Cash outperforms stocks as indicators confirm U.S. downturn to BofA
Quantitative market indicators observed at Bank of America by a team led by cross-asset and quantitative strategist Alex Makedon and equity and quantitative strategist Savita Subramanian confirm that the U.S. economy is “deeper” in a downturn (from a later stage in the business cycle) in a report released on Tuesday. The report said February was the second straight month.
Going back to 1990, there have been seven similar episodes, with recessions lasting an average of 12 months (but between six months in 1995-1996 and 19 months during the global financial crisis), Bank of America said.
What’s more, “cash is now an alternative,” Bank of America said, adding that “we think cash is more attractive than stocks as we expect a total return for the S&P 500 this year of just 2% to 10%. 3%,” while cash yields 5% on T-bills and the bank’s economists “even after recent developments still expect an eventual rate of 5.25%-5.5%.”
The best equity investing strategies revolve around those based on a company’s cash flow, the team wrote. These strategies, which emphasize free cash flow-to-enterprise value or price-to-free cash flow ratios, “have outperformed the index in previous downturns, especially outside of the zero interest rate policy (ZIRP) era when cash had little value. These factors are still underestimated by active managers and cheap compared to history.”
Bank of America’s thinking is that stocks that provide free cash flow and dividends represent a “bird in the hand,” while high-P/E, growth stocks are a “dream to buy” idea. Unfortunately for those counting on the revival of past leaders, “longer-duration equity duration stocks (the ‘dream’ growth stocks most sensitive to funding costs) may have more wiggle room,” Bank of America said. .
— Scott Snapper
Stocks such as Lennar, First Republic move after hours
leiner — Homebuilders rose about 3 percent in after-hours trading. Lennar beat analysts’ expectations for earnings and revenue in the latest quarter, according to Refinitiv data. The company reported earnings of $2.06 per share on revenue of $6.49 billion.
first republic — Regional banks rose again after hours and were last up 8.9 percent.other bank name Western Union and key company They also rose, rising about 5% and 3%, respectively.
Read the full list of stock movements after get off work.
— Samantha Subin
3M – the lowest in 10 years – set a new 52-week low among 15 new lows for the S&P 500 on Tuesday
3M was among 15 stocks in the S&P 500 that hit fresh 52-week lows on Tuesday, falling to their lowest point since February 2013. 3M, once known as Minnesota Mining and Manufacturing, is the only one of the 15 stocks that is also in the Dow Jones Industrial Average.
- Caiwang (plate), the lowest since 2009
- Hasbro (have), the lowest since March 2020
- VF Corporation (VFC), the lowest since 2011
- Hormel (Institute of Human Resources), the lowest since 2019
- Devon Energy (observatory), the lowest since January 2022
- hundreds (CNC), the lowest since October 2021
- CVS Health (CV), the lowest since April 2021
- southwest(LUV), the lowest since May 2020
- 3M (Um), the lowest since 2013
- Create Digital (create), the lowest since March 2020
- CF Industries (carbon fiber), the lowest since February 2022
- West Rock (world rally championship), the lowest since August 2020
- Advanced Auto Parts (Associated Press), the lowest since May 2020
- organ (OGN), the lowest since the spin-off from Merck in June 2021
- Boston Properties (BXP), the lowest since 2009
Three stocks in the S&P 500 hit new 52-week highs on Tuesday:
- Arista Networks (Aneta), dating back to the all-time high for IPOs in 2014
- Cadence Design System (CDNS), setting a record high since ECAD went public in 1987
- General Electric Medical Technologies (Global Energy Center), an all-time high for a GE spin-off in December 2022
— Scott Schniper, Christopher Hayes