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Stocks fell today as investors weighed the negative remarks and cautiousness of U.S. Federal Reserve Chair Jerome Powell, hedge fund managers Stanley Druckenmiller and David Tepper, and Dr. Anthony Fauci.
Here's what our experts - Chris Johnson, D.R. Barton, Jr., and Shah Gilani - thought about their comments, where they see stocks heading next, and how you can position your portfolio today.
- With a forward-looking price/earnings ratio of 27 on the S&P 500, the stock market has the richest valuation in 18 years.
- Chris senses trouble ahead because most companies are announcing that profit outlooks are worsening during their earnings reports.
- Companies have cut some 30 million workers, but that may not be enough to help profit margins and sustain these lofty valuations.
- The obstacles include lower profits, falling demand, and uncertainty around the coronavirus and reopening the economy without a second wave of the virus ensuing.
- Stocks have rallied 30% off their March lows even amid terrible economic data and gloomy earnings prospects.
- For the first quarter, earnings are on track to fall 13.6%. Forecasts for the rest of the year see a 40.6% drop in Q2, a 23% decline in Q3, and an 11.4% drop in Q4.
- Chris thinks the No. 1 thing investors should be doing now is watch the financials battling their technical indicators:
- Monday and Tuesday saw companies like Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM), and others break below critical support levels on increased volume.
- If you're subscribed to Chris' proprietary Night Trader system, you can access the puts he's buying on these companies that are already moving into serious positive territory.
- D.R. explained the reasons why the market was down about 2% mid-day:
- Anthony Fauci warned that reopening the economy too quickly risks "suffering and death," especially if cities and states do not adhere to the federal government's guidelines on when and how they can begin to reopen.
- Hedge fund manager David Tepper said this is the second-most most overvalued stock market he's ever seen, only behind 1999.
- One of D.R.'s favorite stocks to watch today is Lockheed Martin Corp. (NYSE: LMT), currently trading for $365.
- D.R.'s technical indicators show the stock turning over right now, and he thinks it will be a great long-term investment if you can pick up shares for $330 or less.
- Shah thinks the market was down big today because Fed Chair Jerome Powell described the current outlook as "highly uncertain and subject to significant downside risks."
- Shah believes the Fed kept interest rates too low for too long. And without the ability to lower them without going into negative territory, that leaves the U.S. central bank vulnerable.
- Now, the only thing the Fed can do is throw more money at all the problems and hope that they go away.
- Overall, Shah thinks things are likely going to be a lot worse for a lot longer.
- Tomorrow, Shah is not only watching the new unemployment claims, but the continuing unemployment claims.
- He's expecting another 2.5 to 3 million new Americans to claim unemployment.
- And he thinks investors should be looking to put more downside protection on before heading into the weekend.
Catch us tomorrow - starting LIVE again at 8:45 a.m. EDT with Chris Johnson, right here.
If you missed our live streams today, you can now replay them on our YouTube channel here.
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