Is the Stock Market Showing a Net Bullish Signal?: Morning Report

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Monday, April 4, 2022

“Cash is trash,” billionaire Ray Dalio told me in a chat recently (more on that below). And you may be right about the current investment environment.

Cash allocations are almost twice as high as last year’s levels, according to new data from Bank of America. The data looks at the recommended average allocation to stock and cash by sell-side strategists.

After recommended cash allocations hit a low of 2.5% last August, they have jumped to 4.1% today. BofA says this is a “big” move.

At the same time, sentiment on equities has declined for three straight months as investors digest worrying headlines about inflationthe war between Russia and the Ukraine, and the weakening of corporate profit margins.

While investors who have more cash appear negative for stocks at first glance, they actually aren’t historically, the BofA strategist notes. Savita Subramanian.

“What we’ve found is that Wall Street consensus strategists are a very reliable contrarian indicator. When they tell you to reduce your exposure to equities and increase your allocation to cash, that’s actually net bullish. What we found is that when most of the evidence tells you to be more cautious and defensive, all that information is probably priced into the market and the market is more likely to surprise in the opposite direction,” Subramanian said on Yahoo Finance Live.

So on that note, throw away cash and maybe put $1,000 into GameStop and another $1,000 into a boring company that pays dividends (note: this is NOT investment advice). YOLO!

Happy trading!

patchwork

One on one with Ray Dalio: I had the opportunity to catch up with the founder and co-chief investment officer of Bridgewater Associates, Ray Dalio. So keep an eye out for a lot of “stuff” coming to Yahoo Finance today from that long conversation, which comes across as a new post on youtube by Dalio titled “Principles for Dealing with the Changing World Order” is approaching a staggering 10 million views. But here’s a quote from Dalio that got me thinking, and maybe it should get you thinking too. “I think most likely what we’re going to have is a period of stagflation. And then you have to understand how to build a balanced portfolio for that type of environment.”

Morning tweet: Ark Invest’s Cathie Wood is not interested in more interest rate hikes by the Federal Reserve, as seen in a new tweet. It makes sense, since the last thing any executive from Tesla, Coinbase, Teladoc, Roku and Zoom (the top five holdings in Wood’s Ark Innovation ETF) wants to see a higher cost of capital as they continue to try for world domination. Speaking of Wood’s longtime favorite Tesla, the company posted first-quarter deliveries of 310,000 versus Street’s estimates of 312,000. Miss can’t derail the action, like Wedbush analyst dan ives Notes: “Bears will point to Tesla missing leading Street estimates, although we think supply/logistics issues for Tesla in the final week of the quarter were building up and most investors will look through the slight lack of official headlines in deliveries. We remain firmly bullish on the Tesla story and I think when taking into account all the manufacturing headwind dynamics, this was a modestly bullish impression.”

starbucks: CEO of Starbucks Kevin Johnson officially resigns today, handing over the coffee boat to the company’s iconic founder and unsuccessful presidential candidate Howard Schultz. Here’s a list of a few key moments from Johnson’s tenure: 1) launch of sous vide egg bites in 2017 – these things are great on the go; two) launch of the unicorn frappe in 2017 — this drink was gold in the Instagram photo; 3) adjusting the starbucks rewards program in 2019 that caused an uproar on social media; 4) announcing in 2020 a plan to close 400 company-operated stores — this was long overdue; 5) debuting by decision in mid-March To rid the single-use cup company: Get ready to take your $75 Yeti bottle to Starbucks; 6) unionization at Starbucks was born under Johnson’s mandate (expert report from Dani Romero from Yahoo Finance in this); 7) Lifting hourly pay at starbucks at more than $15 per hour; 8) stop Schultz’s expensive pet project to open gigantic Roastery stores in major cities.

The Starbucks keys are now back in Schultz’s pocket. he loves write blog posts, and I suspect we’ll get some of them (probably meant to cool down the union movement) before he retires before the end of 2022 (assuming he doesn’t decide to stay on as CEO). I’ll offer this dose of advice to Howard. The most important thing you could do for the future of Starbucks is to spend the next three months traveling visiting Starbucks stores around the world and listening to what employees are going through right now. In many ways, this is a different company than the one he had when he left in 2017, largely due to aftershocks from the pandemic, but also because of Starbucks’ mistakes. So you really should hear workers and then implement a plan for the next decade from there, and it’s not just about giving them a few extra dollars an hour, it’s also about total quality of life.

Second, Starbucks has lost a lot of great executive talent in the last decade (see Walgreens new CEORoz Brewer, former CEO of Starbucks). I wish you the best Howard, you know how to contact me (just don’t cancel my free birthday drink for writing this, I intend to use it today).

Diverse: A personally therapeutic part, a fun and informative part for investors. That’s my hot lesson from jumping into “The Business Essential” podcast hosted by Kartik Raghuram. Give it a listen on Spotify. (Yes, we are talking about gas prices).

What pandemic? the WSJ reports that as of today, JPMorgan “planned to discontinue other measures, such as mandatory testing for the unvaccinated or asking employees to report COVID-19 infections. It added that it would discontinue its policy of hiring only vaccinated people.”

OK so. As Julie Hyman and I talked afterwards Friday’s jobs reportThe sharp upward revisions and 5.6% rise in wages are likely to put the Fed on the line for a 50 basis point rate hike in its meeting from May 3 to 4. “The 50 case, barring any negative surprises between now and the next meeting, has grown,” San Francisco Fed President Mary Daly said. told the FT.

By brian sozzi a general editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn.

what to see today

Economy

  • 10:00 a.m. Eastern Time: factory orders, February (-0.6% expected, 1.4% in January)

  • 10:00 a.m. Eastern Time: Durable Goods Orders, End of February (-2.2% expected, -2.2% in previous print)

  • 10:00 a.m. Eastern Time: Durable goods orders, excluding transportation, End of February (-0.6% expected, -0.6% on previous print)

  • 10:00 a.m. Eastern Time: Non-defense capital goods orders, except aircraft, End of February (-0.3% in the previous edition)

  • 10:00 a.m. Eastern Time: Shipments of non-defense capital goods, except aircraft (0.5% on previous print)

Profits

There are no notable reports scheduled for publication

Politics

  • President Biden He will appear alongside some large trucks at the White House at 1:45 pm ET to promote the administration’s plan for truckers and his work to strengthen supply chains. Secretary of Transportation Pete Buttigieg will appear alongside Biden.

  • The appointment of the judge of the Supreme Court Ketanji Brown Jackson is ready to move forward as the Judiciary Committee meets at 10:00 a.m. ET to vote on his nomination. It is expected to receive a full Senate vote by the end of the week.

  • Securities and Exchange Commission Chairman Gary Gensler will deliver a keynote speech at a symposium on “The future of cryptocurrencies and digital assets” hosted by the University of Pennsylvania Carey School of Law beginning at 1:00 p.m. ET

top news

European markets are mixed as the EU prepares new sanctions against Russia [Yahoo Finance UK]

Starbucks’ Schultz announces suspension of share buyback program when he returns [Reuters]

UK regulators to review LME halt to chaotic trading [Reuters]

Tesla cannot restart Shanghai production on Monday: internal memo [Reuters]

Yahoo Finance Highlights

Supply chains: ‘Nearshoring’ could be the answer to US logistics woes, says Deloitte exec

Student Loans: Mom Criticizes Purdue ISA Offer As Her Son Faces Nearly $100,000 In Debt

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