Tag: Motley Fool

Consumer confidence is down as rising inflation and interest rates push up the costs of living.

ASX 200 share price movements are reflecting these concerns. The benchmark S&P/ASX 200 Index (ASX: XJO) has fallen 14% year to date.

As my Fool colleague Mitch reported last week, the latest Westpac-Melbourne Institute consumer sentiment index fell by 4.5% from the prior quarter to 86.4. A reading below 100 indicates pessimism — and the lower it goes, the more uncertain and cautious people are feeling.

Westpac chief economist Bill Evans said the June figure was not far off some of our worst financial periods. This includes COVID-19 (75.6) and the global financial crisis (79).

So in other words, Aussies are feeling pretty down in the dumps, economically speaking.

Which ASX 200 shares are the best ones to buy?

Supermarkets usually do well during periods of inflation, says Will Riggall, the chief investment officer at Clime Investment Management.

In a recent interview with the Australian Financial Review (AFR), Riggall said:

The segment of the market that has historically performed well during periods of inflation are the Australian supermarket players, namely Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL).

While we may see some trading down to lower-priced items, consumers will continue to buy food and other goods. The size and strength of the big two players will see margins remain stable amid a more challenging environment for the broader consumer sector.

Consumer staples over consumer discretionary

As Mitch also reported, consumers are now putting off household purchases. The ‘time to buy a major household item’ sub-index slipped 3.3% to 89.5 in June. Such a number has only been recorded prior to a severe economic contraction.

In a new note, Bell Asset Management says consumer discretionary shares face more risk than consumer staples with pricing power.

Bell Asset Management said:

At present, the economy remains on a reasonably strong footing, but there is an increased
risk of reduced consumer discretionary spending as priorities of the household wallet shift
more toward essential purchases of fuel, utilities and food.

Bell says investors often overlook company fundamentals and indiscriminately sell their ASX shares.

We are very cautious since our research and modelling shows that the magnitude of earnings downgrades will likely increase in the second half of the year.

Poor quality companies will take the brunt of the fall, whereas quality companies with pricing power will be far better placed to outperform.

As active stock pickers, it is times like this where there are large disconnects between quality and value, often making an opportune time to buy out of favour stocks.

The post Which ASX 200 shares could benefit from falling consumer confidence? appeared first on The Motley Fool Australia.

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More reading

• Has 2022 proven Woolworths is a defensive ASX share?
• How to start investing in stocks: This ASX 200 share is where I’d begin
• Analysts name 2 ASX dividend shares with attractive yields to buy next week
• Why is the Coles share price getting off lightly today?
• 2 defensive ASX dividend shares with good yields that analysts rate as buys

Motley Fool contributor Bronwyn Allen 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 positions in and has recommended COLESGROUP DEF SET. 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 Webjet Limited (ASX: WEB) share price is trading 2.8% down today at $5.21. It started the session higher but has since crawled its way down to intraday lows.

Meanwhile, the benchmark S&P/ASX 200 Index (ASX: XJO) has lifted in afternoon trade and is 0.16 higher at 6,518.

More broadly, Webjet shares have whipsawed sideways these past six months. They are now trading roughly in line with their December 2021 levels.

What’s up with the Webjet share price?

ASX travel shares have gained momentum in recent days amid positive economic data showing travel spending is now above pre-COVID levels.

As the Motley Fool reported on Monday, the insights, from National Australia Bank Ltd (ASX: NAB), showed its customers spent 600% more on overseas travel in the 12 months to 1 May 2022.

In May 2022 alone, NAB customers spent $46 million on international flights, up from $43 million in 2019.

The Webjet share price also got a vote of confidence from Goldman Sachs. Its analysts reckon that Webjet is a buy, valuing the company at $6.90 per share in doing so.

The Goldman team say Webjet has a strong balance sheet and opportunities for growth, a recipe it likes.

Despite the positive reports, investors have punished the share in recent weeks, selling it down from a high of $6.13 on 8 June.

That’s after it had touched the $6.12 mark three times in the last three months, as seen on the chart below. In that time, it is down 5% after some wide volatility both ways.

This year to date, the Webjet share price has gained 1.16%. It is also up 2.95% over the past 12 months.

In comparison, the ASX 200 is down 12.48% year to date and 10.73% over the past year.

The post Why is the Webjet share price tailgating the ASX 200 today? appeared first on The Motley Fool Australia.

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More reading

• Analysts name 2 top ASX 200 shares to buy today
• ASX 200 travel shares take off again on Tuesday. Here’s why
• Why are ASX 200 travel shares lifting off on Monday?
• How did ASX 200 travel shares perform amid today’s sell-off?
• These are the 10 most shorted ASX shares

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has recommended Webjet Ltd. 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is fighting hard to stay in positive territory. At the time of writing, the benchmark index is up 0.1% to 6,516.6 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are pushing higher:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The ANZ share price is up 1.5% to $22.15. Investors have been buying this banking giant’s shares amid rumours that it could be making a major acquisition. ANZ is understood to be running the rule over a multi-billion-dollar purchase of accounting software company MYOB. The bank is believed to be interested in building a one-stop platform for small businesses.

Block Inc (ASX: SQ2)

The Block share price is up 3% to $87.49. This is despite the payments giant’s US listed shares having an average night on Wall Street. However, when adjusting for current foreign exchange rates, this gain brings Block’s ASX listed shares largely in line with the value of their US counterparts.

Bubs Australia Ltd (ASX: BUB)

The Bubs share price is up 3% to 64 cents. This follows the release of yet another announcement relating to its US infant formula shipments. Today’s update, the sixth in the space of a month, reveals that two planes have been sourced for its next shipments. No changes have been made to Bubs’ overall plan to ship 1.25 million tins to the US to help with shortages.

PayGroup Ltd (ASX: PYG)

The PayGroup share price is rocketing 157% higher to 94 cents. The catalyst for this impressive gain has been a takeover approach for the human capital management (HCM) solutions company. According to the release, Deel has offered $1 per share in cash, which equates to a total consideration of $119.3 million.

The post Why ANZ, Block, Bubs, and PayGroup shares are pushing higher appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX software share just rocketed 150% on takeover news
• Block shares are back on the buy list for this big-name investor
• Should you ‘buy the dip’ in ASX 200 bank shares?
• ASX 200 midday update: Pilbara Minerals’ lithium price update, BHP tumbles
• ANZ share price rises as MYOB acquisition rumours swirl

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool Australia has recommended BUBS AUST FPO. 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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An attractive dividend yield and a 30% upside? Well, that sounds peachy. But could Macquarie Group Ltd (ASX: MQG) shares really deliver both of those things in 2022?

Macquarie is one of the most well-followed ASX shares on the market. Many call it a bank, or even the ASX’s fifth big four bank. Macquarie does offer traditional banking products such as term deposits and mortgages. But this company does a whole lot more than just that. Macquarie is a broad player in the financial space. It does investment banking and asset management amongst other things.

And it does this exceptionally well, judging by its share price performance. Over the past five years, Macquarie shares have given investors a return of over 83%, not including dividends. That runs rings around the other big ASX bank shares like Commonwealth Bank of Australia (ASX: CBA).

Macquarie shares have a 30% upside: broker

One ASX broker reckons Macquarie shares can run even higher going forward.

As my Fool colleague James covered this week, Morgans is currently very bullish on Macquarie shares.

Although the broker notes that it will be tough for Macquarie to top the net profit after tax (NPAT) of $4.7 billion it delivered in FY2022, it is still rating the company a buy with a 12-month share price target of $215.

If that came to pass, it would indeed represent an upside of 31.25% on current pricing.

Here’s how Morgans justified its bullish outlook:

We anticipate some near-term earnings volatility over FY23 but we like MQG’s favourable longer-term growth profile and consistent history of delivering strong returns (~15% average ROE over time).

What about dividends?

Not only is Morgans pencilling in a 30% share price upside, it is also factoring in some big things when it comes to dividend payments.

The broker anticipates a full-year dividend of $7.07 per share over FY2023, and then $7.47 per share over FY2024. For some context, Macquarie has paid out $6.22 in dividends per share over FY2022, giving it a current trailing dividend yield of 3.78%.

So according to Morgans, Macquarie has a 31.25% upside over the next 12 months, with a forward dividend yield of 4.32%. No doubt that would sound pretty good for most investors. But we shall have to wait and see if Morgans’ tips prove to be accurate.

At the current Macquarie share price, this ASX 200 share has a market capitalisation of $63.1 billion.

The post Can Macquarie shares deliver an attractive dividend yield AND 30% upside in 2022? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: Pilbara Minerals’ lithium price update, BHP tumbles
• 5 things to watch on the ASX 200 on Thursday
• What’s the outlook for ASX 200 bank dividends?
• How has the BrainChip share price performed since joining the ASX 200?
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

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 Macquarie Group 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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The Flight Centre Travel Group Ltd (ASX: FLT) share price is underperforming on Thursday amid reports a new Queensland tax has worried the company’s boss.

Flight Centre CEO Graham Turner told the Australian Financial Review (AFR) a new levy on large businesses represents “a big blow” to the company.

At the time of writing, the Flight Centre share price is $17.65, 0.9% lower than its previous close.

For context, the broader market is currently in the green. The S&P/ASX 200 Index (ASX: XJO) has lifted 0.27% while the All Ordinaries Index (ASX: XAO) is up 0.1%.

Let’s take a closer look at the new tax that’s reportedly expected to drag on the ASX travel giant’s bottom line.

Flight Centre share price slips as boss slams new tax

The Flight Centre share price is in the red today. Meanwhile, the Brisbane-based company’s boss is said to have slammed a new tax on large businesses.

Turner has reportedly called the levy, designed to fund mental healthcare services in Queensland, “another financial blow”.

“The reality is we … put a lot of effort into [mental health initiatives] already and a lot of money,” Turner said, per the AFR.

The levy was announced alongside the state’s budget on Tuesday.

It will see businesses with payrolls greater than $10 million paying a 2.5 cent levy for every $10 of taxable wages they pay above that level. Businesses with payrolls of more than $100 million will pay an extra levy of 5 cents for every $10 of taxable wages they pay above that figure.

That’s expected to inject an extra $1.64 billion into the state over five years to support mental health and wellbeing and combat substance abuse. Fewer than 6,000 businesses are expected to be impacted by the levy.

Queensland treasurer Cameron Dick commented businesses eligible to pay the tax will also benefit from additional mental health services.

“The productivity gains from additional investment in mental health will dwarf the costs … and larger businesses are well-positioned to reap these productivity rewards,” Dick said, continuing:

Big businesses like large supermarkets and banks have done well out of COVID … and are well placed to chip in to address mental illness.

But Flight Centre hasn’t, in fact, benefited from the pandemic. Turner was quoted as saying:

I’ve got nothing against the coal companies but at least they are doing pretty well at the moment. For us, it’s not great news that’s for sure.

The Flight Centre share price has slipped more than 20% since the company announced its return to profitability in March.

The post Flight Centre share price stumbles amid ‘big blow’ from new tax appeared first on The Motley Fool Australia.

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More reading

• ASX 200 travel shares take off again on Tuesday. Here’s why
• Why are ASX 200 travel shares lifting off on Monday?
• These are the 10 most shorted ASX shares
• Flight Centre share price climbs amid $30m investment in staff
• How did ASX 200 travel shares perform amid today’s sell-off?

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 recommended Flight Centre Travel Group 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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It has been another disappointing day for the BHP Group Ltd (ASX: BHP) share price.

In afternoon trade, the mining giant’s shares are down 3% to $39.80.

This means the BHP share price is now down over 6% since this time last week.

Why is the BHP share price under pressure?

Investors have been selling the Big Australian’s shares following further weakness in the iron ore price.

According to Metal Bulletin, the benchmark iron ore price fell a further 5.5% to US$109.40 a tonne during overnight trade.

This has been driven by continued softness in downstream demand in China despite the announcement of accelerated fiscal expenditure, as well as the sale of infrastructure-related government bonds.

Global recession fears may also be weighing on commodity prices. For example, other base metals also took a tumble last night. This includes aluminium falling 2.2%, copper dropping 2.5%, nickel sinking 5.8%, and tin tumbling 7.2%.

Other miners follow suit

It isn’t just the BHP share price that has dropped into the red today. Fellow mining giants Fortescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO), and South32 Ltd (ASX: S32) are also trading lower and dragging on the ASX 200 index.

This has led to the S&P/ASX 200 Resources index losing 2.7% of its value so far today.

The post Here’s why the BHP share price is in the red today appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: Pilbara Minerals’ lithium price update, BHP tumbles
• Why we just bought these 3 ASX shares: fund
• 5 things to watch on the ASX 200 on Thursday
• Could China ‘steel’ the show for the iron ore price?
• BHP share price claws back half of Monday’s losses on Tuesday

Motley Fool contributor James Mickleboro 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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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.

On June 6, Amazon (NASDAQ: AMZN) completed a 20-to-1 stock split, bringing its share price to around $100 at the time of this writing. While this change doesn’t reduce the company’s $1.1 trillion market cap, it makes the stock more accessible to investors who might not have thousands to put into the market. 

Let’s discuss the pros and cons of investing in the stock today.

First-quarter earnings weren’t as bad as they seem

The ubiquitous online retailer has become a one-stop-shop for everything from electronics to grocery delivery through its brick-and-mortar subsidiary, Whole Foods. Like many companies, Amazon has seen its retail operations come under pressure from inflation, which increases the cost of doing business while potentially eroding consumer purchasing power. Weaker-than-expected first-quarter results have also left many investors wondering if it’s time to jump ship. 

Amazon posted a net loss of $3.8 billion in the first quarter, down from an $8.1 billion profit in the prior-year period. While this looks like a shocking deterioration, it isn’t as bad as it looks on the surface. 

Most of Amazon’s bottom line weakness comes from a pre-tax loss of $7.6 billion from its investment in electric automaker Rivian Automotive, which has fallen 66% from its IPO price of $78 per share. Investors should note that Amazon purchased Rivian before its IPO, recording an $11.8 billion noncash gain in the fourth quarter of 2021. So while the loss looks scary, it is unrelated to Amazon’s core business. 

Pivoting to new growth drivers

Amazon’s North American e-commerce segment grew revenue by 8% year over year to $69.2 billion in the first quarter. But the flagship business posted a $1.57 billion operating loss because of inflation and supply chain-related challenges. It is unclear when these headwinds will resolve, but Amazon’s massive scale and diversified business model should help it bounce back over the long term. 

Amazon’s cloud computing business, AWS, has already grown to become a dominant force in the company. Revenue in this segment increased 37% year over year to $18.4 billion, with operating income jumping 57% to $6.5 billion.

And cloud computing isn’t the only trick Amazon has up its sleeve. According to Business Insider, Amazon has become the third-biggest digital advertising company behind Alphabet and Meta Platforms‘ Facebook. The advertising business grew 23% to $7.9 billion in the first quarter. And Amazon’s user base of over 300 million shopping-motivated active users should help it maintain its healthy growth rate. 

Amazon is also pushing into direct-to-consumer streaming with its $8.5 billion acquisition of the MGM film studio. While investors probably shouldn’t expect Amazon to become the next Netflix, MGM’s intellectual property could boost Amazon Prime and help enhance customer satisfaction. Amazon’s subscription services brought in $8.4 billion in first-quarter revenue, up 11% from the prior-year period. 

Inflation is still a massive challenge

With the May inflation rate standing at 8.6% and rising interest rates increasing the cost of capital, this is a challenging time for stock market investors. But while it is difficult to time the bottom, Amazon is a stock to watch. The company’s retail operations will be hit hard by the weak macroeconomic environment, but its massive scale and diversified growth drivers could make it a great way to bet on a rebound. 

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

The post Is Amazon a buy after the stock split? appeared first on The Motley Fool Australia.

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More reading

• Amazon stock post-split: Bear vs. bull
• Nasdaq bear market: Where to invest $1,000 right now
• Why Meta, Amazon, and Apple shares were falling today
• Why Amazon stock crushed the market today
• 2 Warren Buffett stocks to buy and hold forever

Will Ebiefung has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Netflix. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Netflix. 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 Pointerra Ltd (ASX: 3DP) share price is rocketing today.

Shares in the 3D geospatial data technology company are up 18.4% at the time of writing, after earlier posting gains of more than 22%.

Below are the highlights of the latest energy contract news that looks to be piquing ASX investor interest.

What energy contract news was announced?

The Pointerra share price is surging after the company reported that United States-based Florida Power and Light (FPL) has entered into new contracts for the Pointerra3D Answers storm response solution.

FPL, an existing Pointerra customer, will employ Pointerra3D Answers to support its storm response program, commencing with the 2022 storm season. Major storm response efforts can cost utilities US$100 million per event.

FPL will be able to load pre-storm and post-storm LiDAR collection that will be fully processed by Pointerra3D.

Pointerra said the results would be available within 24 hours for pre-storm collection and six hours for post-storm collection. It stated: “These delivery times are unprecedented in the industry and are only possible through leveraging Pointerra’s proprietary and highly automated AI/ML algorithms and scalable cloud architecture.”

The Pointerra3D Answers will “guide the deployment of FPL crews and resources critical to incident response and the restoration of power to customers”.

Revenue from the new contracts will depend on the number of storm responses and how serious those storms are. Pointerra said revenue has “the potential to be material”, and will be at least US$250,000 per year.

The Pointerra share price also looks to be getting a boost from the report that FPL’s parent company, NextEra Energy, has entered into an enterprise subscription agreement to use Pointerra3D Analytics.

NextEra will employ Pointerra3D Analytics to support its multibillion-dollar greenfield development of solar energy project sites across continental US.

As with the FPL contract, Pointerra said revenue has the potential to be material and will be at least US$250,000 per year.

Pointerra share price snapshot

Despite today’s leap, the Pointerra share price remains down 44% in 2022. That compares to a year-to-date loss of 16% posted by the All Ordinaries Index (ASX: XAO).

Longer-term Pointerra shareholders will have little to complain about, however, with shares up 1,000% over the past five years.

The post Pointerra share price storms 18% higher on energy contract news appeared first on The Motley Fool Australia.

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More reading

• Is Amazon a buy after the stock split?
• Why I think these 2 ASX shares are ideal for growth investors
• Why I think better buying opportunities could still be ahead for ASX shares
• Guess which ASX software share just rocketed 150% on takeover news
• Own PointsBet shares? Here’s what the SIG investment means for shareholders

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 positions in and has recommended Pointerra Limited. The Motley Fool Australia has recommended Pointerra 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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The ASX share market is seeing a lot of volatility right now. It’s painful, but for investors wanting to put their money to work, it could be a good time to consider leading ASX growth shares.

Investors put a lot of effort into finding the right assets to buy, researching all the metrics such as profits and the health of the balance sheet. But I think buying businesses at a good price is just as important.

We are being presented with a wide range of assets at lower prices now. So, I think this is a good time to be investing. It’s impossible to say whether we’ve seen the bottom of the plunge yet, but I do believe it’s an opportune time to go looking for ASX growth shares like my own two picks below.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This is an exchange-traded fund (ETF) that gives investors exposure to many of the world’s biggest and strongest technology businesses.

Businesses like Apple, Alphabet and Microsoft are very integrated into many people’s work or home lives and I can’t see that changing any time soon. I’m not sure how a challenger would be able to dislodge Google Search, YouTube, or Microsoft Office. iPhones seem to be here to stay, too, and so on.

There is a whole range of leading businesses in this portfolio such as Amazon, Nvidia, Meta Platforms, Fortinet, Costco, Moderna, PayPal and Adobe.

As a group, I think this ETF has quality holdings and I think collectively they can keep doing well thanks to their leading market positions. To 31 May 2022, the prior five years showed an average return per annum of 18%. But bear in mind past performance isn’t necessarily a reliable indicator of future performance.

After the approximate 30% fall in value of the NDQ ETF, I think this group of businesses looks even more attractive.

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is a leading ASX retail share that sells baby and infant products. Some of the things it sells include prams, car seats, furniture, clothes, toys, and so on.

In my opinion, this ASX growth share has plenty of growth potential. It’s already achieving some of the things I like to see from retailers.

The FY22 half-year result showed that total sales increased by 10% to $239.1 million, which was good growth. The company also displayed an improved profit margin, allowing the statutory net profit after tax (NPAT) to rise by 12.2% to $8.1 million.

I think the business can grow in a number of ways. It’s planning to expand its store network from 64 to 100 in Australia over time. It’s also planning to build a store network in New Zealand as well.

The company can continue to grow its online sales, partly thanks to its loyalty program and also expanding its product range. In the six weeks to 9 February 2022, Baby Bunting said its online sales growth was 30%, showing good ongoing progress.

Management is also assessing the $5.1 billion baby goods market for future long-term growth opportunities, relative to its current $2.5 billion addressable market.

A bonus is the (trailing) grossed-up dividend yield of 5.3%, which adds to total returns.

The post Why I think these 2 ASX shares are ideal for growth investors appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Costco Wholesale, Microsoft, Nvidia, and PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Moderna Inc. and has recommended the following options: long January 2024 $420 calls on Adobe Inc., long March 2023 $120 calls on Apple, short January 2024 $430 calls on Adobe Inc., and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Adobe Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Baby Bunting, Nvidia, and PayPal Holdings. 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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An expert from Morgan Stanley has warned that the US share market could face further trouble this year. However, I believe this could mean great buying opportunities are on the way for ASX shares.

The pessimistic call about US shares comes from Mike Wilson, an expert from Morgan Stanley.

Negative expectations

Wilson thinks further declines could be ahead, despite the S&P 500 Index (INDEXSP: .INX) registering a drop of more than 20% in 2022.

According to the Australian Financial Review, Wilson said while the market is now more fairly priced, the S&P 500 is not yet pricing “the risk of a recession, in our view, which is 15% to 20% lower, or roughly 3,000″.

“The bear market will not be over until recession arrives or the risk of one is extinguished,” he said.

Part of the pessimism comes from the fact that the yield on 10-year US government bonds has gone higher than expected. It was recently 3.27%.

Wilson said:

For us, the end game remains the same; we see a pretty poor risk reward over the next three to six months with recession risk rising in the face of very stubborn inflation readings. Valuations are closer to fair at this point, but hardly a bargain if earnings are likely to come down and/or a recession is coming.

We recognise a lot of pain has already been inflicted during this bear market. Nevertheless, we can’t yet get bullish for more than just a bear market trade until we reach the 200-week moving average of 3,500. Even then, we would only expect an oversold bounce until recession risk falls materially.

Why could this mean better buying opportunities for ASX shares?

As an investor, I want to be able to buy my favourite investment ideas at a cheaper price.

Share prices don’t all move in unison. However, quite often, we see the ASX share market following on from what has happened in the US share market.

If there is going to be a decline of US shares by 15% to 20% from here, then it’s possible the ASX share market could also see falls.

I would like to see further ASX declines so that I can buy more shares at a lower price. I am many years from retirement, so getting more bang for my buck in the next few decades sounds better to me.

As Warren Buffett once said:

To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.

I’m looking forward to loading up on ASX share hamburgers during this period, particularly if prices go quite a lot lower. I have already been buying this month, and I plan to invest a lot more over the rest of this year.

It’s also possible to invest in iShares S&P 500 ETF (ASX: IVV) on the ASX.

The post Why I think better buying opportunities could still be ahead for ASX shares appeared first on The Motley Fool Australia.

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More reading

• Waiting to start investing in ASX shares? Today could be a brilliant time to do it
• Why I’d buy the iShares S&P 500 ETF right now for instant diversification

Motley Fool contributor Tristan Harrison 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 iShares Trust – iShares Core S&P 500 ETF. 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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