April 28, 2022

April Showers

Historical April has been a good month for stocks, being up 61 out of 94 times from 1928 to 2022.  The average positive return for the month is 4.4%, while the average down return is 3.8%  With only a few days left in the month the S&P is off 7.8%!  

If things don’t approve in the next few days, April will take the title of the worst monthly return since the COVID crisis began in March 2020.  January’s -5.26% return currently holds the record.  April is going to need some major help in the next couple of days.  

Even though corporate earnings season continues to generate bottom-line beats, we can’t seem to find a bottom.  In yesterday’s issue, John mentioned there is a greater risk to the downside.  If you look at net flows into global equity funds, they remain negative for a second consecutive week, meaning investors are pulling money out of funds more than adding to them.  The $30 billion that investors have pulled from equity funds in the last two weeks is the most since the first quarter of 2020, again the start of the pandemic.

Maybe the valuations after the pandemic grew too fast, but some of these numbers are staggering.  Are we really worse off now than during the pandemic

Despite several indicators saying things are oversold, there’s no indication that we’re at a bottom either.  

Since this April brought in showers, will May finally bring in flowers?  Will the Fed meeting turn things around?  Or will the old adage, “sell in May and go away” be the best option?

TRADE IDEA

If you want exposure to the bearish side, you can buy puts, sell calls against shares you have in your account, short sell stocks, or buy inverse ETFs.  There are several inverse ETFs out there, based on strategies and objectives.  You even have the 2x or 3x leveraged ETFs.  I recommend doing some research as not all ETFs are created equal.  Most are not meant to be held for long periods of time and definitely be careful with 2x and 3x leveraged ETFs.  As tempting as it may be, you can see wild swings in your account.  

Do you like Gold Miners?  Check out NUGT (bull 2x gold miners ETF).

Maybe you’re on the bearish side of the market.  Check out SPDN (bear 1x SP500 ETF).

Or check out PSQ ( bear 1x QQQ) if you’re bearish on the Nasdaq100.

MARKETS

Cherry-picking stocks within the Consumer Defensive sector is still your best bullish option with relative performance charts like these.  This is why John wrote about hedging your portfolio in yesterday’s issue.  It’s a good read.  Make sure you go back and review from time to time.  

TRADING EDUCATION

We’re going to get through more of your questions from last week as soon as I am back to normal.  

In the meantime, if you’re looking for a way you can demand more from dividend-paying stocks, you should take the time to check out Dave Durham’s Triple Play Income.  While I’m getting some rest and over my cold, Dave is creating income on dividend stocks outside of their payout dates.  He’s always looking out for stocks to add to his watchlist and then when the stock matches his criteria, he’ll send an out alert and tell you how you can take advantage of dividend-paying stocks in three unique ways.  His portfolio is up over 10% while the SP500 is down almost 13%.  Now is a perfect time to check it out!

If you have any questions, comments, or anything we can help with, reach us at any time.

Jeff

Editor, Wealthy Investor Society