Money in a Minute for the Week Ending April 30, 2022

by Barbara Hadden

Every Saturday I recap “news you can use” from the week: a handful of quotes from major (and often expensive) news sources, so you can stay up to date on the news that affects your money without spending a dime and in less than a minute.

Here are headlines and quotes from select money stories this week. At the end, you’ll find my take on the news.

SP 500 Ready to Join Bear Market, Says Morgan Stanley (April 25, Bloomberg)

“With defensive stocks now expensive and offering little absolute upside, the SP 500 appears ready to join the ongoing bear market,” said Morgan Stanley strategists in a note on Monday. “The market has been so picked over at this point, it’s not clear where the next rotation lies. In our experience, when that happens, it usually means the overall index is about to fall sharply with almost all stocks falling in unison.”

Stocks drop 2.8%, led lower by tech, as April’s slump continues. (April 26, The New York Times)

Stocks slid on Tuesday, adding to a losing streak that has April shaping up to be Wall Street’s worst month in two years.

The steady drop … has come as investors have confronted a long list of fears: that the Federal Reserve could raise interest rates far more quickly than economists had anticipated; that rising prices and wages could erode corporate profits; and that renewed lockdowns in China could become another drag on the global economy.

A major recession is coming, Deutsche Bank warns (April 26, CNN)

“We will get a major recession,” Deutsche Bank economists wrote in a report to clients on Tuesday.

The problem, according to the bank, is that while inflation may be peaking, it will take a “long time” before it gets back down to the Fed’s goal of 2%. That suggests the central bank will raise interest rates so aggressively that it hurts the economy.

U.S. Economy Shrank in First Quarter (April 28, The Wall Street Journal)

The U.S. economy shrank at a 1.4% annual rate in the first quarter, the Commerce Department said Thursday, its first contraction since early in the pandemic.

Economists think that overall the economy remains on solid ground, even with the possibility of a contraction, because consumers and businesses have continued to spend. But some economists see risks building for a steeper slowdown, with high inflation chief among them.

My take on the week

Here’s a quote from my column last week:

“Want to know how to predict when a rally or sell-off may be on the horizon? One way to do that is to keep an eye on investor sentiment. One of the oldest is the American Association of Individual Investors (AAII) Investor Sentiment Survey. This weekly survey reveals the percentage of AAII members who are bullish (positive), bearish (negative) and neutral about the market’s prospects over the next six months.

As of Friday, the percentage of bears was about 44%. The highest percentage of bears this year was 53%, and the market did stage a brief rally not long after.”

Guess what? This week’s survey, taken on Wednesday, showed a bearish sentiment reading of 59.4%. That’s the highest it’s been in more than a year.

As I explained last week, this is a contrary indicator, meaning the greater the number of bears, the more oversold the market and the higher the likelihood of a rally.

Put another way, the market often goes in the opposite direction than the majority thinks it will. So a high bearish (negative) sentiment reading often presages a move up in stocks.

As I also said, however, no indicator works every time. But this one is suggesting we may have found a temporary respite from selling pressure. As I write this at noon on Thursday, April 28, we are rallying. Whether we close higher is anyone’s guess.

To be clear, I still think stocks have more room to go on the downside: See the articles above for plenty of reasons. But even in the worst of years, there are decent days. Maybe we’ll have a few soon.

Check out my podcast

I hope having these news notes makes your life easier. Want something else that’s concise and impactful? Check out my weekly “Money!” podcasts. They’re brief, casual conversations with news recaps, as well as tips and tricks to make you richer.

You can listen right here on the Money Talks News website, or download them wherever you get your podcasts. Just look for Money! with Stacy Johnson.

Check them out: You’ll be glad you did!

About me

I founded Money Talks News in 1991. I’m a CPA, and I have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.