It's Starting to Look a Lot Like 1968; How Should You Invest?
Let's review the year's developments as of midsummer.
A bitterly fought presidential campaign amid a sharply divided electorate; racial tensions erupting into urban violence; proliferating accusations of police brutality against minorities; terrorist killings at home and overseas; a divisive Republican standard-bearer clamoring for law and order; U.S. troops fighting guerrilla insurgencies in foreign lands; growing economic insecurity among the middle class; national political conventions poised for armed protests; a seemingly endless spate of senseless shootings; increasing incivility and a coarsening of public discourse ...
Yep, the summer of 1968 was a scary time.
As we survey the similarly tumultuous events of 2016, we're reminded of the often-quoted malapropism of baseball legend Yogi Berra: "It's deja vu all over again."
By 1968, economic growth and the stock market had been rising, with only minor hiccups, for two decades. Prosperity would continue until the 1973-74 bear market, when stocks across the board got crushed. Today's bull market is more than seven years old. Do we face a similar day of reckoning?
Below, we examine the key numbers to watch this week. We also spotlight a time-tested investment strategy that steadily makes money regardless of political or economic volatility.
Here's one key difference between 1968 and 2016: These days, the inflation beast seems safely in its cage. The U.S. Labor Departmentreported last Friday that consumer prices rose a modest 1% in June from a year ago, indicating that the Federal Reserve will continue to take its time in hiking interest rates from the record lows that have helped propel stocks higher. The Fed's target for inflation is 2%.
In other positive news Friday, the U.S. Commerce Department reported that retail sales rose a strong 2.7% in June from a year earlier. In a separate report, the Fed said industrial output rose 0.6%, reversing May's 0.3% decline.
This "Goldilocks" economic climate (not too hot, not too cold) presents several market-beating growth opportunities, especially if second-quarter earnings continue to surprise on the upside.
Last week's record highs posted by the S&P 500 (SPY) - Get Report and the Dow Jones Industrial Average have generated investor euphoria leavened by anxiety. How long can this overbought and aging bull market last? Second-quarter earnings reports and economic data scheduled in the days ahead will provide clues as to whether you should stay in the game or take a breather on the bench.
Among the sector-moving operating results on the docket this week:
Monday:Bank of America and Yahoo!.
Tuesday:Goldman Sachs,Johnson & Johnson, Novartis, Lockheed Martin, Discover Financial Services, and Microsoft.
Wednesday:Abbott Laboratories, Halliburton, Illinois Tool Works, American Express, Newmont Mining, and Qualcomm.
Thursday:ABB, Alaska Air Group, General Motors, Union Pacific, Schlumberger, Starbucks, Visa, and AT&T.
Friday:American Airlines, General Electric, Honeywell International, and Textron.
Lockheed Martin, Schlumberger, Starbucks, Visa and General Electric are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells SLB, SBUX, V or GE? Learn more now.
On the economic docket this week:
Monday: Housing Data. Tuesday: Housing Starts. Wednesday: MBA Mortgage Applications and EIA Petroleum Status Report. Thursday: Bloomberg Consumer Comfort Index, Existing Home Sales, Leading Indicators, and EIA Natural Gas Report. Friday: PMI Manufacturing Index Flash and Baker Hughes rig count.
For the second quarter overall, research firm FactSet estimates that earnings for S&P 500 companies will decline 5.1%. If this pessimistic projection holds true, it will mark the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009.
Two stocks to particularly watch this week are Bank of America and Yahoo!, both of which are expected to report year-over-year earnings declines. The average analyst projection is for BAC to report second-quarter earnings per share (EPS) of 33 cents, versus 45 cents in the same quarter a year ago. YHOO is expected to post EPS of 10 cents, compared to 16 cents last year.
Final bids to acquire troubled Yahoo! are due on Monday, with Verizonwidely considered to be the eventual buyer. The value of the deal has ranged from $3.5 billion to $5 billion. When the dust settles over Yahoo!, the entire Internet landscape could be altered, as Facebook and Alphabet's Google gird for a possibly revitalized competitor.
Facebook is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells FB? Learn more now.
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As we've just explained, investors are getting buffeted by a chaotic year. In fact, many analysts fear that another bear market is on the horizon. If you'd rather avoid stocks, bonds and funds altogether during this period of extraordinary volatility, I know a way you can make a guaranteed $67,548 over the next 12 months. In fact, this moneymaking technique is so successful and simple, you might want to give up "conventional" investing forever! Click here now to learn more.
John Persinos is an editorial manager and investment analyst at Investing Daily. At the time of publication, Persinos held stock in General Electric, Johnson & Johnson, and Verizon.