Don’t be fooled into thinking the good times are back with today’s market bounce. But a top broker reckons there are two ASX 200 shares that will do well in this volatile climate.

The S&P/ASX 200 Index (ASX: XJO) is rallying over 1% in midday trading. This marks the first time that the index is gaining ground in the last eight trading sessions!

Given that the headwinds hitting global equity markets are still in play, it is probably too early to call the bounce a turning point.

Two ASX 200 shares to weather the storm

Nonetheless, there are two ASX 200 shares that Morgans has bought more of for its core model portfolio.

Never mind the fact that the outlook for shares is still highly uncertain across capital markets. Investors are still on edge with the faster-than-expected interest rate hikes and geopolitical conflict.

Sentiment has been made worse by the crypto bear market that’s dragging on risk assets here and around the world.

Fundamentals look better than sentiment

Morgans is telling investors not to get too caught up in the negativity.

The broker explained:

We think investors can take comfort that recent volatility looks disconnected from strong corporate fundamentals and a solid outlook for the Australian economy.

Betting on this ASX 200 share

On the back of this belief, Morgans has increased its holdings in Lottery Corporation Ltd (ASX: TLC) in its equities-only model portfolio.

The key objective of this portfolio is to beat the ASX 200 Accumulation Index. It aims to do this with a balance of income (dividend) returns and capital growth.

To that end, the Lottery Corporation ticks the boxes. The company demerged from Tabcorp Holdings Limited (ASX: TAH) last month.

The broker said:

TLC is one of the highest performing lotteries businesses in the world, with long duration and exclusive licences to operate lotteries all over Australia (except for WA).

Filling up on Woodside shares

Another ASX 200 share that Morgans has upped its holdings of is Woodside Energy Group Ltd (ASX: WDS).

Morgans explained:

This was a conscious decision to lift our energy sector exposure, partially as a hedge against the inflationary forces affecting other parts of the portfolio, and because WDS looks abnormally cheap post de-merger.

How cheap is cheap?

Well, the broker noted that the Woodside share price trades at a significant discount to its US peers. It’s also sitting at around a 7% dividend yield.

Even in a rising interest rate environment, that represents a relatively attractive yield.

The post Morgans is urging investors to buy these 2 ASX 200 shares for this challenging environment appeared first on The Motley Fool Australia.

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More reading

• Why is the Premier Investments share price falling today?
• ASX 200 midday update: BHP and Rio Tinto rebound, Westpac rated as a buy
• Why is the Core Lithium share price slipping today?
• Why this top broker sees 50%+ upside to the Boral share price
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Brendon Lau has positions in Woodside Petroleum Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX 200 coal shares are enjoying huge gains on the market today.

Multiple ASX 200 coal companies, including Whitehaven Coal Ltd (ASX: WHC), New Hope Corporation Limited (ASX: NHC), and Coronado Global Resources Inc (ASX: CRN), are on the rise today. For perspective, the  S&P/ASX 200 Index (ASX: XJO) is also up 1.23% so far today.

Let’s take a look at what could be impacting ASX 200 coal shares today.

European nations revert back to coal

The Whitehaven share price is soaring 6.72% at the time of writing, while New Hope is jumping 7.48% and Coronado is 7.9% higher.

Coal explorers Yancoal Australia Ltd (ASX: YAL) and Allegiance Coal Ltd (ASX: AHQ) are also leaping 6.36%. and 8.42% respectively.

News out of Europe could be impacting coal shares. The Netherlands, Germany, and Austria are all revisiting coal due to an energy crisis sparked by the Russian invasion of Ukraine, France 24 reported.

Commenting on the decision, Dutch climate and energy minister Rob Jetten said:

The cabinet has decided to immediately withdraw the restriction on production for coal-fired power stations from 2002 to 2024.

European countries relying on coal may provide export opportunities for Australian coal companies. Whitehaven, Coronado, New Hope, Yancoal, and Allegiance all export coal around the globe.

The German government indicated it is taking measures to save gas “in view of throttling of gas supplies from Russia”. Economics and Climate Protection Minister Robert Habeck noted the gas market situation had deteriorated in recent days. He added:

In order to reduce gas consumption, less gas is to be used to produce electricity. Instead, coal-fired power plants will have to be used more. 

Share price snapshot

The Whitehaven share price has gained 159% in the past year, while New Hope has soared 85%. Coronado shares have also rocketed 134% in the past year.

For comparison, the benchmark ASX 200 Index has lost 10% in the last 52 weeks.

The post Why are ASX 200 coal shares having such a smoking session today? appeared first on The Motley Fool Australia.

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More reading

• Are these coal miners shaping up to be underrated ASX dividend shares?
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why is the Whitehaven share price crumbling 6% on Friday?
• 2 energy ASX shares to buy while inflation is killing everything else: expert
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At last, it’s a green day for ASX shares so far in this Tuesday’s trading session. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has gained a healthy 1.12% and is now back over 6,500 points. But no one seems to have told the Premier Investments Limited (ASX: PMV) share price.

Premier Investments shares have fallen steeply today. This ASX 200 retailer and owner of the Smiggle, Peter Alexander, and Just Jeans brands closed at $20.12 a share yesterday but the company’s share price is down a hefty 3.38% so far today at $19.44 a share.

So why are Premier Investments shares defying the market so decisively today?

Why is the Premier Investments share price plunging 3.38% today?

Well, it’s not as bad as you might think. There’s a good reason Premier Investments is falling today. It has to do with this retailer’s next dividend.

Yes, today is the day that Premier Investments is going ex-dividend. The company is set to pay out its interim dividend for FY2022 on 27 July next month. But if an investor wants to see this dividend arrive in their bank accounts, they would have had to own the shares before today.

An ex-dividend date cuts off new investors from receiving a dividend, which means yesterday was the last day new Premier Investments investors could sign up. Since the value of this upcoming dividend is now unavailable, its value has effectively left the Premier Investments share price. That is why we are seeing this company drop by such a solid amount today.

So investors who were on the books before today can now look forward to receiving the company’s interim dividend of 46 cents per share, fully franked, on 27 July.

It’s going to be a fairly lucrative dividend for investors too. The 46 cents per share is a marked increase on last year’s interim dividend of 34 cents per share. It’s also steady on the company’s last final dividend of 46 cents per share that was paid out back in January.

These dividends now give Premier Investments shares a dividend yield of 4.7% on the current share price.

The post Why is the Premier Investments share price falling today? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: BHP and Rio Tinto rebound, Westpac rated as a buy
• Why is the Core Lithium share price slipping today?
• Why this top broker sees 50%+ upside to the Boral share price
• 5 things to watch on the ASX 200 on Tuesday
• Will Westpac shares really pay a 9.6% dividend yield next year?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At lunch on Tuesday, the S&P/ASX 200 Index (ASX: XJO) is having a positive day at last. The benchmark index is currently up 1.2% to 6,509.6 points.

Here’s what is happening on the ASX 200 today:

Resources sector rebounds

The resources sector has played a key role in the ASX 200’s strong gain today. The likes of BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) are pushing higher and helping to drive the S&P/ASX 200 Resources index 2.5% higher at lunch. This follows a positive night of trade for most base metals.

GrainCorp’s investor day

The GrainCorp Ltd (ASX: GNC) share price is storming higher today. This follows the release of the grain exporter’s investor day event presentation. At the event, the company reaffirmed its FY 2022 full-year operating profit guidance of $590 million to $670 million.

Westpac rated as a buy

The Westpac Banking Corp (ASX: WBC) share price could be good value following recent declines. That’s the view of analysts at Morgan Stanley, which have retained their overweight rating on the banking giant’s shares. And while the broker has cut its price target to $22.30, this still implies plenty of upside over the next 12 months. Westpac is the only big four bank it rates as a buy currently.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the Paladin Energy Ltd (ASX: PDN) share price with a 7% gain. This is despite there being no news out of uranium producer. Going the other way, the City Chic Collective Ltd (ASX: CCX) share price has been the worst performer with a 3.5% decline on no news. This latest decline means the plus sized fashion retailer’s shares are down almost 70% in 2022.

The post ASX 200 midday update: BHP and Rio Tinto rebound, Westpac rated as a buy appeared first on The Motley Fool Australia.

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More reading

• Why is the Core Lithium share price slipping today?
• Why is the Graincorp share price sprouting on Tuesday?
• Why this top broker sees 50%+ upside to the Boral share price
• 5 things to watch on the ASX 200 on Tuesday
• Why did the Paladin Energy share price tumble 13% on Monday?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

It’s perhaps too soon to call today’s rebound in the crypto world sustainable. Indeed, this weekend brought yet another plunge to major cryptocurrencies, with Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) dropping to $17,708 and $896, respectively. For Bitcoin, this was its lowest level since 2020, and for Ethereum, this was the token’s lowest level since early 2021.

However, the story has changed as of 9:30 a.m. ET on Monday. Bitcoin and Ethereum have rebounded 5.5% and 8.7%, respectively, in the past 24 hours. These gains built on the upticks seen yesterday. At the time of writing, these tokens trade for around $20,500 and $1,130 apiece. 

Proof-of-stake blockchain Solana (CRYPTO: SOL) also experienced similar price action. Solana dropped as low as $26.06 this weekend. However, today’s 11.4% 24-hour move (at 9:30 a.m. ET) along with some strong price action yesterday has this token trading above $35, matching its highest level in over two weeks earlier this morning. 

So what

The ongoing fallout from the implosion of Terra (CRYPTO: LUNA) and the more recent collapse of Celsius (CRYPTO: CEL) continue to provide significant headwinds for this sector. Whether algorithmic stablecoins are likely to be a thing of the past is up for debate. However, seeing a centralized exchange such as Celsius fall under the pressure of declining crypto prices is concerning for many investors.

One beacon of light which appears to be buoying top tokens such as Bitcoin, Ethereum, and Solana today is news that Celsius has put forward a recovery plan, and its community is rallying behind this project. This morning, CEL tokens reached their highest levels in more than a month, as investors bank on this recovery plan resulting in a resolution of claims in short order. Experts suggest that claims could be resolved within nine months, saving this exchange from liquidation.

Now what

Bitcoin, Ethereum, and Solana are among the most-traded and most-utilized tokens in the market. The significant declines these top tokens have seen in recent weeks have provided long-term investors with the ability to accumulate at much more attractive prices. We’ve seen some indication of mass retail buying of Bitcoin, for example, with a reported 13,000 new holders of a whole Bitcoin (“whole Bitcoiners”) materializing over the past week. 

That said, it’s also true that the downside pressure on the crypto sector from macro forces appears unrelenting. This has been the worst quarter ever for the crypto sector, which really says something, given the gravity of previous declines. Perhaps we’re not out of the woods yet.

Indeed, concerns around the potential for a recession are pertinent. The Federal Reserve is hiking rates at its fastest rate in nearly two decades, and as more outsized rate hikes materialize, liquidity will continue to be drained from the system. For most cryptos, which have been the beneficiaries of the incredibly cheap liquidity that’s been pumped into the market, this is a tough time to suggest the next bull run is right around the corner.

That said, 2022 will likely shape up to be a year where fortunes are made or lost. Depending on one’s view on the sector (and time horizon), I think both are possible, given the volatility we’ve seen of late. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post The key driver behind the recovery in Bitcoin, Ethereum, and Solana today appeared first on The Motley Fool Australia.

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More reading

• Ethereum price collapses 35% in a week. Are crypto sharks to blame?
• Bitcoin price rockets 14% but experts say cryptos aren’t out of the woods yet
• Why US$19,500 is a line in the sand for the Bitcoin price
• Why tech billionaire Bill Gates is ‘not involved’ in crypto or NFTs
• Why Bitcoin, Ethereum, and Dogecoin dropped and popped in the last 24 hours

Chris MacDonald has positions in Ethereum and Solana. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Ethereum, and Solana. The Motley Fool Australia owns and has recommended Bitcoin, Ethereum, Solana and Terra. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Core Lithium Ltd (ASX: CXO) share price is edging lower today amid a positive announcement from the company.

At the time of writing, Core Lithium shares are down 0.47% to $1.07 each.

In contrast, the S&P/ASX 200 Index (ASX: XJO) is recovering lost ground after consecutive falls, up 1.1% to 6,504 points.

Core Lithium advances Finniss Lithium Project

Investors are bidding up the Core Lithium share price after the company provided an update on its wholly-owned Finniss Lithium Project in the Northern Territory.

According to its release, Core Lithium advised that mining rates have accelerated at the Grants Stage 1 open pit. This is due to the arrival of the dry season and the commissioning of an additional excavator and trucks to the site.

Previously, the Grants open pit was affected by higher-than-average rainfall and an extended wet season. Ultimately, this led to an increase in fuel consumption for its trucks as well as delays in open-pit mining.

Now crushing contractor CSI Mining Services (CSI) has begun mobilisation to the site as planned.

The company’s Dense Media Separation (DMS) plant has been handed over to Primero which has commenced construction activities. The structural steel is being imported from China and is now, along with all DMS components, being shipped to Australia.

Core Lithium also noted it has completed the Finniss site administration and IT complex. This will allow staff to relocate from their temporary facilities to the site-based administration building.

Finally, the company received initial environmental approval for its BP33 mine and submitted the BP33 Mining Management Plan (MMP).

Despite being a two-stage process, it’s anticipated the Northern Territory government will give approval during the September 2022 quarter.

The Finniss project is on track for its first production of spodumene concentrate by the end of the 2022 calendar year.

Management commentary

Core Lithium chair Greg English said:

The Finniss project is progressing well with Lucas, CSI and Primero all on site. Practical completion of the new administration and IT complex will allow staff to spend more time at the operation and should lead to productivity improvements in simply reducing travel time alone.

The submission of the BP33 Underground Mine MMP was a great achievement with formal approval anticipated from the NT Government in the coming months.

Core Lithium share price summary

Regardless of tumbling 17% in the past month, the Core Lithium share price has surged by 83% in 2022.

When looking further back, its shares are up an astonishing 369% over the last 12 months.

Based on today’s price, Core Lithium has a market capitalisation of approximately $1.87 billion.

The post Why is the Core Lithium share price slipping today? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: BHP and Rio Tinto rebound, Westpac rated as a buy
• Why this top broker sees 50%+ upside to the Boral share price
• 5 things to watch on the ASX 200 on Tuesday
• Will Westpac shares really pay a 9.6% dividend yield next year?
• Why are ASX 200 bank shares having such a cracking start to the week?

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Owners of this ASX mining share, rejoice! The company has uncovered a major high-grade silver discovery. The Lode Resources Ltd (ASX: LDR) share price more than doubled shortly after opening this morning on the back of the news.

At the time of writing, the Lode Resources share price is swapping hands for 27 cents, 80% higher than its previous close.

However, at its intraday high, stock in the ASX mining share – worth approximately $12 million at Monday’s close – was swapping hands for 34 cents apiece, representing a 124% gain.

Let’s take a closer look at the find that’s sent the ASX small cap rocketing higher on Tuesday.

ASX mining share more than doubles on major find

ASX mining share Lode Resources is leaping upwards today following a major discovery at the company’s Webbs Consol Project.

Exploration at the project’s Tangoa West prospect has intercepted high-grade silver-lead-zinc-copper mineralisation over a thick drill intercept at shallow depths.

The find includes an aggregate 5.9 metres at 1,074 grams per tonne of silver equivalents within the
broader intercept of 26.7 metres at 399 grams per tonne of silver equivalents.

That highlights potential mineralisation outside the subsurface below the project’s old workings. It also outlines potential mineralisation in surface targets with no previous mining.

Additionally, newly identified vertical mineralisation and alteration zonation could be good news for the current drilling program as previous programs seem to have only tested upper portions of mineralised lodes.

All that has excited the ASX mining share’s managing director, Ted Leschke.

“The high-grade silver-base metal discovery at Tangoa West … extends the high-grade Webbs Consol mineral system to three kilometres,” Leschke said.

“In addition, the newly recognised vertical mineralisation and alteration zonation identified in drilling to date has strong implications for mineralisation at depth at Webbs more broadly”.

Tangoa West is one of several drill targets being tested at the project.

Lode Resources share price snapshot

Perhaps unsurprisingly, the ASX mining share has been performing well recently.

It has gained 22% in 2022 so far. It’s also currently nearly 93% higher than it was this time last year.

The post Guess which ASX mining share just rocketed 120% on a major discovery appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: BHP and Rio Tinto rebound, Westpac rated as a buy
• The key driver behind the recovery in Bitcoin, Ethereum, and Solana today
• Why is the Core Lithium share price slipping today?
• Here’s why the Weebit Nano share price is rocketing 19% today
• Why is the Bega share price on the nose this week?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Weebit Nano Ltd (ASX: WBT) share price is charging higher today, gaining 19% in early trade to $2.33.

It’s now settled at $2.22, up 13.27% on yesterday’s closing price.

Shares in the company – which develops next-generation memory technologies for the global semiconductor industry – closed yesterday at $1.96 each.

So, why are investors bidding up the ASX tech share’s price today?

A maiden public demonstration

The Weebit Nano share price is off to the races after the company reported today it will hold the first public demonstration of its ReRAM IP module.

That demonstration is intended to show the technology’s real-world capability as a “non-volatile memory (NVM) integrated into an actual subsystem”. It will take place at the three-day Leti Innovation Days event, currently underway in France.

According to the release, the interactive presentation will demonstrate its Weebit ReRAM functioning as an NVM memory block. The module will be fed live images and should retain that data while powered off, then display the data separately.

The Weebit Nano share price could also be getting a boost from the company reporting it expects its ReRAM module to publicly demonstrate its faster write speed compared to typical flash memory technology.

Commenting on the demonstration, CEO of Weebit Nano Coby Hanoch said:

This is the first time we are publicly demonstrating our ReRAM embedded in silicon, less than a year after taping out the module. The demo of our ReRAM technology represents yet another key technical milestone as we progress toward full productisation. The demo will be a great asset for use in our sales activities with potential customers.

Weebit Nano share price snapshot

Faced with fast-rising interest rates that have hit almost every growth share, the Weebit Nano share price has struggled in 2022, down 20% after factoring in today’s gains. By comparison, the All Ordinaries Index (ASX: XAO) is down 16% year-to-date.

Longer term, Weebit Nano shares are outperforming, up 44% over the past 12 months compared to an 11% loss posted by the All Ords.

The post Here’s why the Weebit Nano share price is rocketing 19% today appeared first on The Motley Fool Australia.

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More reading

• Weebit Nano share price rockets 7% today. Here’s why
• 3 ASX All Ordinaries shares defying the sell-off to surge higher

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bega Cheese Ltd (ASX: BGA) share price is trading down again on Tuesday and is now 3.5% in the red at the time of writing.

Shares have taken a nosedive this week, in continuation of a downtrend started from 10 June. Since then, the Bega share price has sunk from $4.65 to $3.86 in early trade on Tuesday.

In wider market moves, the S&P/ASX 200 Index (ASX: XJO) has started in the green today and now trades 1% higher at 6,502.

What’s up with the Bega share price?

There’s been no market-sensitive news out of Bega’s camp lately.

However, the share did cop a downgrade from the analyst team at UBS last week. The broker reckons higher milk prices and other cost pressures are likely to pull Bega’s earnings lower in FY23.

“Input cost pressures mainly relate to increased milk supply costs, but also material increases in packaging, freight, labor and electricity,” the broker said.

It revised its FY23 earnings before interest, tax, depreciation and amortisation (EBITDA) to $214 million, down from a previous $245 million.

The UBS team now values Bega at $4.75 per share.

Following the downgrade, those at Bell Potter also cut recommendations to a hold at a $4.20 price target.

Meanwhile, Macquarie followed suit and cut its price target by 12% to $4.75 per share as well.

Despite the shift in sentiment, support remains behind Bega, with several brokers still constructive on its outlook.

Out of all analysts covering the share, almost 64% rate Bega a hold right now, versus 27% saying it’s a buy, according to Bloomberg data.

The consensus price target is $4.86 per share, per this list.

This year to date, shares are down more than 30%, as seen on the chart below.

The post Why is the Bega share price on the nose this week? appeared first on The Motley Fool Australia.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There’s no denying that it’s been an uphill climb for Wall Street and investors since the year began. Remember that fabled walk to and from school in three feet of snow, uphill, both ways, which your parents told you about as a kid? This is the stock market equivalent of it.

Since the three major U.S. indexes hit their all-time closing highs between mid-November and early January, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI), broad-based S&P 500 (SNPINDEX: ^GSPC), and technology-focused Nasdaq Composite (NASDAQINDEX: ^IXIC), have respectively tumbled by 19%, 24%, and 34%, as of June 16. More importantly, it firmly places the Nasdaq and S&P 500 in a bear market. The S&P 500 is often viewed as the best barometer of U.S. stock market health.

This indicator has correctly predicted five S&P 500 bear markets

Although some investors might be surprised by the S&P 500 losing nearly a quarter of its value in just over five months, one telltale signal with an impeccable track record correctly predicted this tumble. That indicator is the Shiller price-to-earnings (P/E) ratio, which is also referred to as the cyclically adjusted price-to-earnings ratio, or CAPE ratio.

Whereas traditional P/E ratios compare the price of a security to its trailing12-month earnings or its forecast earnings for the current or coming year, the Shiller P/E ratio is based on average inflation-adjusted earnings from the previous 10 years.

The telltale bear market warning has occurred anytime the Shiller P/E has crossed above and sustained 30. Aside from the fact that the average Shiller P/E since 1870 is just 16.95, pushing above 30 has a notoriously bad track record: 

• 1929: Following the Black Tuesday crash, the broader market went on to lose most of its value during the Great Depression. The Dow Jones ultimately shed 89% of its value.
• 1997-2001: The S&P Shiller P/E ratio would hit an all-time high of 44.19 immediately prior to the dot-com bubble bursting. Following the market’s peak, the S&P 500 lost about half its value.
• Q3 2018: During the second half of 2018, the Shiller P/E ratio found its way, briefly, above 30. During the fourth quarter of 2018, the S&P 500 lost 19.8% of its value, or 20% on a rounded basis. A decline of 20% is the accepted threshold for a bear market.
• Q4 2019-Q1 2020: In the six months leading up to the 33-calendar-day coronavirus crash, the S&P Shiller P/E ratio was, again, north of 30. The COVID-19 crash erased 34% from the S&P 500.
• Q3 2020-Q2 2022: Finally, the S&P Shiller P/E topped 40 prior to the S&P 500 rolling over in early January 2022. Thus far, the index is down 24%.

S&P 500 Shiller CAPE Ratio data by YCharts.

A few caveats to take into consideration

To recap, that’s five instances since 1870 where the Shiller P/E ratio has topped 30, and five subsequent bear market retracements totaling 20% to 89%. It’s simply never been wrong.

However, there are a number of caveats that should be understood before proclaiming this the greatest bear market telltale signal of all time.

For example, valuation “norms” have changed significantly over the past century. Prior to the mid-1980s, computers weren’t exactly commonplace on Wall Street. It took quite a bit of time to disseminate information from businesses to Main Street, which allowed rumors to perpetuate. In other words, the environment wasn’t conducive to supporting lofty valuations.

Since the mid-1980s, the information barrier between businesses, Wall Street, and Main Street, has gradually disappeared. Today, John and Jane Q. Investor can access income statements, balance sheets, and management commentary at the click of a button. This ease of access to information drives more investor risk-taking and has, therefore, inflated the Shiller P/E ratio over the past 25 years.

Something else to consider is that, even though the Shiller P/E ratio has a perfect track record of predicting an eventual bear market once valuations become extended, there’s no telling how far above 30 it’ll climb, or how long the Shiller S&P 500 will stay above 30. If you’d bet against the benchmark S&P 500 when it first crossed 30 during the third quarter of 2020, you’d still be underwater today, even with a 24% decline in the index.

Also, take note that valuation isn’t always the reason a bear market takes shape. The COVID-19 pandemic that cratered the S&P 500 over the course of five weeks in 2020 had little to do with the perception of extended valuations.

Bear markets are a surefire buying opportunity for the patient

Although it may not seem like it at the moment, bear markets are, historically, the perfect time to invest.

When looking at the long-term performance of the S&P 500, one thing that’s abundantly clear is that bull markets last considerably longer than corrections (that is, declines of at least 10% from a recent high). Since the beginning of 1950, the aggregate number of days spent in a bull market outweighs days spent in correction by roughly 2.6-to-1. This means every sizable correction is an opportunity for patient investors to strike.

If you’re wondering where to invest, there are plenty of great ideas.

For instance, dividend stocks have a proven track record of outperformance. According to a 2013 report from J.P. Morgan Asset Management, a division of JPMorgan Chase, income stocks averaged a hearty 9.5% annual return between 1972 and 2012. By comparison, publicly-traded stocks that didn’t pay a dividend gained an average of only 1.6% annually over the same time frame. Because dividend stocks are almost always profitable and time-tested, they make a good case to increase in value over time.

Interestingly, growth stocks can be smart investments when the U.S. economy weakens and the S&P 500 enters a bear market. A Bank of America/Merrill Lynch study published in 2016 found that over a 90-year period (1926-2015), value stocks outpaced growth stocks in the return column (17% to 12.8%, based on average annual return). But during periods of weakness, growth stocks performed considerably better than value stocks.  

Investors can also buy an S&P 500 tracking index. According to data from Crestmont Research, if you, hypothetically, were to have bought an S&P 500 tracking index and held for 20 years at any point since 1900, you would have generated a positive total return, including dividends. There isn’t a single point on the S&P 500’s rolling 20-year timeline where this statement doesn’t hold true.

Patience can pay off handsomely on Wall Street.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This telltale bear market signal for stocks has never been wrong appeared first on The Motley Fool Australia.

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Sean Williams has positions in Bank of America. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

from The Motley Fool Australia https://ift.tt/CNMQIOS