The 1Q 2022 GDP report will be released tomorrow morning at 8:30 am ET. Last year’s 1Q was an outstanding 6.3%. This year is predicted to be a barely-breathing 0.4% (source: GDPNow). If the number is negative, Thursday could be a blood bath on Wall Street.
The low expectations are one of the biggest reasons why the S&P500 is already down -12% year to date. There are at least 6 other concerns that are also weighing on wealth. If you haven’t already read my blog “Recession Risks in 6 Charts,” click to access.
Have You Lost More Than 6%?
Here’s an important equation to factor in. The S&P500 is down -12%. However, if you’re 50 and you have a properly protected and diversified plan, then you should only be down about -4%. If you are over 30 and your losses are more than -6% total, then that is a giant red flag that your wealth plan is not properly protected and diversified.
As you can see in the sample pie chart below, we began overweighting 20% safe in January of 2022, and actively encouraged everyone to rebalance (take profits) at the end of December 2021. The all-time high of the S&P500 was on January 4, 2022. I first announced the overweighting in my December 1, 201 blog. (It’s a good idea to follow my Twitter feed, which is conveniently located on the home page at NataliePace.com, to ensure that you don’t miss important emails of this nature.) If you haven’t already subscribed to my YouTube.com/NataliePace channel, you might be missing out on my free videoconferenes and webinars.
2021 was a gangbuster year of 5.7% GDP growth – largely as a robust recovery from the pandemic recession. 2022 faces inflation, rising interest rates, war, leverage, elevated equity prices, churn and an inverted yield curve. The forecast is for 2.8% GDP growth in 2022.
Tesla is down 30% from its 52-week high. The company lost -12% (about $121/share) yesterday, and has clawed back about 3% of the losses today.
AMD is down 48% year to date. The company dropped 6% yesterday.
Both Tesla and AMD are still experiencing impressive revenue growth at 80% and 50% respectively. (AMD is projecting 45% revenue growth in the 1st quarter. Earnings will be released on May 3, 2022 after the markets close.)
So, what gives? Expensive stock prices. Even with the share price pullbacks, Tesla’s P/E is 118 and AMD’s is 33. The historic average of P/Es is about 17. Yes, growth companies can take a higher P/E. However, as we’ve been highlighting, stock prices entered the nethersphere in 2021.
Why did Google Drop Yesterday?
Alphabet (Google) announced earnings yesterday. The company is still growing revenue, with $68 billion being 23% higher than the same quarter in 2021. However, net income dropped -8.3%, to $16.436 billion. There’s nothing disastrous about this – if the P/E weren’t 22, and if there weren’t so many headwinds impacting the outlook for the 2nd quarter, including foreign exchange rates (a stronger dollar), the war in Ukraine, a suspension of activities in Russia and a “tough comp” compared to a robust 2Q in 2021. Alphabet shares were down 6% yesterday, including after-hours trading (after the earnings report and call took place).
Microsoft was a bright spot. After dropping 3.74% before the earnings report, investors raced back in for 4.51% gains in after-hours trading. Microsoft saw an increase in revenue of 18% to $49.4 billion in the last quarter. GAAP net income also increased to $16.7 billion (up 8%). The company is projecting a solid next quarter, even with the challenges of mark-to-market adjustments for their equity investments (potential losses), a rise in COVID cases in China (production and supply disruptions, particularly for OEM, Surface, and Xbox consoles), FX headwinds and a 1% impact on suspension of new business in Russia.
Microsoft’s P/E is also inflated at 30. However, the company’s share repurchases continue to be robust, with $23.9 billion invested in buybacks over the past nine months ($8.8 billion in the most recent quarter).
Email info@NataliePace.com if you’d like a Big Tech Stock Report Card.
It’s Easy to Make Money in a Bull Market
Recessions tell us who has been swimming naked, as Warren Buffett is fond of saying. Do you have your swimming suit on? Are you properly protected and diversified? Now is the time to know what you own and to be the boss of your money. Today’s rally might bring a little hope to Buy & Hope investors. However, it’s better to have wisdom and time-proven strategies underpinning your wealth plan, rather than rely upon blind faith that someone else is protecting you – particularly when the longest bull market in history is trending in the opposite direction.
If you'd like to learn 21st Century time-proven investing strategies to protect your wealth from a No. 1 stock picker, join us for our June 10-12, 2022 retreat. Email info@NataliePace.com or call 310-430-2397 to learn more and to register. Click on the banner ad below to discover the 18+ strategies you'll learn and master.
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money was released on September 17, 2021.
Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.