuff…
… if I was just starting…
… I would probably be excited by these announcements too.
The E-Trade Baby Needs a Suit of Armor
You’ve seen the ads…
The cute little E-Trade baby with all the knowledge and skills…
“Look how easy trading is…”
Sorry to pop the bubble, but studies show that 90% to 95% of traders lose. If that dancing baby were real, it would be a bloody baby … THE BLOODY BABY WOULDN’T EVEN BE ABLE TO BE SHOWN ON TV!
Which is why I have to warn people about this new development.
For me, commission-free trading doesn’t change ANYTHING. Commissions don’t really matter to me — they’ve always been a negligible cost and always will be. And you don’t become a millionaire by cutting your commission costs on trading! This move by the brokerages is like dangling a carrot in front of a vegan’s eyes.
Unleash Your Inner Trader or … the Lure of Commission-Free Broker
This is a trick. A trick to get poor people to trade more.
First, commissions are only $5 or $10 per trade. So you’re talking about saving what it costs to buy a few cups of coffee at your favorite coffee shop.
It increases the gambling aspect of trading. Why? Because now you don’t have to pay commissions. So you can, theoretically, trade more. This is little ticky-tacky stuff that lures in degenerate gamblers. It gets people excited.
You should not be trading more.
Commission-Free Broker Fails to Fix the BIG Problem
What’s the big problem? The problem I’m trying to help you solve?
People overtrade and have no idea how to plan trades.
I wish they were tripling commissions to make a higher barrier to entry. If fees were higher, people would be more hesitant. There wouldn’t be as much overtrading.
Churning Your Account Won’t Make You a Millionaire
Frankly, most people aren’t gonna become millionaires by overtrading. In fact, they’ll churn their accounts even more. So what’s gonna happen with all these brokers announcing commission-free trading?
My guess is it will increase trading volume. Which means more people will lose. Roughly 90% lose now. But it will probably go up … maybe 92% or 95% will now lose.
The Worst Mindset Trap I’ve Ever Heard
I know this is controversial. Everybody wants to save money, right?
But frankly, the race to commission-free reinforces the wrong priorities. People wanna cheap out. And they think they’re gonna do better saving a few dollars.
But traders don’t lose due to commissions. They lose because of overtrading. Or taking bad trades. Commission-free reinforces both overtrading and taking bad trades. People will take more bad trades, trade a lot more, and get more frustrated.
That’s why I had to write this post and get it out to you fast.
Crazy how all brokers going commission free are getting poor people into trading more, but that won’t make you rich. You MUST have patience and wait for only the best plays, Commissions always have and always will be irrelevant, study the fuck up and don’t give into these games!
— Timothy Sykes (@timothysykes) October 3, 2019
Are You Prepared for Battle?
This is a battlefield.
Investors and traders are losing the war. They’re getting crushed. If you compare trading to war, then you could compare commission-free trading to a military parade. Everyone’s excited. We all want to see the shiny stuff going by.
“Look, it’s a parade!”
But they’re masking the ugly reality. So when someone messages me and says, “this is so great…” I have to shake my head. No, it’s not.
If you go into the nuances of it … it’s not so great. It’s masking the big problems in the industry. And now, poor dumb people think they’re getting help. The fact is, they’re getting screwed even more.
Again, this is finance. This is trading. It describes pretty much everything that’s wrong with this industry and…
… explains why I teach.
A Warning to Those Who Value Education
Now you know why I have to warn people about this.
My job is to educate based on reality. It’s my job as a 20-year veteran to dispel the myths and expose the ugly realities.
Here’s a reality…
The firms are still gonna make money. Some people are saying “Oh my god, are these companies gonna go out of business?”
If you look at what their actual business is, they make less than 20% of their revenue from commissions. In fact, TD Ameritrade expects to lose roughly 15%–16% of its current revenue. For Schwab, it’s only around 7%. E-Trade expects around a 20% drop.
So, yes, it seems like they’re losing a small portion of their business.
But remember these are still the same brokers. And they’re luring dumb gamblers with this scheme. They definitely have ways of making it up on the back end. A side newbies and poor people don’t even know about…
The Rich Get Richer While the Poor Get Poorer
It’s kinda sad.
The poor think they’re getting richer when the rich are actually tricking them.
“Yay! Poor people … get excited … we’re lowering your commissions!”
And the poor people are like…
“Yay! Let’s save $5 or $10 because I’m poor and it means a lot to me!”
But they don’t realize what’s really going on.
The Hidden Costs of Commission-Free Trading
The brokerages are gonna find new ways of making money. How? Lots of hidden fees. Like payment for order flow. What’s that? What’s payment for order flow? Glad you asked…
Brokers get cash payments for routing orders through specific electronic trading firms. It’s how Robinhood can afford to be commission-free. But like I’ve been saying for a while about Robinhood…
… you can save on commissions but get crappy executions. What’s the point of saving $10 on a commission if you lose $250 because your order fill was crap? And that’s just one example.
When the brokers go commission-free they’re gonna make a little extra in lots of other ways. Like those crappy executions. Or market making. Or by charging you an extra tenth of a penny per share. If you trade with a big account, it might cost you an extra $400. Or more.
No matter how they do it … you’ll likely pay more in ways you can’t even see.
Remember, like I said, right now roughly 90% of traders lose. And this will make the percentage go up … maybe even up to 95%. They’re luring in the poor. And, frankly, the poor get poorer … and the rich get richer.
My Job Is to Cut Through the BS
Those of us who make millions laugh at this stuff. Not at the poor people, at the brokers using the race to zero commissions to lure in suckers.
It’s my job to teach you the ways of the rich. If you’re poor, I’m on your side. Think of me as your champion. I want to educate you so you’re prepared for battle. I want you to see through the BS and change the mindset of cutting costs when it’s not in your interest.
The Rich Don’t Like It
Why? Because I keep being real in an industry full of fakes. And now, it’s an industry with a shiny lure to draw you in and annihilate your account.
You could ignore me. Feel free to enjoy the big no-commissions push. Get screwed on executions. Join the 90%+ of traders who lose…
You get to choose.
Or, heed my warning, learn to plan your trades, avoid overtrading and be willing to pay commissions for better service.
You can thank me later. Hell, you can call me Robin Hood if you like…
Just not the broker.
If you’re ready to go deep, to really understand the nuances and build a foundation of knowledge to last a lifetime, apply for the Trading Challenge today.
Be prepared for transparency. Get ready to immerse yourself so you get the most out of your membership. But only if you’re ready. Do you have what it takes?
What Students Are Saying
Check out what my students are saying … this week alone:
“So glad I attended the inner circle at the summit. Jump started my trading. So much more confident. Made a nice little profit of $1100 following the rules and taking profits on $PURA. Love the morning dip buy. in at .11 and out .13. Go to the inner circle live trading if you ever have a chance. Worth it!”
And user BrandoKlein:
“6k shares in $UNRG @.3650 out @.41= +261.60 !”
And these Profit.ly users:
Bloodhound: “timothysykes in response to your question re results today. Bought NAKD 20K just premrkt @0927 hrs for .0575 and sold @0932 hrs for .64. Good process and no risk on overnight hold, which was important for this newb. Had to be away the rest of the day, so really didn’t do anything later as couldn’t have watched it.”
redwagonrider: “[expletive deleted] YA TIM there is the power. knowing how the market is reacting to super strong stocks at the end of the day. Taking the trades that are setting up. focusing only on the biggest % gainer. Effing love learning from you! adapt adapt adapt”
michaeldufresne: “timothysykes $500 on a 2k account on NAKD and $SPNV.”
cfcmickt: “Bought $CLSI Friday into the close at $0.028 FGD low price OTC as this had further green days after the first recently. Sold this morning for $0.036. Took my near 29% profit, did not want to be greedy and hold and hope for more. Safe profits. Yet another green month.”
MOKI: “$CLSI in at .0608 and scaled out, half at .0822 and the other half at .0870 +239.”
Or this from one of my top young students…
Jack Kellogg: “locked $CLSI 35k from .0335, sell .046s. $400-ish. nice way to start the week.”
Tweets from Students
Like this one from @sublimetrades:
Awesome trade on $CLSI otc breakout. Long 40k @ .0455, added 25k @ .048, and 55k @ .0565. Scaled out in the mid .06s to mid .07s for $1,860 profit (18.6 R). $2k a day keeps the real job away. #Forward🐢 #MondayMotivation @timothysykes pic.twitter.com/YxOO9XkeDn
— John Papa (@SublimeTrades) September 30, 2019
And this from @GaRlk888:
$CLSI OTC multi-day breakout.
Nowhere else you can make 24% to your deposit per day risking only 3 %. Awesome setup. Thank you @timothysykes ,@kroyrunner89 ,@Jackaroo_Trades ,@Dom_Mastro10 ,@iVarunMad . pic.twitter.com/F30t3FUmtp
— GaRlk088 (@GaRlk888) September 30, 2019
Or this one from @Chesskid90:
— Sean Riddell (@Chesskid90) September 30, 2019
Finally had my first $100+ day since I started trading mid-September. Bought $CVSI on first green day at 1.83 sold at 2.03 during the (slow) morning spike. Partnership catalyst w/major retailer. @timothysykes @StocksToTrade pic.twitter.com/WLeN6ogiBo
— Brandon H (@BHilton124) October 2, 2019
— Carlos (@Aristi0714) September 28, 2019
And this from @MalvarezJj:
— Coward Trader (@MalvarezJj) October 3, 2019
Bought 2000 $spnv late yesterday at $.19 and held overnight. Spiked to $.25 and sold for $240 profit. It kept going up to .33 but I could hear @timothysykes “take profits!!” I left another $300 but not a bad trade from $500 account.
— iceekikistocks (@iceestocks) October 1, 2019
And new Challenge student @InceNY1:
I’m done today! As a new challenge student Time to study!! $1345.64 profit @ $NIO $824.18 / $SPNV $521.46
I Will start to post all my trade @profitly
Thanks @timothysykes @StocksToTrade @tbohen pic.twitter.com/eYlfuDE0Xl
— ERIC INCE (@InceNY1) October 3, 2019
Do you have experience with zero-commission brokers? Share in the comments below. New to trading? If you get it, comment below with “I’d rather pay commissions than get crappy executions.” Comment below, I love to hear from all my readers!
Coronavirus Stocks To Buy When An Outbreak Occurs
This post is more for me than it is for you, and in no way a recommendation to buy these stocks. It is my journal listing of stocks that are moving on volume on the latest Wuhan Coronavirus scare. What do we know so far? Very little as it seems many are keeping this thing under wraps. However, more details are pointing to a more significant threat.
It’s hard to determine what is fact and fiction in this new age of “Fake News” , but here is the current Outbreak map and the RO number:
— James (@JFJAFJF) January 25, 2020
UPDATE: Transmission of #coronoavirus estimated at 2.6 by another research group (lower than the 3.8 initial reports). But 2.6 is still extremely bad —each infected person will infect 2.6 others. Even the authors admit #CoronaOutbreak containment will be very difficult. Thread: pic.twitter.com/Gg2vyIevL4
— Dr. Eric Feigl-Ding (@DrEricDing) January 25, 2020
Stocks seeing activity due to the outbreak are as follows (Highest price to lowest price): AZN, MRNA, VIR, LAKE, NNVC, NVAX, APT, ICCC, CERS, INO, AHPI, BCRX, AEMD, CODX, CBLI, LLIT
AZN – engages in the discovery, development, and commercialization of prescription medicines for the treatment of respiratory, inflammation, autoimmune, cardiovascular, metabolic, oncology, infection, neuroscience, and gastrointestinal diseases worldwide
AstraZeneca CEO Pascal Soriot told CNBC. “We have a very large presence in China, and are the number one pharmaceutical company there, we employ 16,000 people — so as you would imagine it matters to us, we really care a lot and we’ll monitor this, but it really looks like it’s contained for the time being.”
MRNA – Creating a new category of transformative medicines based on mRNA to improve the lives of patients. From the beginning, we designed our strategy and operations to realize the full potential value and impact of mRNA over a long time horizon across a broad array of human diseases
Note: “MRNA has received new funding from vaccine alliance CEPI to accelerate its work on a coronavirus vaccine, and it has joined forces with the Coalition for Epidemic Preparedness Innovations on a vaccine approach.”
VIR – a clinical-stage immunology company focused on combining immunologic insights with cutting-edge technologies to treat and prevent serious infectious diseases.
Note: “$VIR holds a portfolio that includes an antibody for another coronavirus strain, but management is testing to determine efficacy on the Wuhan strain.”
LAKE – The company offers limited use/disposable protective clothing, such as coveralls, lab coats, shirts, pants, hoods, aprons, sleeves, smocks, and shoe covers; high-end chemical protective suits to provide protection from highly concentrated and hazardous chemical and biological toxins; and fire fighting and heat protective apparel, which is used for the maintenance of high temperature equipment, and for military and airport crash and rescue teams.
NNVC – NanoViricides, Inc., a nano-biopharmaceutical company, discovers, develops, and commercializes therapeutics for the treatment of viral infections. The company is developing anti-influenza drug candidates at pre-clinical and advanced pre-clinical stage, which include two FluCide drugs comprising NV-INF-2, an oral anti-influenza drug and NV-INF-1, an injectable anti-influenza drug for novel strain of H7N9, Bird Flu H5N1, and other Highly Pathogenic Influenzas
Note: The company announced a secondary offering after the first day spike. Investors gobbled it up, buying the dip like madmen.
NVAX – Novavax, Inc., a clinical-stage vaccine company, focuses on discovering, developing, and commercializing recombinant nanoparticle vaccines and adjuvants. The company also has pre-clinical stage programs for various infectious diseases, including the Middle East respiratory syndrome coronavirus; and develops technology for the production of immune stimulating saponin-based adjuvants.
Note: Like NNVC, the company has already announced a secondary offering and the stock is recovering from the news.
APT – engages in developing, manufacturing, and marketing a line of disposable protective apparel, building supply products, and infection control products in the United States and internationally.
Note: APT is LAKE’s little cousin. They almost always move in tandem with each other.
ICCC – is involved in the development of Mast Out, a Nisin-based intramammary treatment of subclinical mastitis in lactating dairy cows; and treatments that prevent E. coli K99 and bovine coronavirus, as well as calf scours caused by enteric pathogens.
CERS – Its INTERCEPT Blood System is based on its proprietary technology for controlling biological replication; and targets and inactivates blood-borne pathogens, including viruses, bacteria, and parasites, as well as harmful white blood cells, while preserving the therapeutic properties of platelet, plasma, and red blood cell transfusion products.
NOTE: Cowen notes that it is encouraged by prior data suggesting that Cerus’s Intercept could be an effective tool against the Coronavirus family.
INO – a clinical stage biopharmaceutical company, develops active DNA immunotherapies and vaccines in combination with proprietary electroporation delivery devices to prevent and treat cancers and infectious diseases.
NOTE: “INO is developing a vaccine to treat the MERS strain of coronavirus, management may be able to contribute its research toward the Wuhan coronavirus effort.”
AHPI – Allied Healthcare Products, Inc. engages in the manufacture, marketing, and distribution of various respiratory products for a range of hospital and alternate site settings to the health care industry in the United States, Europe, Canada, Latin America, the Middle East, the Far East, and internationally.
Note: A sleeper Coronavirus play that popped up after traders started searching for companies that had products to treat respiratory problems. The stock was halted on Friday for a few mintues as traders rushed to buy up shares.
BCRX – a biotechnology company, designs, optimizes, and develops small molecule drugs that block key enzymes involved in the pathogenesis of diseases
NOTE: galidesivir is in a Phase 1 study for a range of viruses, including coronaviruses. The early stage of development may prohibit material contribution in the immediate outbreak, but BioCryst may be able to lend some useful data.
AEMD – a medical device company, focuses on creating devices for the treatment of cancer, infectious diseases, and other life-threatening conditions. It develops Aethlon Hemopurifier, a medical device that targets the elimination of circulating viruses and tumor-secreted exosomes that promote cancer progression.
CODX – is a molecular diagnostics company that has developed and intends to manufacture and sell reagents used for diagnostic tests that function via the detection and/or analysis of nucleic acid molecules (DNA or RNA), and to sell diagnostic equipment from other manufacturers as self-contained lab systems.
NOTE: Similar to NNVC & NVAX, the company issued a secondary offering right after the one day spike. Investors gobbled up the dip quick on Friday.
CBLI – a biopharmaceutical company, focuses on developing pharmaceuticals designed to address diseases with unmet medical need.
LLIT – offers medical devices, including medical ventilators, general hospital products, medical compressors, and wireless medical products, as well as related supporting products.
NOTE: Similar to AHPI, the stock was halted serval times as traders went down the food chain for respirator products.
Feel free to add tickers to this list in the comment section.
Stock Market Week Ahead for the trading week beginning January 27th, 2020
Good Saturday afternoon to all of you here on r/StockMarket. I hope everyone on this sub made out pretty nicely in the market this past week, and is ready for the new trading week ahead.
Here is everything you need to know to get you ready for the trading week beginning January 27th, 2020.
After virus scare, markets look to Fed rate policy to keep stock rally going – (Source)
With stocks coming off their first losing week of the year, investors will be looking for the Federal Reserve to soothe markets by reaffirming its position that interest rates will be low for a long time into the future.
The outbreak of the coronavirus in China in the past week took the steam out of a market that has been repeatedly rallying to new highs since December. The S&P 500 fell just about 1% for the week, amid fears the virus could lead to slower growth not only in China, but across the globe.
Those concerns could continue to spook markets in the coming week, but stocks should be buffeted by the Fed’s anticipated commitment to low rates and its current Treasury bill buying program. The Fed meets Tuesday and Wednesday. Fed Chairman Jerome Powell is expected to emphasize that the Fed remains on a neutral policy path and that would only change if there was a significant change in the economic outlook.
There are also some major earnings reports, including from Apple, which hit an all-time high Friday morning before closing lower with the broader market. It could have a big impact on sentiment and help influence trading across the technology sector.
Stocks were choppy in the past week, and Treasury yields have been sinking on worries about the new virus. The 10-year yield sunk to a Nov. 1 low of 1.68% and investors drove gold prices higher in a flight-to-safety trade.
“It’s overshadowing everything, and what the market is looking for is that the Chinese are containing it, and the spread is minimal,” said Quincy Krosby, chief market strategist at Prudential Financial. “The derivative of all of this is what does it do to growth? Traders and investors are hoping the stimulus that has been introduced into the Chinese economy is going to take hold, and this is not going to halt that turnaround.”
Krosby said the market has been looking for an excuse to pull back. The S&P 500 ended the week at 3,295, off 1%, but it is still up about 2% for the year so far.
“You could see going into the weekend the 10-year Treasury yield is down, gold is higher, the market is in a text book defensive state,” said Krosby. “We had a market that was poised for a bout of profit-taking and this is it.”
Earnings roll out
There are more than 135 S&P companies reporting earnings in the week ahead, with a heavy focus on technology, industrials and consumer stocks. Apple reports Tuesday, and Microsoft and Facebook are Wednesday. Boeing and General Electric report Wednesday, while McDonald’s releases results Wednesday. On Friday, big oil reports with ExxonMobil and Chevron expected.
Earnings reports so far have been mostly better than expected, with 68.2% of companies beating earnings per share estimates, according to Refinitiv. Earnings are expected to be down about a half percent for the fourth quarter, based on actual reports and estimates of companies yet to report.
“Coming into any earnings season with stocks at all time highs is fraught with peril,” said Art Hogan, chief market strategist at National Securities. “It’s precarious because you have the opportunity for outsized moves if you miss earnings, revenues or guidance.”
Hogan said companies may be able to give a better indication of the future, now that there’s a first phase trade deal between the U.S. and China. He said markets will also be looking for guidance from China and elsewhere on whether the virus appears to be containable or not.
Fed is big story but won’t say much
The Federal Reserve is not likely to say much has changed in its outlook, except that it’s last three interest rate cuts may have helped the economy and financial conditions.
“The big news is just talk on the balance sheet. I think that’s going to be the key messaging,” said Jim Caron, portfolio strategist at Morgan Stanley Investment Management. “I think the data has been okay. There’s really nothing new there. The only thing that’s really new or interesting is going to be what’s going on with the balance sheet.”
The Fed has been buying about $60 billion in Treasury bills each month to expand its balance sheet, ending a program where it was shrinking the balance sheet. The Fed is adding reserves to end a problem in the repo market, which is basically the plumbing of the financial markets where institutions go to get short term cash.
Many traders believe the program is adding liquidity to markets, and therefore driving investors into stocks.
Mark Cabana, head of short rate strategy at BofA Securiteis, said the Fed is not changing its benchmark fed funds target rate, but the fixed income market has been expecting the Fed to make a technical adjustment to another rate. He said the fed funds rate, trading at about 1.55%, has come to the lower end of the Fed’s target range of 1.5 to 1.75%.
For that reason it is likely to raise the interest rate on excess reserves by five basis points. “The intent is to affirm the bottom end of the Fed’s target range, ” he said.
Besides the technical move, they “may be will provide a little more guidance on what it would take to vote rates one way or the other,” he said.
There’s an important data calendar in the coming week, including the first look at the fourth quarter’s gross domestic product on Thursday. Personal income and spending data is Friday, and that includes the personal consumption expenditure inflation deflator, watched by the Fed.
New home sales could continue the string of positive news in housing, when they are released Monday, and there are durable goods Tuesday.
This past week saw the following moves in the S&P:
Major Indices for this past week:
Major Futures Markets as of Friday's close:
Economic Calendar for the Week Ahead:
Sector Performance WTD, MTD, YTD:
Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:
S&P Sectors for the Past Week:
Major Indices Pullback/Correction Levels as of Friday's close:
Major Indices Rally Levels as of Friday's close:
Most Anticipated Earnings Releases for this week:
Here are the upcoming IPO's for this week:
Friday's Stock Analyst Upgrades & Downgrades:
February Almanac: Weak Link in Best Six Months
Even though February is right in the middle of the Best Six Months, its long-term track record, since 1950, is rather tepid. February ranks no better than sixth and has posted meager average gains except for the Russell 2000. Small cap stocks, benefiting from “January Effect” carry over; tend to outpace large cap stocks in February. The Russell 2000 index of small cap stocks turns in an average gain of 1.2% in February since 1979—just the sixth best month for that benchmark.
A strong February in 2000 boosts NASDAQ and Russell 2000 rankings in election years. Otherwise, February’s performance, compared to other presidential-election-year months, is mediocre at best with no large-cap index ranked better than seventh (DJIA and S&P 500 since 1950, Russell 1000 since 1979).
Solid January Starts Not Rare, February Could Be Tepid
Bullish sentiment is running high and why not. A new decade has begun, January has been bucking the recent trend of volatile performance and the market is trading at or near all-time record highs. Big round numbers like 29000, 3300 and 9000 are also emotionally satisfying. Our Santa Claus Rally and First Five Days indicators were both positive and the market is well on its way to completing a historically bullish January Trifecta. A positive January Barometer is all that remains to complete the January Trifecta.
As of yesterday’s close DJIA was up 2.3% year-to-date. S&P 500 was up 2.79% and NASDAQ stood at 4.44%. Although these gains are above average, they are actually not all that uncommon by the thirteenth trading day of the New Year. Since 1901 (119 years), DJIA has been up 2.3% or more on the thirteenth trading day 33 times before this year. DJIA’s largest gain on the thirteenth trading day was 11.4% in 1976 (+17.9% for the full-year). S&P 500 has equaled or exceeded 2.79% on the thirteenth trading day 26 times since 1930 while NASDAQ has bested 4.44% 15 times since 1971. Depending on index, gains equal to or greater than this year come about approximately once every 3.3 to 3.6 years. 2012 was the last election year where all three indexes were up more on the thirteenth trading day than this year.
In the following Seasonal Patten Charts of DJIA, S&P 500 and NASDAQ, we compare 2020 (as of yesterday’s close) to All Years and Election Years. Here it is clear that the market has gotten off to a solid start with well above average gains so far. Throughout 2019, the market tracked its historical patterns quite closely which suggests some mean reversion could occur this February as the month has been historically tepid for DJIA and S&P 500.
Another Look At Election Years
Last week in our LPL Research blog, we took a closer look at how stocks have performed during an election year. We found that since 1940, the S&P 500 Index hasn’t been lower during an election year when an incumbent president has been up for reelection.
We’ve had many requests to look more into election years, so we thought we’d take another look at this impactful year.
The S&P 500’s track record for reelection years has been impressive, but its average path during these years has been quite interesting, as shown in the LPL Chart of the Day. In ten reelection years since 1950, the S&P 500 on average has barely budged from February through June, before breaking out in the second half of the year.
“Stocks actually have traded in a tight range from February through June during election years, with the big rally taking place during the second half of the year,” explained LPL Financial Senior Market Strategist Ryan Detrick.
From a quarterly view, the S&P 500 has historically posted modest returns in the four quarters of an election year, but the benchmark has been higher an impressive 82% of the time in the fourth quarter of all election years. That’s one of the best track records of any quarter in the four-year presidential cycle.
Recession Watch Update
As the economic expansion caps its first decade, we thought it’d be a good time to check on LPL Research’s leading indicators in our Recession Watch Dashboard.
As you can see in our latest update and in the LPL Chart of the Day, the overall view hasn’t changed much. We believe we are in the later stages of this economic expansion, but we still see little threat of imminent recession. The current expansion is the longest on record, at 126 months, but the economy has grown at a slow and steady rate. We believe this measured pace, along with supportive fiscal policy, has contributed to this cycle’s continued durability.
In the fourth quarter, the needle moved in different directions for two of our five forecasters:
We removed the U.S. Treasury Yield Curve from On Watch status as the spread between the 3-month and 10-year yields moved back into positive territory. The spread between the 2-year and 10-year yields also climbed to an 18-month high following the Federal Reserve rate cuts. Going back to 1955, a yield curve inversion (long-term yields falling below short-term yields) has preceded each of the nine recessions. It’s important to note, however, that parts of the curve flickered between positive and inverted territory several times before the actual recession occurred.
We added Market Valuations to On Watch status, as the S&P 500 Index trailing price-to-earnings (P/E) ratio rose near cycle highs. The P/E ratio is now comfortably above our 2020 target of 18.75. With the S&P 500 surpassing the upper end of our year-end fair value target of 3,300, we are watching closely to see if earnings growth is strong enough to justify these elevated valuations. The low interest-rate and inflation environment continue to be strong tailwinds for market valuations.
“We remain optimistic of continued, albeit possibly slower, economic growth in the United States in the coming year, bolstered by recent progress on the U.S.-China trade deal,” said LPL Financial Chief Investment Strategist John Lynch. “While we continue to monitor the indicators closely, at the present time, we see only a modest chance of recession starting within the next year.”
STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending January 24th, 2020
STOCK MARKET VIDEO: ShadowTrader Video Weekly 1.26.20
Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-
Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:
Monday 1.27.20 Before Market Open:
Monday 1.27.20 After Market Close:
Tuesday 1.28.20 Before Market Open:
Tuesday 1.28.20 After Market Close:
Wednesday 1.29.20 Before Market Open:
Wednesday 1.29.20 After Market Close:
Thursday 1.30.20 Before Market Open:
Thursday 1.30.20 After Market Close:
Friday 1.31.20 Before Market Open:
Friday 1.31.20 After Market Close:
Apple, Inc. $318.31
Apple, Inc. (AAPL) is confirmed to report earnings at approximately 4:30 PM ET on Tuesday, January 28, 2020. The consensus earnings estimate is $4.53 per share on revenue of $87.74 billion and the Earnings Whisper ® number is $4.80 per share. Investor sentiment going into the company's earnings release has 74% expecting an earnings beat The company's guidance was for earnings of $4.18 to $4.66 per share. Consensus estimates are for year-over-year earnings growth of 8.37% with revenue increasing by 4.07%. Short interest has decreased by 5.2% since the company's last earnings release while the stock has drifted higher by 28.7% from its open following the earnings release to be 39.6% above its 200 day moving average of $227.94. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, January 24, 2020 there was some notable buying of 10,425 contracts of the $320.00 call expiring on Friday, January 31, 2020. Option traders are pricing in a 5.4% move on earnings and the stock has averaged a 4.8% move in recent quarters.
Tesla, Inc. $564.82
Tesla, Inc. (TSLA) is confirmed to report earnings at approximately 4:55 PM ET on Wednesday, January 29, 2020. The consensus earnings estimate is $2.03 per share on revenue of $6.99 billion and the Earnings Whisper ® number is $2.24 per share. Investor sentiment going into the company's earnings release has 43% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 6.84% with revenue decreasing by 3.26%. Short interest has decreased by 27.2% since the company's last earnings release while the stock has drifted higher by 87.7% from its open following the earnings release to be 100.1% above its 200 day moving average of $282.24. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, January 9, 2020 there was some notable buying of 12,168 contracts of the $700.00 call expiring on Friday, June 19, 2020. Option traders are pricing in a 12.8% move on earnings and the stock has averaged a 10.2% move in recent quarters.
Advanced Micro Devices, Inc. $50.35
Advanced Micro Devices, Inc. (AMD) is confirmed to report earnings at approximately 4:15 PM ET on Tuesday, January 28, 2020. The consensus earnings estimate is $0.31 per share on revenue of $2.10 billion and the Earnings Whisper ® number is $0.32 per share. Investor sentiment going into the company's earnings release has 71% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 287.50% with revenue increasing by 47.99%. Short interest has decreased by 34.0% since the company's last earnings release while the stock has drifted higher by 52.9% from its open following the earnings release to be 48.5% above its 200 day moving average of $33.91. Overall earnings estimates have been unchanged since the company's last earnings release. On Thursday, January 9, 2020 there was some notable buying of 16,799 contracts of the $60.00 call expiring on Friday, February 21, 2020. Option traders are pricing in a 9.7% move on earnings and the stock has averaged a 10.5% move in recent quarters.
Amazon.com, Inc. –
Amazon.com, Inc. (AMZN) is confirmed to report earnings at approximately 4:00 PM ET on Thursday, January 30, 2020. The consensus earnings estimate is $3.98 per share on revenue of $86.00 billion and the Earnings Whisper ® number is $4.15 per share. Investor sentiment going into the company's earnings release has 71% expecting an earnings beat The company's guidance was for revenue of $80.00 million to $86.00 million. Consensus estimates are for earnings to decline year-over-year by 35.18% with revenue increasing by 18.81%. Short interest has increased by 22.4% since the company's last earnings release while the stock has drifted higher by 9.7% from its open following the earnings release to be 2.0% above its 200 day moving average of $1,824.47. Overall earnings estimates have been revised lower since the company's last earnings release. On Tuesday, January 21, 2020 there was some notable buying of 1,348 contracts of the $1,862.50 put expiring on Friday, January 31, 2020. Option traders are pricing in a 4.5% move on earnings and the stock has averaged a 3.2% move in recent quarters.
Microsoft Corp. $165.04
Microsoft Corp. (MSFT) is confirmed to report earnings at approximately 4:10 PM ET on Wednesday, January 29, 2020. The consensus earnings estimate is $1.32 per share on revenue of $35.69 billion and the Earnings Whisper ® number is $1.38 per share. Investor sentiment going into the company's earnings release has 87% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 20.00% with revenue increasing by 9.91%. Short interest has increased by 18.2% since the company's last earnings release while the stock has drifted higher by 18.9% from its open following the earnings release to be 18.6% above its 200 day moving average of $139.21. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, January 14, 2020 there was some notable buying of 11,176 contracts of the $165.00 call expiring on Friday, April 17, 2020. Option traders are pricing in a 4.0% move on earnings and the stock has averaged a 2.5% move in recent quarters.
Facebook Inc. $217.94
Facebook Inc. (FB) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, January 29, 2020. The consensus earnings estimate is $2.51 per share on revenue of $20.83 billion and the Earnings Whisper ® number is $2.63 per share. Investor sentiment going into the company's earnings release has 83% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 5.46% with revenue increasing by 23.15%. Short interest has increased by 2.4% since the company's last earnings release while the stock has drifted higher by 10.8% from its open following the earnings release to be 14.2% above its 200 day moving average of $190.86. Overall earnings estimates have been revised lower since the company's last earnings release. On Tuesday, January 14, 2020 there was some notable buying of 9,443 contracts of the $200.00 put expiring on Friday, February 7, 2020. Option traders are pricing in a 5.8% move on earnings and the stock has averaged a 7.2% move in recent quarters.
Boeing Co. $323.05
Boeing Co. (BA) is confirmed to report earnings at approximately 7:30 AM ET on Wednesday, January 29, 2020. The consensus earnings estimate is $1.73 per share on revenue of $21.67 billion and the Earnings Whisper ® number is $1.40 per share. Investor sentiment going into the company's earnings release has 2% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 68.43% with revenue decreasing by 23.54%. Short interest has increased by 8.9% since the company's last earnings release while the stock has drifted lower by 6.4% from its open following the earnings release to be 8.7% below its 200 day moving average of $353.77. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, January 24, 2020 there was some notable buying of 7,609 contracts of the $330.00 call expiring on Friday, January 31, 2020. Option traders are pricing in a 5.0% move on earnings and the stock has averaged a 2.1% move in recent quarters.
General Electric Co. $11.71
General Electric Co. (GE) is confirmed to report earnings at approximately 6:00 AM ET on Wednesday, January 29, 2020. The consensus earnings estimate is $0.18 per share on revenue of $26.16 billion and the Earnings Whisper ® number is $0.20 per share. Investor sentiment going into the company's earnings release has 70% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 14.29% with revenue decreasing by 21.39%. Short interest has decreased by 24.1% since the company's last earnings release while the stock has drifted higher by 19.7% from its open following the earnings release to be 15.0% above its 200 day moving average of $10.18. Overall earnings estimates have been revised lower since the company's last earnings release. On Monday, January 13, 2020 there was some notable buying of 18,933 contracts of the $11.00 call expiring on Friday, February 21, 2020. Option traders are pricing in a 7.2% move on earnings and the stock has averaged a 6.9% move in recent quarters.
Mastercard Inc $323.67
Mastercard Inc (MA) is confirmed to report earnings at approximately 8:00 AM ET on Wednesday, January 29, 2020. The consensus earnings estimate is $1.87 per share on revenue of $4.39 billion and the Earnings Whisper ® number is $1.89 per share. Investor sentiment going into the company's earnings release has 81% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 20.65% with revenue increasing by 15.31%. Short interest has increased by 12.0% since the company's last earnings release while the stock has drifted higher by 16.6% from its open following the earnings release to be 18.7% above its 200 day moving average of $272.70. Overall earnings estimates have been revised higher since the company's last earnings release. On Wednesday, January 15, 2020 there was some notable buying of 2,162 contracts of the $200.00 put expiring on Friday, January 15, 2021. Option traders are pricing in a 3.5% move on earnings and the stock has averaged a 2.2% move in recent quarters.
AT&T Corp. $38.50
AT&T Corp. (T) is confirmed to report earnings at approximately 6:50 AM ET on Wednesday, January 29, 2020. The consensus earnings estimate is $0.87 per share on revenue of $46.97 billion and the Earnings Whisper ® number is $0.88 per share. Investor sentiment going into the company's earnings release has 63% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 1.16% with revenue decreasing by 2.13%. The stock has drifted higher by 0.5% from its open following the earnings release to be 8.0% above its 200 day moving average of $35.63. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, January 8, 2020 there was some notable buying of 5,621 contracts of the $42.00 call expiring on Friday, April 17, 2020. Option traders are pricing in a 3.9% move on earnings and the stock has averaged a 4.8% move in recent quarters.
What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead r/StockMarket.
How to Turn $2,000 Into $10,000 Using a TFSA
If you have a TFSA, then congratulations. You’ve made the single best decision you could make when it comes to financial planning. With tax-free growth and withdrawals, TFSAs are the best deal in Canada.
But having a TFSA is only the first step. Next, you need to build wealth through regular contributions and prudent investing. Fortunately, these actions are easier than most people realize.
In fact, going from $2,000 in your TFSA to $10,000 is a pretty straightforward endeavour. All you need is time, a bit of math, and the right stocks.
Do the math
There are only a few ways to increase your wealth. Most people know that contributing more money and earning a higher rate of return are big factors. The biggest factor, however, is time.
You’re likely familiar with compound interest. Einstein reportedly called it one of the most powerful forces in the universe. But compound interest only works with time.
Let’s assume you have $2,000 in your TFSA and never contribute another cent. By earning 8% per year, how quickly will it become $10,000? After five years, you’ll have $3,000. That’s not great. After 10 years, you’ll have $4,300.
Are you starting to see the magic of compound interest? Over the first five years, you made a profit of $1,000. Over the next five years, your profit totaled $1,300. Your money is growing faster the more that time passes.
In total, it will take 21 years to reach $10,000. That’s a long time, but here’s the catch: you can accelerate the process with small contributions.
What if you started with $2,000, earned 8% per year, but also contributed an additional $100 per month? That’s only $25 each week. In this scenario, it would only take five years to hit $10,000. That’s a lot better than 21 years!
Combining the power of compound interest with regular contributions is a sure-fire way to accrue a fortune. You just need to stay diligent.
Pick your stocks
How can you earn 8% annual returns? If you have a TFSA, one of your best options is pipeline stocks.
Pipelines are pure middlemen. They charge energy companies based on the volumes they transport. It doesn’t matter where commodity pricing goes, pipelines will profit all the same.
This stability allows pipeline stocks to pay industry-leading dividends that have proven resilient for decades.
Inter Pipeline, for example, pays a 7.7% dividend. Because these distributions are completely tax free in a TFSA, you can meet your invest goals through the dividend alone. Over the last decade, however, shares have also tripled in value. Continued capital gains would only accelerate your path to a $10,000 TFSA.
Enbridge is another ideal option with a dividend yield of 6%. As the largest pipeline company on the continent, Enbridge has structural cost advantages that few competitors possess. Its scale also affords it bargaining power. On new pipelines, Enbridge wants customers to agree to 10-year contracts. That should give it unparalleled cash flow visibility, fueling future dividend growth.
Set everything in motion
Going from a $2,000 TFSA to a $10,000 TFSA is simple. Run the math, establish a regular contribution schedule, and choose resilient dividend stocks like Inter Pipeline and Enbridge. Protecting these dividends from taxes is an opportunity you shouldn’t pass up. From there, all you need to do is wait.
There’s nothing better to an income investor than the sight of dividends rolling into your account. But the old saying goes there are two things certain in life – death and taxes… and the latter can result in some of those precious dividends slipping through your fingers and into the taxman’s pocket!
But did you know that dividends from Canadian-based companies are eligible for special tax credits? For further details on this – and to find out the name of the single most tax-efficient account to hold your US stocks in! – simply click the link below to grab your free copy of our new report…
- Why Enbridge’s (TSX:ENB) Stock Price Is Too Low
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- Is Hexo (TSX:HEXO) Stock a Buy at its Current Price?
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- 2 TSX Stocks That Turned $20,000 Into $1 Million
The Motley Fool owns shares of and recommends Enbridge. Fool contributor Ryan Vanzo has no position in any stocks mentioned.
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