Commentary/Opinion – Page 5

The limit for 401(k) contributions will jump nearly 10% in 2023, but it’s not always a good idea to max out your retirement investments

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The federal government will allow you to save nearly 10% more for retirement in 2023. But it’s not likely that many will take advantage of the tax break. The simple reason: Most people don’t make enough money to save more from their paychecks.

The average amount that participants contribute is 7.3% of their salary, according to Vanguard’s How America Saves 2022 report. At that rate, you’d have to make more than $300,000 to hit the $22,500 maximum amount an employee can save in a workplace plan for 2023, up from $20,500 in 2022. To put it another way, to save the max, you’d have to put aside $1,875 per month, or $865 per paycheck if you’re paid biweekly.

Only 14% of participants saved the maximum amount in 2020.

Few people will also likely take advantage of the increase in the catch-up contribution limit, which will allow those 50 and older to contribute an extra $7,500, up by $1,000 from 2022, for a total of $30,000. Vanguard’s report found that only 16% of those eligible participate, even though 98% of plans allow for catch-up contributions.

“The max numbers are very high. A lot of people don’t make that kind of money,” says Anqi Chen, assistant director of savings research at the Center for Retirement Research at Boston College.

You might not need to max out

Not everyone needs that kind of money put away for retirement. The key is to save over time to eventually be able to replace your current income in the future, supplemented by Social Security. If you’re making $60,000 now, it wouldn’t make sense to try to save more than a third of your yearly income just because the government says you can.

“You don’t want to deprive yourself today or later on. You want to balance that over time, to be able to maintain the same standard of living in retirement,” says Chen.

The tried-and-true method to get people to contribute to retirement savings is a monetary incentive: matching funds. That “free money” on the table is at the base of every recommendation for how much workers should contribute. Give at least up to the match, everyone says. But almost all company retirement plans offer matching funds, and it hasn’t yet solved the retirement crisis facing most Americans who haven’t saved enough.

Trend in deferral rate changes

Vanguard 2022

If there’s a takeaway from the new IRS limits, it’s that pushing up the limits every year does help. Retirement contributions have been indexed for inflation since 2001 for good reason, because legislators recognized that the amount you need in the future is constantly going up.

Ten years ago, the maximum for 401(k) contributions was $17,000 and going back 30 years to 1992, it was $8,728. In today’s dollars, that certainly wouldn’t be enough.

At the same time, the government has to cap it somewhere to put a limit on tax deferral, so you can’t just shelter all your income from the IRS.

“These annual step-ups matter over time, because saving for retirement is a multidecade thing,” says David Stinnett, head of strategic retirement consulting for Vanguard.

His advice for those who can’t max out, particularly younger workers, is to at least contribute up to the company match and then automatically escalate your savings rate over time to something in the rage of 12% to 15%.

It can be helpful to think of the amounts in dollar terms, rather than percentages.

“By starting small and thinking of it as just ‘3 pennies per dollar’ earned and then adding ‘2 pennies per dollar’ each year going forward, you’ll get on track to those recommended savings rates in no time,” says Tom Armstrong, vice president of customer analytics and insight at Voya Financial.

Escalating over time does seem to move the needle, according to Vanguard’s study, at least if you look at the rate of people coming to the table. The voluntary participation rate was only 66%, but the participation rate for automatic enrollment was 93%.

“What that does is make it easy to save more,” says Stinnett.

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December 31, 2022

These 20 stocks were the biggest losers of 2022

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This has been the year of reckoning for Big Tech stocks — even those of companies that have continued to grow sales by double digits.

Below is a list of the 20 stocks in the S&P 500
SPX,
-0.72%
that have declined the most in 2022.

First, here’s how the 11 sectors of the benchmark index have performed this year:

S&P 500 sector	2022 price change	Forward P/E	Forward P/E as of Dec. 31, 2021
Energy	57.8%	9.6	11.1
Utilities	-0.5%	18.8	20.4
Consumer Staples	-2.7%	20.9	21.8
Healthcare	-3.2%	17.4	17.2
Industrials	-6.7%	18.0	20.8
Financials	-12.1%	11.7	14.6
Materials	-13.4%	15.6	16.6
Real Estate	-27.7%	16.2	24.2
Information Technology	-28.8%	19.6	28.1
Consumer Discretionary	-37.4%	20.7	33.2
Communication Services	-40.4%	14.0	20.8
S&P 500	-19.2%	16.5	21.4
Source: FactSet

The energy sector has been the only one to show a gain in 2022, and it has been a whopper, even as West Texas Intermediate crude oil
CL.1,
+0.41%
has given up most of its gains from earlier in the year. Here’s why investors are still confident in the supply/demand setup for oil and energy stocks.

Looking at the worst-performing sectors, you might wonder why the consumer discretionary and communication services sectors have fared worse than information-technology, the core tech sector. One reason is that S&P Dow Jones Indices can surprise investors with its sector choices. The consumer discretionary sector includes Tesla Inc.
TSLA,
+0.70%
and Amazon.com Inc.
AMZN,
-1.17%,
which has fallen nearly 50% this year. The communications sector includes Meta Platforms Inc.
META,
-1.21%,
along with Match Group Inc.
MTCH,
+0.50%,
which is down 69% for 2022, and Netflix Inc.
NFLX,
-0.44%,
which is down 52% this year.

There have been many reasons easy to cite for Big Tech’s decline, such as a questionable change in strategy for Facebook’s holding company, Meta, as CEO Mark Zuckerberg has put so much of the company’s resources into developing a new world that most people don’t wish to enter, at least yet. Meta’s shares were down 64% for 2022 through Dec. 29.

You might also blame the Twitter-related antics and sales of Tesla shares by CEO Elon Musk for the 65% decline in the electric-vehicle maker’s stock this year. But Tesla had a forward price-to-earnings ratio of 120.3 at the end of 2021, while the S&P 500
SPX,
-0.72%
traded for 21.4 times its weighted forward earnings estimate, according to FactSet. Those P/E ratios have now declined to 21.7 and 16.4, respectively. So Tesla no longer appears to be a very expensive stock, especially for a company that increased its vehicle deliveries by 42% in the third quarter from a year earlier.

Analysts polled by FactSet expect Tesla’s stock to double during 2023. It nearly made this list of 20 EV stocks expected to rebound the most in 2023.

The worst-performing S&P 500 stocks of 2022

Here are the 20 stocks in the S&P 500 that fell the most for 2022 through the close on Dec. 29.

Company	Ticker	2022 price change	Forward P/E	Forward P/E as of Dec. 32, 2021
Generac Holdings Inc.	GNRC, -0.84%	-71.4%	13.7	30.2
Match Group Inc.	MTCH, +0.50%	-68.9%	20.1	48.5
Align Technology Inc.	ALGN, -0.52%	-67.7%	27.4	48.7
Tesla Inc.	TSLA, +0.70%	-65.4%	21.7	120.3
SVB Financial Group	SIVB, -0.38%	-65.4%	10.8	23.0
Catalent Inc.	CTLT, -0.40%	-64.6%	13.0	32.5
Meta Platforms Inc. Class A	META, -1.21%	-64.2%	14.7	23.5
Signature Bank	SBNY, -0.34%	-64.1%	6.2	18.6
PayPal Holdings Inc.	PYPL, -0.01%	-62.6%	14.8	36.0
V.F. Corp.	VFC, +0.15%	-62.5%	11.9	20.4
Warner Bros. Discovery Inc. Series A	WBD, -1.64%	-59.9%	N/A	7.5
Carnival Corp.	CCL, -0.23%	-59.8%	38.1	N/A
Stanley Black & Decker Inc.	SWK, -0.42%	-59.8%	17.0	15.9
Lumen Technologies Inc.	LUMN, -1.79%	-57.8%	7.7	7.8
Zebra Technologies Corp. Class A	ZBRA, -0.44%	-56.7%	14.5	30.1
Dish Network Corp. Class A	DISH, -0.96%	-56.5%	8.6	10.9
Caesars Entertainment Inc.	CZR, +0.24%	-55.7%	51.4	144.5
Lincoln National Corp.	LNC, +0.26%	-55.1%	3.4	6.2
Advanced Micro Devices Inc.	AMD, -0.97%	-55.0%	17.8	43.1
Seagate Technology Holdings PLC	STX, -0.55%	-53.1%	15.0	12.4
Source: FactSet

Click on the tickers for more information about the companies.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

Another way of measuring the biggest stock-market losers of 2022

It is one thing to have a large decline based on the share price, but that doesn’t tell the entire story. How much of a decline have investors seen in the holdings of their shares during the year? The S&P 500’s total market capitalization declined to $31.66 trillion as of Dec. 28 (the most recent figure available) from $40.36 trillion at the end of 2021, according to FactSet.

Shareholders of these companies have suffered the largest declines in market cap during 2022.

Company	Ticker	2022 market capitalization change ($bil)	2022 price change
Apple Inc.	AAPL, -0.63%	-$851	-27.0%
Amazon.com Inc.	AMZN, -1.17%	-$832	-49.5%
Microsoft Corp.	MSFT, -1.15%	-$728	-28.3%
Tesla Inc.	TSLA, +0.70%	-$677	-65.4%
Meta Platforms Inc. Class A	META, -1.21%	-$465	-64.2%
Nvidia Corp.	NVDA, -1.37%	-$376	-50.3%
PayPal Holdings Inc.	PYPL, -0.01%	-$141	-62.6%
Netflix Inc.	NFLX, -0.44%	-$138	-51.7%
Walt Disney Co.	DIS, -1.62%	-$123	-43.7%
Salesforce Inc.	CRM, -0.96%	-$118	-47.8%
Source: FactSet

So there is your surprise for today: Apple is this year’s biggest stock-market loser.

Don’t miss: Best stock picks for 2023: Here are Wall Street analysts’ most heavily favored choices

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December 30, 2022

Surprise! CDs are back in vogue with Treasurys and I-bonds as safe havens for your cash

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If there’s a silver lining to the current economic situation that features soaring inflation and falling stocks, it’s that savers can get more for their money.

Even after just a few months of rising interest rates, you can find online savings accounts yielding more than 3%. But that might not be good enough anymore.

“Rather than being grateful for yield, that’s going to change quickly into turning your nose up at yield,” says Matt McKay, a certified financial planner and partner at Briaud Financial Advisors in College Station, Texas.

The Federal Reserve continued to raise rates through the end of 2022, and yields on savings products are now high enough that they look like a safe haven compared with a stock market that’s in the red this year.

And that means certificates of deposits, or CDs, are back in the conversation — even if that comes with caveats.

Advisers still favor Treasury bills and notes and Series I savings bonds for getting the best combination of low risk and high yield, but some are looking more seriously at CDs now. And for the everyday investor doing it on their own, CDs offer an additional boost beyond a savings account without much effort.

“It’s good for anyone if they have cash sitting around, if you can pick up something — CDs, T-bills, whatever — it’s good to get something,” says McKay.

Remember CDs?

If you’re under 50, you might never have invested in a CD and have no memory of how investors used to build ladders of different maturities as a cornerstone of their portfolio.

“With younger clients, nobody ever talks about CDs — never, never, never,” says Dennis Nolte, a certified financial planner and financial consultant at Seacoast Investment Services in Orlando, Fla.

For some, however, CDs never went out of style. These promissory notes from banks, which have been around in the U.S. since the 1800s, come in maturities generally from three months to five years, in exchange for interest at maturity.

You’re locked into the time period or face surrender charges that vary, unless you choose a more flexible, lower-interest option. The laddering strategy consists of buying CDs at different maturities and then reinvesting as they each come due.

Over the past few years, CDs haven’t been worth it for most savers, who could get as much from a high-yield savings account without restrictions. The average five-year CD would have nabbed you nearly 12% in 1984, but now the average five-year rate is just 0.74%, according to Bankrate.com. Back in 1984, CDs were nearly 50% of deposits at FDIC-insured banks, with $1.24 trillion held in the first quarter of that year. In 2022, there’s nearly the same dollar amount, which amounts to just 6.3% of deposits.

With rates rising, you can find better-than-average deals, closing in on 4% at some banks or brokerages. Many have a $1,000 minimum purchase, but you can find fractional offers for as little as $100.

CDs versus Treasurys and I-bonds

Treasury bills and notes come in roughly the same maturities as CDs, and are yielding slightly more currently. They also have no state tax burden on gains.

You can buy directly at TreasuryDirect.gov, with a $100 minimum, but to sell, you have to transfer holdings to a brokerage. Or you can buy and sell through a brokerage, but your minimums may be $1,000.

For I-bonds, you can only buy directly at TreasuryDirect.gov, with a minimum of $25 and a maximum of $10,000 per person a year, with gifts allowed to others up to $10,000 per recipient. I-bonds are indexed for inflation, with rates that reset every six months, and today are yielding 6.89% through April 2023. The biggest caveat is that you are locked into one year, and then face a surrender penalty of three months of interest if you cash out before five years.

A strategy for today’s rising rates

If you are chasing yield and have money you don’t need for a year, then I-bonds are the place for the first $10,000.

“It makes sense to max out I-bonds before investing in CDs,” says Ken Tumin, founder of DepositAcccounts.com.

Just make sure you’re motivated enough to navigate a still-wonky website and keep track of the investment on your own, because it won’t align with any of your other accounts. McKay had a client who was eager to jump into I-bonds, and he was mad at first that McKay hadn’t recommended it. “But then he called to complain, saying this is terrible, it’s so difficult,” he says.

If you have funds beyond that for savings, consider Treasury bills or notes because the rates are higher, says Tumin. Then consider CDs. That’s what Nolte is doing with some clients, particularly older ones who have past experience with them.

“Why not get something guaranteed? It’s maybe not keeping pace with inflation, but you’re not losing principal,” says Nolte.

CD rates move more slowly than other products, so even after the next rate hike, this strategy would still apply. But already Tumin sees investors ready to lock into long-term CDs, anticipating a recession and a drop in interest rates. If rates subsequently fall, and CDs lag, they would eventually end up with a price advantage over Treasury investments. Then people like McKay will be advising clients to buy in earnest.

“That’s when CDs become most attractive — as soon as rates peak or there are cuts [in rates],” says McKay.

Got a question about the mechanics of investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write me at beth.pinsker@marketwatch.com.

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December 30, 2022

These 20 energy stocks are worth a look if you think oil prices will soar in 2023

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Harris Kupperman, the president of Praetorian Capital, made a couple of interesting calls heading into 2022. He predicted that stocks of the giant tech-oriented companies that led the bull market would be sold off, and that oil prices would continue to rise through the end of 2022.

The first prediction came true, while the second one for oil prices fizzled. After rising to $130 in March, oil prices have fallen back to where they started the year. Then again, that second prediction still could have made you a lot of money because the share prices of oil companies kept rising anyway.

That leads to a new prediction for 2023 and a related stock screen below.

Here’s a chart showing the movement of front-month contract prices for West Texas Intermediate (WTI) crude oil
CL.1,
-0.62%
since the end of 2021:

FactSet

Even though Kupperman didn’t get his oil price call right, the energy sector of the S&P 500
SPX,
-1.20%
was up 60% for 2022 through Dec. 27, excluding dividends. That is the only one of the 11 S&P 500 sectors to show a gain in 2022. And the energy sector is also cheapest relative to earnings expectations, with a forward price-to-earnings ratio of 9.8, compared with 16.7 for the full S&P 500.

WTI pulled back from its momentary peak at $130.50 in early March, but that didn’t reverse the long-term trend of low capital spending by oil and natural gas producers, which has given investors confidence that supplies will remain tight.

Vicki Hollub, the CEO of Occidental Petroleum Corp.
OXY,
-3.50%
— the best-performing S&P 500 stock of 2022 — said during a recent interview that there was “no pressure to increase production right now,” citing a $40 per barrel break-even point for oil prices.

Kupperman now expects strong demand and low supplies to push oil as high as $200 a barrel in 2023.

At the end of November, these 20 oil companies stood out as reasonable plays for 2023 based on expectations for free-cash-flow generation and dividend payments.

For this next screen, we are only looking at ratings and consensus price targets among analysts polled by FactSet.

There are 23 energy stocks in the S&P 500, and you can invest in that group easily by purchasing shares of the Energy Select SPDR ETF
XLE,
-2.24%.
We can expand the list of large-cap names by looking at the components of the iShares Global Energy ETF
IXC,
-1.91%,
which holds all the energy stocks in the S&P 500 plus large players based outside the U.S.

The top five holdings of IXC are:

Company	Ticker	Country	% of portfolio	Share “buy” ratings	Dec. 27 price	Price target	Implied 12-month upside potential
Exxon Mobil Corp.	XOM, -1.64%	U.S.	16.4%	54%	110.19	118.89	7.89%
Chevron Corp.	CVX, -1.48%	U.S.	11.5%	54%	179.63	190.52	6.06%
Shell PLC	SHEL, -0.70%	U.K.	7.8%	83%	23.67	29.82	25.99%
TotalEnergies SE	TTE, -1.40%	France	5.6%	62%	59.63	64.40	8.00%
ConocoPhillips	COP, -2.67%	U.K.	5.4%	83%	118.47	140.84	18.88%
Source: FactSet

Prices on the tables in this article are in local currencies.

IXC holds 51 stocks. To expand the list for a stock screen, we added the energy stocks in the S&P 400 Mid Cap Index
MID,
-1.24%
and the S&P Small Cap 600 Index
SML,
-1.89%
to bring the list up to 91 companies, which we then pared to 83 covered by at least five analysts polled by FactSet.

Here are the 20 companies in the list with at least 75% “buy” or equivalent ratings that have the most upside potential over the next 12 months, based on consensus price targets:

Company	Ticker	Country	Share “buy” ratings	Dec. 27 price	Price target	Implied 12-month upside potential
EQT Corp.	EQT, -7.82%	U.S.	83%	36.34	59.14	63%
Green Plains Inc.	GPRE, -2.72%	U.S.	80%	29.80	43.40	46%
Cameco Corp.	CCO, +0.33%	Canada	100%	30.48	44.25	45%
Talos Energy Inc.	TALO, -8.40%	U.S.	86%	19.77	28.67	45%
Ranger Oil Corp. Class A	ROCC, -6.22%	U.S.	100%	41.33	58.00	40%
Tourmaline Oil Corp.	TOU, -4.92%	Canada	100%	71.40	98.83	38%
Civitas Resources Inc.	CIVI, -4.06%	U.S.	100%	58.82	80.83	37%
Inpex Corp.	1605, -2.08%	Japan	88%	1,477.00	1,965.56	33%
Diamondback Energy Inc.	FANG, -2.26%	U.S.	84%	137.58	181.90	32%
Santos Limited	STO, -3.12%	Australia	100%	7.20	9.26	29%
Matador Resources Co.	MTDR, -3.98%	U.S.	79%	57.59	73.75	28%
Targa Resources Corp.	TRGP, -2.63%	U.S.	95%	73.89	94.05	27%
Cenovus Energy Inc.	CVE, -2.55%	Canada	84%	26.24	33.22	27%
Shell PLC	SHEL, -0.70%	U.K.	83%	23.67	29.82	26%
Ampol Limited	ALD, -2.89%	Australia	85%	28.29	35.01	24%
EOG Resources Inc.	EOG, -3.54%	U.S.	79%	132.08	157.52	19%
ConocoPhillips	COP, -2.67%	U.S.	83%	118.47	140.84	19%
Repsol SA	REP, -0.66%	Spain	75%	15.05	17.88	19%
Halliburton Co.	HAL, -3.03%	U.S.	86%	39.27	45.95	17%
Marathon Petroleum Corp.	MPC, -1.97%	U.S.	76%	116.82	132.56	13%
Source: FactSet

Click on the tickers for more information about the companies.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

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December 28, 2022

Here are MarketWatch’s most popular Moneyist advice columns of 2022

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What fresh shenanigans and money dilemmas enthralled readers in 2022?

Another year of broken promises, dodgy dealings and moving letters about how to get back on one’s feet after divorce, unemployment and even a 15-year abusive relationship.

The most widely-read Moneyist of 2022, however, was actually one of the shortest letters from someone called ‘Surprised Sister.” The answer, as is often the case, was not so simple, nor so short.

Here is the No. 1 Moneyist column of the year: ‘We are surprised and bewildered’: My brother passed away and left his house, cash and possessions to charity. Can his siblings contest his will?

My response: There are times to contest a will: a parent who was being controlled by a new friend or greedy child, and/or someone who was forced to change their will when they were not of sound mind.

But her own legal advice notwithstanding, I suggested she should accept your brother’s wishes. Feeling aggrieved that she did not inherit his estate is not enough to break his will.

Separate the emotions from the finance, and the answer often reveals itself. But there were others that ran the gamut from romance to stocks. They other most-read columns are an eclectic bunch:

Here are the 5 runner-ups:

I had a date with a great guy. I didn’t drink, but his wine added $36 to our bill. We split the check evenly. Should I have spoken up?

It would be nice to offer to take the booze off the check, you were a non-drinker, would you speak up at one drink or two or three, if your date split the entire bill 50/50?

The financial intricacies of dating are like an onion that can be peeled ad infinitum. We’ve had plenty to chew over. Paying for one of your date’s drinks is OK, paying for two is pushing it.

My father offered his 3 kids equal monetary gifts. My siblings took cash. I took stock. It’s soared in value — now they’re crying foul

“The Other Brother” wrote that his father offered three children a choice: stocks or cash. The other two siblings took the cash. He took the cash. The stock soared. Dems are the breaks.

Her siblings could have chosen stocks over cash, but they wanted immediate gratification. That was their decision, and they are going to have to take ownership of their choice and live with it.

I’m an unmarried stay-at-home mother in a 20-year relationship, but my boyfriend won’t put my name on the deed of our house. Am I unreasonable?

They have been in a 20-year relationship and have a 10-year-old child. “Not on the Deed” said she and her partner have had several tense “discussions” about adding me to the deed.

I told her that her contribution to your partnership is valuable, her sense of worth is valuable, and her role as a homemaker and a mother is also valuable. Yes, he should add her.

My friend got us free theater tickets. When I got home, she texted me, ‘Can you get our next meal or activity?’ Am I obliged to treat her?

Even amidst the fights over inheritances, some breaches of social and financial etiquette seem so bizarre some people might think, ‘That behavior is too outrageous to be believable.”

The letter writer received free theater tickets, they split the bill 50/50 even though her friend had a cocktail, and she paid $10 for parking. Is he obliged to take her out again? No-can-do.

My date chose an exclusive L.A. restaurant. After dinner, he accepted my credit card — and we split a $600 bill. Shouldn’t he have paid?

Another dating story, this time where the guy chose a fancy restaurant and, as the date wore on, things took a turn for the worst, at least in the letter writer’s eyes: She was asked to split the bill.

What if they didn’t get along? What if he was an abortion-rights supporter and she was anti-abortion? What if he was a Republican and she was a Democrat? Or vice-versa? Always be prepared to pay.

Follow Quentin Fottrell on Twitter.

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

The Moneyist regrets he cannot reply to questions individually.

More from Quentin Fottrell:

‘I’m left with a $100 Bûche de Noël for 10 people — and no place to go’: My friends canceled Christmas dinner. Should I end the 30-year friendship?

I met my wife in 2019 and we married in 2020. I put her name on the deed of my $998,000 California home. Now I want a divorce. What can I do?

I want to meet someone rich. Is that so wrong?’ I’m 46, earn $210,000, and own a $700,000 home. I’m tired of dating ‘losers.’

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December 27, 2022

5 things not to buy in 2023

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It’s been a year of contradictions.

The recession drum beats on, interest rates are rising, and the stock market has taken a tumble, and yet retail sales have risen 6.5% in the last 12 months, trailing a 7.1% increase in the cost of living.

There are other reasons people should consider cutting back on spending in 2023. The personal saving rate — meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money — hit 2.4% in the third quarter from 3.4% in the prior quarter, the Bureau of Economic Analysis said.

“There are signs that people are pulling back on certain expenditures. ”

That is the lowest level since the Great Recession and the eighth-lowest quarterly rate on record (since 1947). Adjusted for inflation, savings are down 88% from their 2020 peak and 61% lower than before the pandemic, according to government data. The personal saving rate hit 2.4% in November vs. 2.2% in October.

Are people buying stocks during a bearish market, and/or have they run out of their pandemic-era savings? Whatever the reasons, more judicious investing and spending decisions seem to be the most prudent approach — especially given the uncertain economic outlook for 2023.

There are signs that people are already pulling back on certain expenditures. Although retail sales are up on the year, they did decline 0.6% month-on-month in November to mark their biggest decline in almost a year, largely because of weak car sales.

About those new cars: New-vehicle total sales for 2022 are projected to reach 13,687,000 units, down 8.4% on the year, according to a joint forecast from J.D. Power and LMC Automotive. MarketWatch reporter Philip van Doorn explains all the reasons why you may wish to skip buying a new car in 2023, in addition to their rising prices.

So what else should you save your money on in 2023? MarketWatch writers give their verdict below.

SPACs

During the pandemic, people loved to buy special purpose acquisitions companies, known as SPACs. In 2021, 613 SPACs listed on U.S. stock exchanges through initial public offerings, according to SPAC Insider. The year before, there were 248 SPAC IPOs. There had never been more than 100 of these before in a single year. There were SPACs associated with Donald Trump and Serena Williams. There were so many, that one was called Just Another Acquisition Corp.

SPACs exist as a means to take private companies public, and theoretically give these shell companies a faster and less regulatory burdensome means to access public capital. The U.S. Securities and Exchange Commission warned investors last April that so-called advantages of the SPAC process, such as reduced legal liability, may not prove to be so solid if tested in court.

The SPACs raised money even though they had no commercial operations or business, and tried to use the cash to buy something that did exist. But investors who bought SPACs that merged with private companies since 2015 have suffered losses of 37%, on average, a year after the merger, according to a recent study. The SPAC and New Issue ETF
SPCX,
+0.37%
has slipped 12% this year. The frenzy for SPACs has predictably gone bust. But if you see one, just stay away from it.

— Nathan Vardi

Crypto

There are two main reasons not to invest in cryptocurrency in 2023, and neither has to do with the precipitous drop in value for most of the major coins in the last year, including but not limited to bitcoin
BTCUSD,
-1.11%,
ethereum
ETHE,
-2.71%
and tether
USDTUSD,
-0.02%.
Investors have long been conditioned to buy the dip and find value where others fear to tread, and then make money on the upswing.

Crypto is different because there’s no correlation to long-held market theories, and buying it amounts more to speculation than to investing. That might seem semantic, but if you look at financial planning holistically, then you treat investing as an exercise in risk tolerance — and crypto is all risk.

Which leads to the other main reason to avoid crypto in the next year: If you do buy it, there’s really no safe way to store it. There’s no federal insurance covering exchange failures and little cyber-theft protection for individuals. That leaves you on your own, which is not a good place to be with your money.

— Beth Pinsker

Meta Quest headsets

On the consumer front, if you’re really into virtual reality, there is nothing wrong with jumping on the new Meta Quest two and Meta Quest Pro headsets that were introduced in 2022 by Meta Platforms Inc.
META,
-0.78%.

The problem is that you might feel like you bought a BlackBerry
BB,
-3.42%
phone in early 2007. Apple Inc.
AAPL,
-1.40%
is expected to finally show off what engineers at the Silicon Valley giant have been cooking up in a years-long project to jump into augmented and virtual reality, and consumers are expected to at least get a glimpse at Apple’s attempt this year, if not a chance to buy whatever the company produces.

The headsets don’t come cheap: Meta said earlier this year it was raising the price of Meta Quest 2 headsets by $100 to $399.99 (128GB) and $499.99 (256GB). The iPhone’s introduction 15 years ago changed the way people look at smartphones, and Apple’s expected jump into this field in 2023 could leave anyone who spent their money on a Meta Quest headset wishing for a new reality.

— Jeremy Owens

Meme stocks

Struggling companies with business models that appear to some to be dying and/or struggling do not generally perform well in the stock market. But during the pandemic these companies often had stocks that soared. What drove them was social media sentiment, driven on platforms like Reddit, by a swarm of retail investors.

There was video game retailer GameStop
GME,
-7.42%,
movie theater chain AMC
AMC,
-8.43%,
and smartphone dinosaur Blackberry. AMC recently announced the sale of another $110 million in stock, adding to a total that has already exceeded $2 billion since the theater chain got swept up into meme-stock madness. CEO Adam Aron wrote on Twitter that the move put the company “in a much stronger cash position.”

GameStop recently reported its seventh consecutive quarterly loss and reiterated its goal of returning to profitability in the near term, but analysts have signaled that many challenges lie ahead. During the company’s recent third-quarter conference call, Chief Executive Officer Matt Furlong said that GameStop would be open to exploring acquisitions of a strategic asset or complimentary business if they were available “in the right price range.”

Buying meme companies like this worked for some in a booming stock market fueled by ultra-low interest rates. But we are now in a bear market with interest rates that are elevated. Corporate fundamentals are back in vogue. So are quaint investment ideas like cashflow. More likely than not, the days of buying meme stocks are over.

— Nathan Vardi

Tesla cars

In recent years, Tesla Inc.
TSLA,
-8.25%
has stood alone as the best option for electric vehicles, while other manufacturers struggled to get production running. But in 2023, there should be many more types of electric cars available, at prices that are expected to trend downward as the year goes along. Teslas range in price from $46,990 for the Tesla Model 3 to $138,880 for the Tesla Model X Plaid.

With major manufacturers such as General Motors Co.
GM,
-0.73%,
Ford Motor Co.
FORD,
-2.68%,
Toyota Corp. and Volkswagen
VOW,
-0.77%
VLKAF,
-1.15%
jumping into the fray, and young Tesla wannabes like Rivian Automotive Inc.
RIVN,
-7.11%,
Lucid Group Inc.
LCID,
-7.24%
and FIsker Inc.
FSR,
-6.19%
expected to start producing cars, consumers will have many more options for EVs.

Meanwhile, Tesla has done little to update the Model 3 since it was introduced in 2017, and has increased prices at a level that Chief Executive Elon Musk has admitted is “embarrassing” for a company that claimed to have a goal of mass-market pricing for EVs.

The average price of a new EV is $64,249, while a new gas car is $48,281, according to Liz Najman, a climate scientist and communications and research manager at Recurrent Auto, an EV research and analytics firm focused on the used-vehicle market. After years of not having much choice beyond Tesla for EVs, 2023 appears to be the year that changes.

— Jeremy Owens

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December 27, 2022

This company has wiped out more investor wealth in 2022 than Tesla

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Elon Musk has been trying this week to defend Tesla’s abysmal stock performance in 2022. The electric vehicle giant has seen its stock plummet by 61% this year, making it the 11th-worst performing stock in the S&P 500 in 2022.

“As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are *not* guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop,” Musk tweeted.

You might expect that Tesla’s stock drop has wiped out more investor wealth than any other stock in the world this year. But you would be wrong.

If we look at declines in market capitalization — the value of companies’ common-shares outstanding — Tesla
TSLA,
-1.76%
has been the fourth worst-performing stock in the benchmark S&P 500 this year, as of 1 p.m. ET on Dec. 21:

Company	Ticker	2022 market cap change ($bil)	Intraday market cap on Dec. 21 ($bil)	Dec. 31, 2021 market cap ($bil)	2022 price change
Amazon.com Inc.	AMZN, +1.74%	-$805	$886	$1,691	-48%
Apple Inc.	AAPL, -0.28%	-$753	$2,160	$2,913	-24%
Microsoft Corp.	MSFT, +0.23%	-$700	$1,825	$2,525	-27%
Tesla Inc.	TSLA, -1.76%	-$622	$439	$1,061	-61%
Meta Platforms Inc. Class A	META, +0.79%	-$466	$318	$784	-64%
Nvidia Corp.	NVDA, -0.87%	-$329	$406	$735	-44%
PayPal Holdings Inc.	PYPL, +0.67%	-$143	$79	$222	-63%
Netflix Inc.	NFLX, -0.94%	-$134	$133	$267	-51%
Walt Disney Co.	DIS, +1.55%	-$122	$160	$282	-44%
Salesforce Inc.	CRM, +0.19%	-$119	$131	$250	-49%
Source: FactSet

On a percentage basis, all these stocks have performed worse than the full S&P 500, which has fallen 19%, excluding dividends.

Amazon.com Inc.
AMZN,
+1.74%
has erased more shareholder wealth than any other publicly traded company in 2022. In total, investors in Amazon have lost $804.6 billion this year. The stock is down 48% in 2022.

Apple Inc.
AAPL,
-0.28%
and Microsoft Corp.
MSFT,
+0.23%
have also suffered larger market-cap declines than Tesla, by virtue of their sheer size.

The companies have different fiscal and annual period ends, but if we look at data for the past three reported quarters and compare to the same period a year earlier, here’s how the four stack up:

Company	Ticker	Change in sales for three quarters from year-earlier period	Change in EPS for three quarters from year-earlier period
Amazon.com Inc.	AMZN, +1.74%	10%	N/A
Apple Inc.	AAPL, -0.28%	6%	2%
Microsoft Corp.	MSFT, +0.23%	14%	-2%
Tesla Inc.	TSLA, -1.76%	58%	169%
Source: FactSet

Amazon showed a net loss of $3 billion for the first three quarters of 2022 as the company neared the end of its extraordinary multiyear effort to build out its warehouse and fulfillment infrastructure. For the first three quarters of 2021, the company booked $19 billion in profits. When announcing Amazon’s third-quarter results CEO Andy Jassy said the company was working methodically toward “a stronger cost structure for the business moving forward.”

The incredible growth of Amazon’s cloud business has stalled and disappointed the expectations the company had nurtured on Wall Street. The Amazon Web Services business is facing increasing competition from the likes of Microsoft and its customers are pulling back. Meanwhile, retail sales have also come in weak going into the Christmas and holiday season.

Amazon’s stock has declined 22% since it closed at $110.96 on Oct. 27, right before it disappointed investors not only with its third-quarter results, but with its outlook: It expects to break even during the holiday quarter. Analysts polled by FactSet had previously expected a profit of more than $5 billion.

Tesla stands in contrast to Amazon, as you can see on the table above. Its sales grew by 58% during the first three quarters of 2022 from the year-earlier period and its earnings per share rose nearly threefold.

This has been a year of significant declines for shares of giant tech-oriented companies, especially those that had traded at lofty price-to-earnings valuations — that group includes Amazon and Tesla. In fact, these companies have given up all their pandemic era gains int he stock market.

But with Tesla’s results so outstanding through the first three quarters of 2022, it raises the question: How much of the drop in the electric car makers share price was tied to Musk’s actions as CEO of Twitter, which he acquired on Oct. 27 after a monthslong saga? And how much of a relief rally, if any, might there be for Tesla if Musk, as expected, steps down as Twitter CEO?

How about some bottom-feeding?

Here’s the same list of 10 stocks in the S&P 500 that have seen the largest declines in market cap this year, with a summary of analysts’ ratings, consensus price targets and declines in their forward price-to-earnings ratios:

Company	Ticker	Share “buy” ratings	Dec. 21 closing price	Cons. price target	Implied 12-month upside potential	Forward P/E as of Dec. 20	Forward P/E as of Dec. 31, 2021
Amazon.com Inc.	AMZN, +1.74%	91%	$85.19	$134.85	58%	49.3	64.9
Apple Inc.	AAPL, -0.28%	74%	$132.30	$173.44	31%	21.4	30.2
Microsoft Corp.	MSFT, +0.23%	91%	$241.80	$293.06	21%	23.7	34.0
Tesla Inc.	TSLA, -1.76%	63%	$137.80	$272.64	98%	24.6	120.3
Meta Platforms Inc. Class A	META, +0.79%	63%	$117.09	$145.45	24%	14.5	23.5
Nvidia Corp.	NVDA, -0.87%	68%	$160.85	$195.72	22%	39.2	58.0
PayPal Holdings Inc.	PYPL, +0.67%	71%	$68.76	$104.32	52%	14.5	36.0
Netflix Inc.	NFLX, -0.94%	47%	$288.19	$302.89	5%	28.4	45.6
Walt Disney Co.	DIS, +1.55%	82%	$87.02	$119.60	37%	19.8	34.2
Salesforce Inc.	CRM, +0.19%	78%	$128.45	$195.18	52%	23.4	53.5
Source: FactSet

A majority of analysts see a golden path ahead for 2023 for all of these stocks except for Netflix.

For more information about any of these companies, click the tickers.

Click here for a detailed guide to the wealth of information available for free on the MarketWatch quote page.

Don’t miss: 11 high-yield dividend stocks that are Wall Street’s favorites for 2023

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December 24, 2022

If you think a Santa Claus rally is coming to the stock market, this is how to play it

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The benchmark S&P 500 Index has finally fallen below the 3900- to 4100-point trading range.

The move prompted an immediate reaction down to 3800, the next support level. (To see my suggestion for a so-called Santa Claus rally, please see the next item, below.)

Frankly, I would have expected more selling after the S&P 500
SPX,
-2.32%
broke a support level of that magnitude (perhaps a move to 3700).

So, 3700 is the next support level, and then there is support at the yearly lows near 3500. On the upside, there is now resistance in the 3900-3940 area.

The larger picture is that SPX is still in a downtrend, and that the last rally failed in early December right at the downtrend line that defines this bear market. The declining 200-day moving average (MA) was also in that same area, near 4100.

We are closing our positions in the McMillan Volatility Band (MVB) buy signal that occurred in early October, and we will now wait for a new signal to set up. If SPX were to close below the lower -4σ Band (currently at 3760 and declining), that would be the first step toward a new buy signal. That does not appear to be imminent.

Equity-only put-call ratios continue to rise and, thus, remain on sell signals. There has been some relatively heavy put buying in stock options over the past few weeks, and that has been a major contributing factor in the rise in the put-call ratios. These ratios are rather high on their charts, so they are considered to be in oversold territory. However, “oversold” does not mean “buy.”

After the market broke below 3900, breadth was poor for the next two days. That pushed the breadth oscillators — which were already on sell signals dating back to December 5^th — into oversold territory. We are now watching to see if they can generate buy signals. In fact, the NYSE breadth oscillator did generate a buy signal as of December 21^st, but the “stocks only” oscillator has not. We generally require that any signal from this indicator (which is subject to whipsaws) persist for at least two consecutive days before considering it to be an actionable signal.

New 52-week highs on the New York Stock Exchange have lagged for some time again, and thus the “new highs vs. new lows” indicator remains on a sell signal.

So, the above indicators are relatively negative, but that is contrasted by the CBOE Volatility Index
VIX,
+15.50%
indicators, which are more bullish. The VIX “spike peak” buy signal of December 13^th remains in place. Moreover, the trend of VIX buy signal, which is a more intermediate-term signal, remains in place. VIX would have to rise above 26 to cancel out these buy signals.

The construct of volatility derivatives remains bullish. That is, the term structures of the VIX futures and of the CBOE Volatility Indices slope upward. Moreover, the VIX futures are all trading at a premium to VIX. January VIX futures are now the front month, so we are watching for a warning sign, which would come if Jan VIX futures rose above the price of Feb VIX futures. That is not in danger of happening at this time.

The seasonal patterns that supposedly “rule” between Thanskgiving and the beginning of the new trading year have not worked out this year. The last of those patterns is yet to come, though — the Santa Claus rally — and it may still be able to salvage something for the bulls.

In summary, we continue to maintain a “core” bearish position and will continue to do so as long as SPX is in a downtrend. We will trade confirmed signals from our other indicators around that “core” position.

New recommendation: Santa Claus rally

The Santa Claus rally is a term and market seasonal pattern defined by Yale Hirsch over 60 years ago. It has a strong track record. The system is simple: The market rises over the last five trading days of one year and the first two trading days of the next year — a seven-day period.

This year the system begins at the close of trading on Thursday, December 22^nd (today). However, if that period does not produce a gain by SPX, that would be a further negative for stocks going forward.

At the close of trading on Thursday, December 22^nd,

Buy 2 SPY Jan (13^th) at-the-money calls

And Sell 2 SPY Jan (13^th) calls that are 15 points out of the money.

There is no stop for this trade, except for time. If the SPDR S&P 500 ETF Trust
SPY,
-2.29%
trades at the higher strike while the position is in place, then roll the entire spread up 15 points on each side. In any case, exit your spreads at the close of trading on Wednesday, January 4^th (the second trading day of the new year).

Follow-up action

All stops are mental closing stops unless otherwise noted.

We are using a “standard” rolling procedure for our SPY spreads: in any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread, or roll down in the case of a bear put spread. Stay in the same expiration, and keep the distance between the strikes the same unless otherwise recommended.

Long 2 SPY Jan (20^th) 375 puts and Short 2 Jan (20^th) 355 puts: this is our “core” bearish position. As long as SPX remains in a downtrend, we want to maintain a position here.

Long 1 SPY Jan (6^th) 408 call and short 1 SPY Jan (6^th) 423 call: this trade is based on the MVB buy signal, which was established on October 4^th. We have already rolled up a couple of times and taken some profit out of the position. Close the remaining spread now.

Long 2 KMB Jan (20^th) 135 calls: we rolled this position up last week. The closing stop remains at 135.

Long 2 IWM Jan (20^th) 185 at-the-money calls and Short 2 IWM Jan (20^th) 205 calls: this is our position based on the bullish seasonality between Thanksgiving and the second trading day of the new year. We will adjust this position if IWM rallies during the holding period, but initially there is no stop for the position, so the entire debit is at risk.

Long 2 PSX Jan (20^th) 105 puts: we intended to hold these puts as long as the weighted put-call ratio remains on a sell signal. However, the put-call ratio has rolled over to a buy signal, so exit these puts now.

Long 2 AJRD Jan (20^th) 52.5 calls: AJRD received an all-cash takeover offer of $56, so exit these calls now. Do not sell them below parity.

Long 1 SPY Jan (20^th) 402 call and Short 1 SPY Jan (20^th) 417 calls: this spread was bought at the close on December 13^th, when the latest VIX “spike peak” buy signal was generated. Stop yourself out if VIX subsequently closes above 25.84. Otherwise, we will hold for 22 trading days.

Long 1 SPY Jan (20^th) 389 put and Short 1 SPY Jan (20^th) 364 put: this was an addition to our “core” bearish position, established when SPX closed below 3900 on December 15^th. Stop yourself out of this spread if SPX closes above 3940.

Long 2 PCAR Feb (17^th) 97.20 puts: these puts were bought on December 20^th, when they finally traded at our buy limit. We will continue to hold these puts as long as the weighted put-call ratio is on a sell signal.

Send questions to: lmcmillan@optionstrategist.com.

Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading advisor. McMillan may hold positions in securities recommended in this report, both personally and in client accounts. He is an experienced trader and money manager and is the author of the best-selling book, Options as a Strategic Investment. www.optionstrategist.com

Disclaimer: ©McMillan Analysis Corporation is registered with the SEC as an investment advisor and with the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but accuracy and completeness are not guaranteed. The officers or directors of McMillan Analysis Corporation, or accounts managed by such persons may have positions in the securities recommended in the advisory.

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December 22, 2022

11 high-yield dividend stocks that are Wall Street’s favorites for 2023

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Investors love dividend stocks but there are different ways to look at them, including various “quality” approaches. Today we are focusing on high yields.

A high dividend yield can be a warning that investors have lost confidence in a company’s ability to maintain its dividend payout. But there are always exceptions, some of which can be brought about by market events — some investors remain skeptical of energy stocks, for example, after so much pain before this year’s outstanding performance for the sector.

Below is a screen of stocks that have high dividend yields and are favored by analysts. The screen has no financial quality filters.

For investors who are interested in dividend stocks but wish to focus on quality and total returns, this recent look at the S&P Dividend Aristocrats (companies that have raised dividends consistently for many years) might be of interest. For those looking for income but also worried about dividend cuts, here is a list of stocks with dividend yields of at least 5% whose payouts are expected to be well-covered by free cash flow in 2023.

If you are looking for higher yields with moderate risk, you should at also learn about funds that use covered-call option strategies to enhance income.

Removing the filters for a high-yield dividend-stock screen

For a broad screen of stocks with high dividend yields that are favored by analysts, we began with the S&P Composite 1500 Index
SP1500,
+1.42%,
which is made up of the S&P 500
SPX,
+1.42%,
the S&P 400 Mid Cap Index
MID,
+1.48%,
and the S&P 600 Small Cap Index
SML,
+1.49%.

The S&P indexes exclude energy partnerships, so we added the 15 stocks held by the Alerian MLP ETF
AMLP,
+1.81%
to the list. Energy partnerships tend to have high distribution yields, in part because they pass most earnings through to investors. But they also can make tax preparation more complicated. They can also be volatile as oil
CL00,
+2.96%
CL00 and natural-gas
NG00,
+1.58%
prices swing.

The S&P indexes also exclude business development companies, or BDCs, so we expanded our initial screen to include the 24 stocks held by the VanEck BDC income ETF
BIZD,
+0.76%.
BDCs are specialized leveraged lenders that make loans with high interest rates, mainly to middle-market companies. They often take equity stakes in the companies they lend to, for a venture-capital-type of investment style. The BDC space features several stocks with very high dividend yields, but is also known for volatility.

You have been warned — this particular stock screen focuses only on high yields and favorable ratings among analysts working for brokerage firms. There is no look back at dividend cuts and no cash-flow analysis as featured in other dividend-stock articles. If you see anything of interest resulting from the screen, you need to do your own research to consider whether or not a long-term commitment to one or more of these companies is worth the risk as you seek high income.

The screen

Starting with the S&P Composite 1500 and the components of AMLP and BIZD, there are 68 stocks with dividend yields of at least 8%, according to data provided by FactSet.

Among the 68 companies, 55 made the first screen, because they are covered by at least five analysts polled by FactSet.

Among the 55 companies, 11 have “buy” or equivalent ratings among at least 70% of analysts.

Here they are, ranked by upside potential implied by analysts’ consensus price targets:

Company	Ticker	Dividend yield	Share “buy” ratings	Dec. 20 price	Consensus price target	Implied 12-month upside potential
Energy Transfer LP	ET, +2.35%	9.08%	95%	$11.68	$16.24	39%
Enterprise Products Partners LP	EPD, +0.88%	8.12%	79%	$23.39	$31.69	35%
Barings BDC Inc.	BBDC,	11.67%	86%	$8.14	$10.75	32%
Redwood Trust Inc.	RWT, +2.70%	13.45%	80%	$6.84	$8.92	30%
Crestwood Equity Partners LP	CEQP, +0.78%	9.75%	100%	$26.86	$35.00	30%
KKR Real Estate Finance Trust Inc.	KREF, +1.38%	11.90%	71%	$14.45	$18.50	28%
Owl Rock Capital Corp.	ORCC, +0.38%	11.21%	91%	$11.78	$14.73	25%
Sixth Street Specialty Lending Inc.	TSLX, +1.89%	10.48%	82%	$17.18	$20.90	22%
Oaktree Specialty Lending Corp.	OCSL, -0.37%	9.97%	100%	$6.77	$7.75	14%
Ares Capital Corp.	ARCC, +1.22%	10.45%	93%	$18.38	$20.87	14%
BlackRock TCP Capital Corp.	TCPC, +1.76%	10.25%	71.43%	$12.49	$14.00	12%
Source: FactSet

One way to begin your own research into any company listed here is to click on the ticker for more information.

You should also read Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.

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December 21, 2022

This is the only stock market prediction for 2023 that you need to know

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When you hear or read about an investing expert’s outlook for the year ahead, bear one thing in mind: Every forecast about 2022 was wrong.

Not just a bit amiss, but complete, total busts.

Oh, some strategists will claim victory for saying the stock market
SPX,
-1.11%
would be down in 2022 or that Treasury bonds
TMUBMUSD10Y,
3.488%
would have yields north of 3%. Or that the yield curve would invert or that inflation would be stickier than anticipated. But they don’t deserve laurels for that.

No one said the market would peak on the first day of the calendar year and go downhill from there and, ultimately, that’s the only tale of 2022 that investors will remember.

Expect forecasts for 2023 to be equally miscalculated.

That doesn’t mean investors should ignore or dismiss the exercise of experts offering outlooks, but it’s why you should question the motives of the soothsayers and revisit one of the greatest market forecasts of all time that’s well on its way to becoming true no matter what the market dishes out next year.

Face it, market strategists and economists don’t make forecasts because they want to, but rather because they have to. Keeping their jobs depends on making mostly lame predictions.

Say something memorable, and the expert and firm might be held accountable for it; pabulum, however, gets overlooked when it’s wrong.

Obvious observations

Thus, forecasts lack insight, gravitating toward the middle ground, to obvious observations on the effect of economic and stock market cycles.

“It looks bad if they don’t have an opinion, but worse when they get something wrong, so most forecasts say as little as possible,” said Jeff Rosenkranz, a fixed-income portfolio manager at Shelton Capital Management, after we finished an interview last week for my podcast, “Money Life with Chuck Jaffe.” “You’re not getting much insight — if they have really valuable insights, this isn’t where they want to tell the world — so most forecasts just aren’t worth much.”

Adds Howard Yaruss, a New York University professor and author of the recent book “Understandable Economics”: “If you are talking about a fine-tuned forecast about stocks and asset values, I don’t see how anyone could go there; accurate predictions aren’t going to happen, or will be luck if they turn out true. Their statements are more about marketing than the market.”

One of Wall Street’s best-known prognosticators says credibility is impossible without accountability, but he acknowledges the tightrope experts walk if they say too much.

Bob Doll, chief investment officer at Crossmark Global Investments, started making forecasts — 10 specific prognostications covering markets, the economy, politics and more — in the 1990s while working for Oppenheimer. He carried the exercise with him during well-chronicled career stops at BlackRock
BLK,
+0.29%,
Nuveen and elsewhere, and historically has been right on north of 70% of his calls.

‘Wordsmithing’

“There’s wordsmithing going on; you word them so that you have a noticeably higher than 50% chance of getting them right, and then say a few things you truly believe in that will make you look really smart if they happen without making you look dumb for believing it,” Doll says.

Good forecasts are not just an academic, rote exercise, Doll says, provided that they’re relevant, prompt thoughtful reactions from the audience and that the expert stands by them. Doll revisits his forecasts every quarter and doesn’t alter them in response to current events.

“You call the beast as you see it,” he says, “and then you stand by it and live with it, and you don’t worry about getting them all right because if you haven’t gotten something wrong, you’ve only said the obvious.”

Wildest market forecast

Which leads to what I think is the best, wildest market forecast of all time, even if it’s more obvious than it appears: Dow
DJIA,
-0.85%
116,200.

If that sounds far-fetched with the Dow Jones Industrial Average standing at roughly 33,500 — and down about 8% since the start of the year — consider that the prognostication was made in 1995 with the index hovering around 4,500.

Also, the call was for the benchmark to hit that level in 2040.

Bill Berger, founder of the Berger Funds — which merged into the Janus funds in 2002 — made the call at the first Society of American Business Editors & Writers Conference on Personal Finance in Boston, giving one of the best talks I’ve ever heard, mostly railing against forecasting and the habit of making too much of market milestones.

(If the Dow 116,200 prediction rings familiar to you, chances are you learned about it from me, as I raised it periodically while working as senior columnist for MarketWatch between 2003 and 2017. Today marks the return of my column to this site, and I’m glad to be back.)

Berger cited what he called “the two rules of forecasting.”

Rule 1: For each forecast, there is an equal and opposite forecast.

Rule 2: Both of them are wrong.

Ironically, 116,200 sounds implausible, but looks dead solid perfect.

By 1995, Berger had worked in investments for 45 years; when he got started, the Dow was below 200. Mathematically, he saw the Dow’s future as reflecting the past; repeating the growth he’d lived through would push the benchmark to 116,200 over the next 45 years.

A septuagenarian at the time, Berger wryly suggested that if he was proved wrong, people come find him to discuss it; sadly, he died a few years later.

The long game

Despite the outlandishness of the forecast, Morningstar calculates that hitting the target would have required an annualized gain of roughly 7.35% over the 45 years. When the Dow peaked on Jan. 4, 2022, the necessary gain was down to 6.33% annualized.

As of Dec. 1, Morningstar calculates that hitting 116,200 in the fall of 2040 will take a 7.07% annualized gain, which feels like a safe bet.

Thus, 2022’s disappointments haven’t derailed long-term investors any more than they’ve crashed the greatest-ever market forecast.

That’s the lesson to remember when confronted with 2023 forecasts; neither the market’s issues nor experts’ ability to diagnose them will derail long-term financial plans or make lifetime goals unreachable.

That’s a prediction worth betting on.

Chuck Jaffe is a MarketWatch columnist and host of the “Money Life with Chuck Jaffe” podcast.

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December 16, 2022

These are the top 10 mistakes people make when planning for retirement

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We all make mistakes in planning for our golden years. But which are the worst, which are the most common, and which ones do we all need to watch out for?

Financial planners have weighed in with the top 10 they see among clients. It’s emerged in a survey conducted by money managers Natixis and just released. And it’s a terrific checklist for anyone who wants to see how they’re doing, and what they need to change.

The…

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December 14, 2022

Best stock picks for 2023: Here are Wall Street analysts’ most heavily favored choices

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Following a sharp and sustained rise in interest rates, U.S. stocks have taken a broad beating this year.

But 2023 may bring very different circumstances.

Below are lists of analysts’ favorite stocks among the benchmark S&P 500
SPX,
the S&P 400 Mid Cap Index
MID
and the S&P Small Cap 600 Index
SML
that are expected to rise the most over the next year. Those lists are followed by a summary of opinions of all 30 stocks in the Dow Jones Industrial Average
DJIA.

Stocks rallied on Dec. 13 when the November CPI report showed a much slower inflation pace than economists had expected. Investors were also anticipating the Federal Open Market Committee’s next monetary policy announcement on Dec. 14. The consensus among economists polled by FactSet is for the Federal Reserve to raise the federal funds rate by 0.50% to a target range of 4.50% to 4.75%.

Read: 5 things to watch when the Fed makes its interest-rate decision

A 0.50% increase would be a slowdown from the four previous increases of 0.75%. The rate began 2022 in a range of zero to 0.25%, where it had sat since March 2020.

A pivot for the Fed Reserve and the possibility that the federal funds rate will reach its “terminal” rate (the highest for this cycle) in the near term could set the stage for a broad rally for stocks in 2023.

Wall Street’s large-cap favorites

Among the S&P 500, 92 stocks are rated “buy” or the equivalent by at least 75% of analysts working for brokerage firms. That number itself is interesting — at the end of 2021, 93 of the S&P 500 had this distinction. Meanwhile, the S&P 500 has declined 16% in 2022, with all sectors down except for energy, which has risen 53%, and the utilities sector, which his risen 1% (both excluding dividends).

Here are the 20 stocks in the S&P 500 with at least 75% “buy” or equivalent ratings that analysts expect to rise the most over the next year, based on consensus price targets:

Company	Ticker	Industry	Closing price – Dec. 12	Consensus price target	Implied 12-month upside potential	Share “buy” ratings	Price change – 2022 through Dec. 12
EQT Corp.	EQT	Oil and Gas Production	$36.91	$59.70	62%	78%	69%
Catalent Inc.	CTLT	Pharmaceuticals	$45.50	$72.42	59%	75%	-64%
Amazon.com Inc.	AMZN	Internet Retail	$90.55	$136.02	50%	91%	-46%
Global Payments Inc.	GPN	Misc. Commercial Services	$99.64	$147.43	48%	75%	-26%
Signature Bank	SBNY	Regional Banks	$122.73	$180.44	47%	78%	-62%
Salesforce Inc.	CRM	Software	$133.11	$195.59	47%	80%	-48%
Bio-Rad Laboratories Inc. Class A	BIO	Medical Specialties	$418.28	$591.00	41%	100%	-45%
Zoetis Inc. Class A	ZTS	Pharmaceuticals	$152.86	$212.80	39%	87%	-37%
Delta Air Lines Inc.	DAL	Airlines	$34.77	$48.31	39%	90%	-11%
Diamondback Energy Inc.	FANG	Oil and Gas Production	$134.21	$182.33	36%	84%	24%
Caesars Entertainment Inc	CZR	Casinos/ Gaming	$50.27	$67.79	35%	81%	-46%
Alphabet Inc. Class A	GOOGL	Internet Software/ Services	$93.31	$125.70	35%	92%	-36%
Halliburton Co.	HAL	Oilfield Services/ Equipment	$34.30	$45.95	34%	86%	50%
Alaska Air Group Inc.	ALK	Airlines	$45.75	$61.08	34%	93%	-12%
Targa Resources Corp.	TRGP	Gas Distributors	$70.42	$93.95	33%	95%	35%
Charles River Laboratories International Inc.	CRL	Misc. Commercial Services	$201.94	$269.25	33%	88%	-46%
ServiceNow Inc.	NOW	Information Technology Services	$401.64	$529.83	32%	92%	-38%
Take-Two Interactive Software Inc.	TTWO	Software	$102.61	$135.04	32%	79%	-42%
EOG Resources Inc.	EOG	Oil and Gas Production	$124.06	$158.24	28%	82%	40%
Southwest Airlines Co.	LUV	Airlines	$38.94	$49.56	27%	76%	-9%
Source: FactSet

Most of the companies on the S&P 500 list expected to soar in 2023 have seen large declines in 2022. But the company at the top of the list, EQT Corp.
EQT,
is an exception. The stock has risen 69% in 2022 and is expected to add another 62% over the next 12 months. Analysts expect the company’s earnings per share to double during 2023 (in part from its expected acquisition of THQ), after nearly a four-fold EPS increase in 2022.

Shares of Amazon.com Inc.
AMZN
are expected to soar 50% over the next year, following a decline of 46% so far in 2022. If the shares were to rise 50% from here to the price target of $136.02, they would still be 18% below their closing price of 166.72 at the end of 2021.

Read: Here’s why Amazon is Citi’s top internet stock idea

You can see the earnings estimates and more for any stock in this article by clicking on its ticker.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

Mid-cap stocks expected to rise the most

The lists of favored stocks are limited to those covered by at least five analysts polled by FactSet.

Among components of the S&P 400 Mid Cap Index, there are 84 stocks with at least 75% “buy” ratings. Here at the 20 expected to rise the most over the next year:

Company	Ticker	Industry	Closing price – Dec. 12	Consensus price target	Implied 12-month upside potential	Share “buy” ratings	Price change – 2022 through Dec. 12
Arrowhead Pharmaceuticals Inc.	ARWR	Biotechnology	$31.85	$69.69	119%	83%	-52%
Lantheus Holdings Inc.	LNTH	Medical Specialties	$54.92	$102.00	86%	100%	90%
Progyny Inc.	PGNY	Misc. Commercial Services	$31.21	$55.57	78%	100%	-38%
Coherent Corp.	COHR	Electronic Equipment/ Instruments	$35.41	$60.56	71%	84%	-48%
Exelixis Inc.	EXEL	Biotechnology	$16.08	$26.07	62%	81%	-12%
Darling Ingredients Inc.	DAR	Food: Specialty/ Candy	$61.17	$97.36	59%	93%	-12%
Perrigo Co. PLC	PRGO	Pharmaceuticals	$31.83	$49.25	55%	100%	-18%
Mattel Inc.	MAT	Recreational Products	$17.39	$26.58	53%	87%	-19%
ACI Worldwide Inc.	ACIW	Software	$20.75	$31.40	51%	83%	-40%
Topgolf Callaway Brands Corp.	MODG	Recreational Products	$21.99	$32.91	50%	83%	-20%
Dycom Industries Inc.	DY	Engineering and Construction	$86.03	$128.13	49%	100%	-8%
Travel + Leisure Co.	TNL	Hotels/ Resorts/ Cruiselines	$37.98	$56.00	47%	75%	-31%
Frontier Communications Parent Inc.	FYBR	Telecommunications	$25.21	$36.18	44%	82%	-15%
Manhattan Associates Inc.	MANH	Software	$120.06	$171.80	43%	88%	-23%
MP Materials Corp Class A	MP	Other Metals/ Minerals	$31.39	$44.79	43%	92%	-31%
Lumentum Holdings Inc.	LITE	Electrical Products	$54.45	$76.44	40%	76%	-49%
Tenet Healthcare Corp.	THC	Hospital/ Nursing Management	$44.22	$62.00	40%	80%	-46%
Repligen Corp.	RGEN	Pharmaceuticals	$166.88	$233.10	40%	82%	-37%
STAAR Surgical Co.	STAA	Medical Specialties	$59.57	$82.67	39%	82%	-35%
Carlisle Cos. Inc.	CSL	Building Products	$251.99	$348.33	38%	75%	2%
Source: FactSet

Wall Street’s favorite small-cap names

Among companies in the S&P Small Cap 600 Index, 91 are rated “buy” or the equivalent by at least 75% of analysts. Here are the 20 with the highest 12-month upside potential indicated by consensus price targets:

Company	Ticker	Industry	Closing price – Dec. 12	Consensus price target	Implied 12-month upside potential	Share “buy” ratings	Price change – 2022 through Dec. 12
UniQure NV	QURE	Biotechnology	$22.99	$51.29	123%	95%	11%
Cara Therapeutics Inc.	CARA	Biotechnology	$11.34	$23.63	108%	88%	-7%
Vir Biotechnology Inc.	VIR	Biotechnology	$25.50	$53.00	108%	75%	-39%
Dynavax Technologies Corp.	DVAX	Biotechnology	$11.22	$23.20	107%	100%	-20%
Thryv Holdings Inc.	THRY	Advertising/ Marketing Services	$18.40	$36.75	100%	100%	-55%
Artivion Inc.	AORT	Medical Specialties	$12.93	$23.13	79%	83%	-36%
Cytokinetics Inc.	CYTK	Pharmaceuticals	$38.33	$67.43	76%	100%	-16%
Harsco Corp.	HSC	Environmental Services	$7.17	$12.30	72%	80%	-57%
Ligand Pharmaceuticals Inc.	LGND	Pharmaceuticals	$64.80	$110.83	71%	100%	-35%
Corcept Therapeutics Inc.	CORT	Pharmaceuticals	$20.84	$34.20	64%	80%	5%
Payoneer Global Inc.	PAYO	Misc. Commercial Services	$5.70	$9.33	64%	100%	-22%
Xencor Inc.	XNCR	Biotechnology	$28.69	$46.71	63%	93%	-28%
Pacira Biosciences Inc.	PCRX	Pharmaceuticals	$45.50	$72.90	60%	80%	-24%
BioLife Solutions Inc.	BLFS	Chemicals	$19.72	$31.38	59%	89%	-47%
Customers Bancorp Inc.	CUBI	Regional Banks	$30.00	$47.63	59%	75%	-54%
ModivCare Inc.	MODV	Other Transportation	$92.22	$145.83	58%	100%	-38%
Stride Inc.	LRN	Consumer Services	$32.56	$51.25	57%	100%	-2%
Ranger Oil Corp. Class A	ROCC	Oil and Gas Production	$36.98	$58.00	57%	100%	37%
Outfront Media Inc.	OUT	Real Estate Investment Trusts	$17.59	$27.00	53%	83%	-34%
Walker & Dunlop Inc.	WD	Finance/ Rental/ Leasing	$82.22	$125.20	52%	100%	-46%
Source: FactSet

The Dow

Here are all 30 components of the Dow Jones Industrial Average ranked by how much analysts expect their prices to rise over the next year:

Company	Ticker	Industry	Closing price – Dec. 12	Consensus price target	Implied 12-month upside potential	Share “buy” ratings	Price change – 2022 through Dec. 12
Salesforce Inc.	CRM	Software	$133.11	$195.59	47%	80%	-48%
Walt Disney Co.	DIS	Movies/ Entertainment	$94.66	$119.60	26%	82%	-39%
Apple Inc.	AAPL	Telecommunications Equipment	$144.49	$173.70	20%	74%	-19%
Verizon Communications Inc.	VZ	Telecommunications	$37.95	$44.60	18%	21%	-27%
Visa Inc. Class A	V	Misc.s Commercial Services	$214.59	$249.33	16%	86%	-1%
Microsoft Corp.	MSFT	Software	$252.51	$293.06	16%	91%	-25%
Chevron Corp.	CVX	Integrated Oil	$169.75	$191.20	13%	54%	45%
Cisco Systems Inc.	CSCO	Information Technology Services	$49.30	$53.76	9%	44%	-22%
UnitedHealth Group Inc.	UNH	Managed Health Care	$545.86	$593.30	9%	85%	9%
Goldman Sachs Group Inc.	GS	Investment Banks/ Brokers	$363.18	$392.63	8%	59%	-5%
Walmart Inc.	WMT	Specialty Stores	$148.02	$159.86	8%	72%	2%
JPMorgan Chase & Co.	JPM	Banks	$134.21	$143.84	7%	59%	-15%
Home Depot Inc.	HD	Home Improvement Chains	$327.98	$346.61	6%	61%	-21%
American Express Co.	AXP	Finance/ Rental/ Leasing	$157.31	$164.57	5%	43%	-4%
McDonald’s Corp.	MCD	Restaurants	$276.62	$288.67	4%	72%	3%
Johnson & Johnson	JNJ	Pharmaceuticals	$177.84	$185.35	4%	36%	4%
Coca-Cola Co.	KO	Beverages: Non-Alcoholic	$63.97	$66.62	4%	73%	8%
Boeing Co.	BA	Aerospace and Defense	$186.27	$192.69	3%	77%	-7%
Intel Corp.	INTC	Semiconductors	$28.69	$29.54	3%	13%	-44%
Walgreens Boots Alliance Inc.	WBA	Drugstore Chains	$41.06	$42.24	3%	17%	-21%
Merck & Co. Inc.	MRK	Pharmaceuticals	$108.97	$110.62	2%	65%	42%
Caterpillar Inc.	CAT	Trucks/ Construction/ Farm Machinery	$233.06	$236.23	1%	41%	13%
Honeywell International Inc.	HON	Aerospace and Defense	$214.50	$217.35	1%	54%	3%
Nike Inc. Class B	NKE	Apparel/ Footwear	$112.07	$112.58	0%	64%	-33%
3M Co.	MMM	Industrial Conglomerates	$126.85	$127.30	0%	5%	-29%
Procter & Gamble Co.	PG	Household/ Personal Care	$152.47	$150.22	-1%	59%	-7%
Travelers Companies Inc.	TRV	Multi-Line Insurance	$187.11	$184.24	-2%	18%	20%
Amgen Inc.	AMGN	Biotechnology	$276.78	$264.79	-4%	24%	23%
Dow Inc.	DOW	Chemicals	$51.11	$48.73	-5%	15%	-10%
International Business Machines Corp.	IBM	Information Technology Services	$149.21	$140.29	-6%	33%	12%
Source: FactSet

Don’t miss: 10 Dividend Aristocrat stocks expected by analysts to rise up to 54% in 2023

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December 13, 2022

This fund beats the S&P 500 by using just 75 of its components. Here’s how it works.

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What worked well during the years-long bull market through 2021 — a focus on growth, regardless of price — has ground to a halt this year. The rebirth of the value style of investing — and modest valuations overall — has taken hold.

The approach taken by the Invesco S&P 500 GARP ETF has paid off through both bull and bear markets.

Let’s begin with a 10-year chart comparing total returns with dividends reinvested for the Invesco S&P 500 GARP ETF
SPGP,
+0.67%
and the SPDR S&P 500 ETF Trust
SPY,
+0.78%,
which tracks the benchmark S&P 500:

FactSet

So far this year, SPGP is down 12%, while SPY is down 16%. But the long-term chart shows significant and consistent outperformance for SPGP, even during the bull market.

The S&P 500 GARP Index

GARP stands for “growth at a reasonable price.” SPGP tracks the S&P 500 GARP Index, which is reconstituted and rebalanced twice a year, on the third Fridays of June and December. The next change occurs Dec. 16.

S&P Dow Jones Indices assigns a growth score to each component of the S&P 500 by averaging the three-year compound annual growth rate (CAGR) for earnings and sales per share.

The top 150 components of the S&P 500 by growth score are eligible for inclusion in the GARP index. Those 150 are ranked by “quality/value composite score,” which is the average of these three ratios:

Financial leverage — total debt to book value.
Return on equity — trailing 12 months’ earnings per share divided by book value per share.
Earnings-to-price — 12 months’ earnings per share divided by the share price.

The top 75 of the 150 by QV rankings are then included in the GARP index and weighted by the growth score, with portfolio weightings ranging from 0.5% to 5%.

There is a weighting limitation of 40% to any one of the 11 S&P sectors.

Addressing concentration risk

The benchmark S&P 500 Index
SPX,
+0.75%
is weighted by market capitalization, which means it is more heavily concentrated than you might expect — success is rewarded, with rising stocks more heavily weighted over time.

That can backfire during a bear market, with Amazon.com Inc.
AMZN,
+2.14%
down 47% and Tesla Inc.
TSLA,
-0.34%
down 51% this year, to name two prominent examples.

Looking at the SPDR S&P 500 ETF Trust
SPY,
+0.78%,
which is the first and largest exchange traded fund and tracks the benchmark index by holding all of its components, six companies (Apple Inc.
AAPL,
+1.21%,
Microsoft Corp.
MSFT,
+1.24%,
Amazon, both common share classes of Alphabet Inc.
GOOGL,
-1.30%

GOOG,
-1.26%
and Berkshire Hathaway Inc.
BRK.B,
+0.06%
) make up 19.2% of the portfolio.

That percentage has come down this year, but a lot of risk remains concentrated in a handful of companies. (Apple alone makes up 6.4% of the SPY portfolio. Tesla is now the ninth-largest holding, making up 1.4% of the portfolio.)

One way to address high concentration in an index fund is to use an equal-weighted approach, which Mark Hulbert recently discussed.

For the Invesco S&P 500 GARP ETF, the underlying index’s selection methodology has resulted in much less portfolio concentration than we see in SPY, with the top five holdings making up 10.9% of the portfolio.

Here are the 10 largest holdings of SPGP:

Company	Ticker	Share of portfolio
Regeneron Pharmaceuticals, Inc.	REGN, +0.15%	2.49%
Cigna Corporation	CI, +0.39%	2.26%
Everest Re Group, Ltd.	RE, +0.24%	2.21%
Vertex Pharmaceuticals Incorporated	VRTX, +1.18%	1.98%
D.R. Horton, Inc.	DHI, -0.39%	1.97%
Expeditors International of Washington, Inc.	EXPD, +0.23%	1.96%
Incyte Corporation	INCY, +0.10%	1.92%
Goldman Sachs Group, Inc.	GS, -0.51%	1.83%
Ebay Inc.	EBAY, +1.67%	1.81%
Pfizer Inc.	PFE, +3.07%	1.73%
Source: FactSet

Click on the tickers for more information about any company, ETF or index in this article.

You should also read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

Don’t miss: 10 Dividend Aristocrat stocks expected by analysts to rise up to 54% in 2023

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December 8, 2022

‘Gaslighters have two signature moves’: Are you being gaslighted at work? Here’s how to recognize the signs.

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Are you less happy at work since you befriended that new recruit? Have they told you stories about how colleagues have constantly undermined them? Or do you have a boss who excludes you from key meetings — and then asks why you did not attend a meeting even though you are pretty sure you were not invited to begin with? If so, you may be working with a gaslighter.

Gaslighters, as the name suggests, cast themselves in a positive light — friend or confidante who is here to help — but actually operate much more effectively in the shadows. Merriam-Webster named “gaslighting” the word of the year. Searches for the word on merriam-webster.com surged 1,740% in 2022 over the prior year year, despite there not being an event that the publisher — known for its dictionaries — could point to as a cause of the spike.

It defines gaslighting as “psychological manipulation of a person usually over an extended period of time that causes the victim to question the validity of their own thoughts, perception of reality, or memories and typically leads to confusion, loss of confidence and self-esteem, uncertainty of one’s emotional or mental stability, and a dependency on the perpetrator.”

Perhaps the reasons were more personal — or professional — than political. My social media feed is now full of thought pieces on how to spot one of these saboteurs. The comments sections read like the show notes of a True Crime podcast — gruesome yet hard to turn away from.

The term was coined in a 1938 play, “Gas Light,” a psychological thriller set in Victorian London and written by Patrick Hamilton.

The term was further popularized after George Cukor’s 1944 film, “Gaslight,” based on the play, in which Gregory (Charles Boyer) tries to convince his wife Paula (Ingrid Bergman) that she has lost her reason. While he turns on the lights in the attic while searching for hidden jewels, the gaslight flickers in the rest of the house. He tells Paula that she is merely imagining the dimming of the lights.

The workplace is fertile ground for such behavior, given what’s at stake: money, power, status, promotion, rivalry and the intrigue that often comes with office politics.

I’m in the business of helping people work out their conflicts at work. None of this surprises me. In fact, I dedicated a whole chapter in my book, “Jerks at Work,” to gaslighters.

“‘For gaslighters, slow and steady wins the race, and the best ones make friends with their victims first.’”

What has surprised me is how wide-ranging the definition of “gaslighting” has become. Everything from “not respecting personal boundaries” to “talking so much shit about me I couldn’t get hired for two years” seems to fall under the umbrella.

What I’ve learned from my doom scrolling is that the word “gaslighter” — probably the worst name to bestow on a colleague or boss — seems to refer to anyone who’s done a whole bunch of bad things to us at work, especially things that involve humiliation.

So what really is a gaslighter, and why is it important to distinguish one from, say, a demeaning boss with a chip on their shoulder and a penchant for public shaming?

If we stick to the clinical definition, gaslighters have two signature moves: They lie with the intent of creating a false reality, and they cut off their victims socially.

They position themselves as both savior and underminer, creating a negative and fearful atmosphere, spreading gossip and taking credit for other people’s work. They are often jealous and resentful, and aim to undercut others in order to further their own position.

You may also be an unwitting pawn in the gaslighting of another colleague. The gaslighter might try to convince you that Johnny is trying to steal your leadership role on a project, and encourage you to freeze him out in the cafeteria at lunch time, or simply be extra wary about sharing important information.

For gaslighters, slow and steady wins the race, and the best ones make friends with their victims first. For this reason, it could also be considered a form of workplace harassment.

They often flatter them, make them feel special. Others create a fear of speaking up in their victims by making their position at work seem more precarious than it is. And the lies are complex, coming at you in layers. It takes a long time to realize your status as a victim of gaslighting, and social isolation is a necessary part of this process.

“‘It takes a long time to realize your status as a victim of gaslighting, and social isolation is a necessary part of this process.’”

But there’s a difference between an annoying coworker or micromanaging boss, and a gaslighter, who lies and conspires to undermine your position. “The gaslighter doesn’t want you to improve or succeed — they’re out to sabotage you,” according to the careers website Monster.com. “They will accuse you of being confused or mistaken, or that you took something they said the wrong way because you are insecure. They might even manipulate paper trails to “prove” they are right.”

Examples cited by Monster.com: “You know you turned in a project, but the gaslighter insists you never gave it to them. You can tell someone has been in your space, moving things around, or even on your computer, but you don’t have proof. You are the only one not included in a team email or meeting invite, or intentionally kept out of the loop. Then when you don’t respond or show up, you are reprimanded.”

Knowing this, what can you do to prevent yourself from becoming a target? First, recognize that gaslighters don’t wear their strategy on their sleeve. Flattery, making you feel like you’re a part of a special club, or questioning your expertise are not things that raise gaslighting alarm bells.

Rather than looking out for mean behavior by a boss or coworker, look out for signs of social isolation. A boss who wants to cut you off from coworkers and other leaders should raise red flags, even if the reason is that “you’re better than them.”

Second, recognize that lie detection is a precarious — and from a scientific perspective, almost impossible — business. Don’t try to become a lie detector, instead take notes, so you can put your “gaslighter” on notice that you are wise to their tactics. You can also use the notes as evidence if you decide to later raise the situation with Human Resources.

Here are some ways to beat the gaslighter: Send emails with “a summary of today’s meeting” so you can document the origin of ideas and make sure they don’t steal credit from you. Furthermore, document things that happened in person, and share it with your would-be gaslighter. And speak up at meetings. Don’t allow yourself to be browbeaten into submission.

The more you document, the more difficult it will be to be victimized. But a word of warning: Don’t try to confront gaslighters — instead, go to your social network to build your reality back up. Trying to beat these folks at their own game is a losing strategy. But these small things, done early in a working relationship, can work wonders.

Tessa West is a New York University social psychology professor with a particular interest in workplace behavior, and author of “J erks at Work: Toxic Coworkers and What to Do About Them.“

People are seeking a genuine connection with their colleagues’ — one that goes beyond ‘Hollywood Squares’ Zoom meetings. Not all workers are happy with remote work.‘

The backlash to quiet quitting smacks of another attempt by the ruling class to get workers back under their thumbs:’ Am I wrong?

We want to hear from readers who have stories to share about the effects of increasing costs and a changing economy. If you’d like to share your experience, write to readerstories@marketwatch.com. Please include your name and the best way to reach you. A reporter may be in touch.

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December 5, 2022

20 dividend stocks with high yields that have become more attractive right now

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Income-seeking investors are looking at an opportunity to scoop up shares of real estate investment trusts. Stocks in that asset class have become more attractive as prices have fallen and cash flow is improving.

Below is a broad screen of REITs that have high dividend yields and are also expected to generate enough excess cash in 2023 to enable increases in dividend payouts.

REIT prices may turn a corner in 2023

REITs distribute most of their income to shareholders to maintain their tax-advantaged status. But the group is cyclical, with pressure on share prices when interest rates rise, as they have this year at an unprecedented scale. A slowing growth rate for the group may have also placed a drag on the stocks.

And now, with talk that the Federal Reserve may begin to temper its cycle of interest-rate increases, we may be nearing the time when REIT prices rise in anticipation of an eventual decline in interest rates. The market always looks ahead, which means long-term investors who have been waiting on the sidelines to buy higher-yielding income-oriented investments may have to make a move soon.

During an interview on Nov 28, James Bullard, president of the Federal Reserve Bank of St. Louis and a member of the Federal Open Market Committee, discussed the central bank’s cycle of interest-rate increases meant to reduce inflation.

When asked about the potential timing of the Fed’s “terminal rate” (the peak federal funds rate for this cycle), Bullard said: “Generally speaking, I have advocated that sooner is better, that you do want to get to the right level of the policy rate for the current data and the current situation.”

Fed’s Bullard says in MarketWatch interview that markets are underpricing the chance of still-higher rates

In August we published this guide to investing in REITs for income. Since the data for that article was pulled on Aug. 24, the S&P 500
SPX,
-0.29%
has declined 4% (despite a 10% rally from its 2022 closing low on Oct. 12), but the benchmark index’s real estate sector has declined 13%.

REITs can be placed broadly into two categories. Mortgage REITs lend money to commercial or residential borrowers and/or invest in mortgage-backed securities, while equity REITs own property and lease it out.

The pressure on share prices can be greater for mortgage REITs, because the mortgage-lending business slows as interest rates rise. In this article we are focusing on equity REITs.

Industry numbers

The National Association of Real Estate Investment Trusts (Nareit) reported that third-quarter funds from operations (FFO) for U.S.-listed equity REITs were up 14% from a year earlier. To put that number in context, the year-over-year growth rate of quarterly FFO has been slowing — it was 35% a year ago. And the third-quarter FFO increase compares to a 23% increase in earnings per share for the S&P 500 from a year earlier, according to FactSet.

The NAREIT report breaks out numbers for 12 categories of equity REITs, and there is great variance in the growth numbers, as you can see here.

FFO is a non-GAAP measure that is commonly used to gauge REITs’ capacity for paying dividends. It adds amortization and depreciation (noncash items) back to earnings, while excluding gains on the sale of property. Adjusted funds from operations (AFFO) goes further, netting out expected capital expenditures to maintain the quality of property investments.

The slowing FFO growth numbers point to the importance of looking at REITs individually, to see if expected cash flow is sufficient to cover dividend payments.

Screen of high-yielding equity REITs

For 2022 through Nov. 28, the S&P 500 has declined 17%, while the real estate sector has fallen 27%, excluding dividends.

Over the very long term, through interest-rate cycles and the liquidity-driven bull market that ended this year, equity REITs have fared well, with an average annual return of 9.3% for 20 years, compared to an average return of 9.6% for the S&P 500, both with dividends reinvested, according to FactSet.

This performance might surprise some investors, when considering the REITs’ income focus and the S&P 500’s heavy weighting for rapidly growing technology companies.

For a broad screen of equity REITs, we began with the Russell 3000 Index
RUA,
-0.04%,
which represents 98% of U.S. companies by market capitalization.

We then narrowed the list to 119 equity REITs that are followed by at least five analysts covered by FactSet for which AFFO estimates are available.

If we divide the expected 2023 AFFO by the current share price, we have an estimated AFFO yield, which can be compared with the current dividend yield to see if there is expected “headroom” for dividend increases.

For example, if we look at Vornado Realty Trust
VNO,
+1.03%,
the current dividend yield is 8.56%. Based on the consensus 2023 AFFO estimate among analysts polled by FactSet, the expected AFFO yield is only 7.25%. This doesn’t mean that Vornado will cut its dividend and it doesn’t even mean the company won’t raise its payout next year. But it might make it less likely to do so.

Among the 119 equity REITs, 104 have expected 2023 AFFO headroom of at least 1.00%.

Here are the 20 equity REITs from our screen with the highest current dividend yields that have at least 1% expected AFFO headroom:

Company	Ticker	Dividend yield	Estimated 2023 AFFO yield	Estimated “headroom”	Market cap. ($mil)	Main concentration
Brandywine Realty Trust	BDN, +2.12%	11.52%	12.82%	1.30%	$1,132	Offices
Sabra Health Care REIT Inc.	SBRA, +2.41%	9.70%	12.04%	2.34%	$2,857	Health care
Medical Properties Trust Inc.	MPW, +2.53%	9.18%	11.46%	2.29%	$7,559	Health care
SL Green Realty Corp.	SLG, +2.25%	9.16%	10.43%	1.28%	$2,619	Offices
Hudson Pacific Properties Inc.	HPP, +1.41%	9.12%	12.69%	3.57%	$1,546	Offices
Omega Healthcare Investors Inc.	OHI, +1.23%	9.05%	10.13%	1.08%	$6,936	Health care
Global Medical REIT Inc.	GMRE, +2.55%	8.75%	10.59%	1.84%	$629	Health care
Uniti Group Inc.	UNIT, +0.55%	8.30%	25.00%	16.70%	$1,715	Communications infrastructure
EPR Properties	EPR, +0.86%	8.19%	12.24%	4.05%	$3,023	Leisure properties
CTO Realty Growth Inc.	CTO, +2.22%	7.51%	9.34%	1.83%	$381	Retail
Highwoods Properties Inc.	HIW, +0.99%	6.95%	8.82%	1.86%	$3,025	Offices
National Health Investors Inc.	NHI, +2.59%	6.75%	8.32%	1.57%	$2,313	Senior housing
Douglas Emmett Inc.	DEI, +0.87%	6.74%	10.30%	3.55%	$2,920	Offices
Outfront Media Inc.	OUT, +0.89%	6.68%	11.74%	5.06%	$2,950	Billboards
Spirit Realty Capital Inc.	SRC, +1.15%	6.62%	9.07%	2.45%	$5,595	Retail
Broadstone Net Lease Inc.	BNL, -0.30%	6.61%	8.70%	2.08%	$2,879	Industial
Armada Hoffler Properties Inc.	AHH, +0.00%	6.38%	7.78%	1.41%	$807	Offices
Innovative Industrial Properties Inc.	IIPR, +1.42%	6.24%	7.53%	1.29%	$3,226	Health care
Simon Property Group Inc.	SPG, +1.03%	6.22%	9.55%	3.33%	$37,847	Retail
LTC Properties Inc.	LTC, +1.42%	5.99%	7.60%	1.60%	$1,541	Senior housing
Source: FactSet

Click on the tickers for more about each company. You should read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

The list includes each REIT’s main property investment type. However, many REITs are highly diversified. The simplified categories on the table may not cover all of their investment properties.

Knowing what a REIT invests in is part of the research you should do on your own before buying any individual stock. For arbitrary examples, some investors may wish to steer clear of exposure to certain areas of retail or hotels, or they may favor health-care properties.

Largest REITs

Several of the REITs that passed the screen have relatively small market capitalizations. You might be curious to see how the most widely held REITs fared in the screen. So here’s another list of the 20 largest U.S. REITs among the 119 that passed the first cut, sorted by market cap as of Nov. 28:

Company	Ticker	Dividend yield	Estimated 2023 AFFO yield	Estimated “headroom”	Market cap. ($mil)	Main concentration
Prologis Inc.	PLD, +1.63%	2.84%	4.36%	1.52%	$102,886	Warehouses and logistics
American Tower Corp.	AMT, +0.75%	2.66%	4.82%	2.16%	$99,593	Communications infrastructure
Equinix Inc.	EQIX, +0.80%	1.87%	4.79%	2.91%	$61,317	Data centers
Crown Castle Inc.	CCI, +0.93%	4.55%	5.42%	0.86%	$59,553	Wireless Infrastructure
Public Storage	PSA, +0.19%	2.77%	5.35%	2.57%	$50,680	Self-storage
Realty Income Corp.	O, +0.72%	4.82%	6.46%	1.64%	$38,720	Retail
Simon Property Group Inc.	SPG, +1.03%	6.22%	9.55%	3.33%	$37,847	Retail
VICI Properties Inc.	VICI, +0.81%	4.69%	6.21%	1.52%	$32,013	Leisure properties
SBA Communications Corp. Class A	SBAC, +0.27%	0.97%	4.33%	3.36%	$31,662	Communications infrastructure
Welltower Inc.	WELL, +3.06%	3.66%	4.76%	1.10%	$31,489	Health care
Digital Realty Trust Inc.	DLR, +0.63%	4.54%	6.18%	1.64%	$30,903	Data centers
Alexandria Real Estate Equities Inc.	ARE, +1.49%	3.17%	4.87%	1.70%	$24,451	Offices
AvalonBay Communities Inc.	AVB, +0.98%	3.78%	5.69%	1.90%	$23,513	Multifamily residential
Equity Residential	EQR, +1.46%	4.02%	5.36%	1.34%	$23,503	Multifamily residential
Extra Space Storage Inc.	EXR, +0.31%	3.93%	5.83%	1.90%	$20,430	Self-storage
Invitation Homes Inc.	INVH, +2.15%	2.84%	5.12%	2.28%	$18,948	Single-family residental
Mid-America Apartment Communities Inc.	MAA, +1.83%	3.16%	5.18%	2.02%	$18,260	Multifamily residential
Ventas Inc.	VTR, +2.22%	4.07%	5.95%	1.88%	$17,660	Senior housing
Sun Communities Inc.	SUI, +2.12%	2.51%	4.81%	2.30%	$17,346	Multifamily residential
Source: FactSet

Simon Property Group Inc.
SPG,
+1.03%
is the only REIT to make both lists.

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November 29, 2022

‘We’re headed for a family feud’: My father offered his 3 kids equal monetary gifts. My siblings took cash. I took stock. It’s soared in value — now they’re crying foul

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Dear Quentin,

Several years before my father’s death, he offered me and my two siblings each an early “cash gift” from his estate in the amount of whatever the maximum non-taxable amount was at the time. He was an active investor and offered the gift in the form of the stock instead of cash. My siblings took the cash and I decided to take it in stock valued the same as the cash amount.

Fast forward five years: My father just passed away and my siblings bought expensive toys and luxury automobiles with their cash, while my stock is worth many times what it was when it was given to me. His will states that the three of us should share in equal parts of his estate, but my siblings are arguing that my now very valuable stock should be included as an asset to be split among the estate.

Legally, they have no leg to stand on, but both are insistent that I’m taking money that is morally theirs. There’s no changing their mind and I’m convinced that we’re headed for a family feud. I’m not sure what I should do. Had the stock value gone to zero in that time, they wouldn’t be arguing that I should get extra to compensate for my “bad gamble.”

The Other Brother

Dear Other Brother,

Them’s the breaks — in this case, the sudden screeching of car brakes.

Your siblings could have chosen stocks over cash, but they wanted immediate gratification. That was their decision, and they are going to have to take ownership of their choice and live with it. Buying stocks are more likely to pay off if you hold on to them over the long term. You did just that. Instead of buying a Ferrari or a Tesla
TSLA,
-0.19%,
you effectively chose to invest your gift.

Show the same certainty now, and don’t cave to your siblings’ demands. Don’t allow them to bully you into selling.

Investing is all about delaying your gratification — the ability to live for today and save for a more comfortable tomorrow, as opposed to having everything today and to hell with tomorrow. The gamification of stock trading with apps such as Robinhood
HOOD,
-0.74%,
which has extended its trading hours beyond the market’s official hours, is in part about getting that dopamine hit. (However, trading after hours comes with risks — chief among them warped stock prices.)

This dispute is about choice. If you had taken the cash, those stocks would still be part of your father’s estate, but you made the choice to take the stock. Your siblings had the same option and chose not to exercise it. Tell them, “I know it must be frustrating for you, but we all had the same opportunity. I took it. You took the cash.”

There is only one reason they missed out — and if they look in the rearview mirror of their respective luxury cars, they will see that reason staring right back at them.

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

The Moneyist regrets he cannot reply to questions individually.

By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

More from Quentin Fottrell:

• My girlfriend says I should tip in restaurants. I say waitstaff are just like construction and fast-food workers. Who’s right?
• ‘He was infatuated with her’: My brother had a drinking problem and took his own life. He left $6 million to his former girlfriend who used to buy him alcohol
• ‘She had a will, but it was null and void’: My friend and her sister are fighting over their mother’s life-insurance policy and bank account. Who should win out?

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November 26, 2022

‘There are plenty of storm clouds on the horizon’: 5 things not to buy on Black Friday

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It’s a year for shopping prudently.

Americans will spend between $942.6 billion and $960.4 billion this holiday season, according to projections from the National Retail Federation. That’s up from last year when holiday sales hit a record $889.3 billion, the trade association said.

However, people are not willing to go as crazy this Black Friday compared to previous years: that 6% to 8% year-over-year growth expectation is slower than the 13.5% annual increase in holiday season spending in 2021 when consumers had pandemic-era government benefits to spend.

Once again, millions of people will also be shopping from the comfort of their home and avoiding the Black Friday crowds. Online and other non-store sales are predicted to rise 10% to 12% (to between $262.8 billion and $267.6 billion).

“People have reason to be concerned about their spending. ”

“The economy is probably doing better than it feels right now, but that’s not true for everyone of course,” said Ted Rossman, senior industry analyst at Bankrate.com. “There are plenty of storm clouds on the horizon.” He cited rising interest rates, 40-year high inflation and tech layoffs.

People have reason to be concerned about their spending. The personal saving rate — meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money — fell to 3.3% in the third quarter from 3.4% in the prior quarter, the government said last month.

Despite a strong labor market and unemployment hovering at 3.7% in October, Rossman said, “it still seems like a recession is likely in 2023, although the best guess is that it will be a mild one.”

So what should you not buy this Black Friday? Quite a lot, if you don’t believe in living large. Here are 5 things to think about avoiding:

— Quentin Fottrell

Tech accessories

For tech accessories — like earbuds and headphones — waiting until December may be a better way to score better deals, added Ryan McGonagill, director, industry research at Savings.com, another site that aggregates discounts.

The most popular electronic products like Apple AAPL iPads, MacBooks and iPhones have scant Black Friday deals. “For a limited time, get an Apple Gift Card to use on a later purchase when you buy an eligible iPhone, Apple Watch, Mac, AirPods, and more,” according to Apple’s Black Friday offer.

Computer makers and retailers, however, are coming off the work-from-home boom and may have inventory they need to thin before year’s end. Holiday discounts on computers, at least through October, were at 10% off the base price, according to analysis from Adobe
ADBE,
+2.92%.

The software and analytics provider said computer discounts could go much steeper, up to 32% off the base price before the end of the year. Cyber Monday could be the best day for bargains on computers, Adobe said, but computer deals may stick around for the rest of 2022.

Pay attention to early deals, if you desperately need a new laptop. “Many retailers offer the same pricing on Black Friday and Cyber Monday,” said Kristin McGrath, editor at RetailMeNot.com, a site that promotes deals. “So start looking on Black Friday and use Cyber Monday as a second chance to snag what you missed.”

— Andrew Keshner

Seasonal items

Winter wear is usually not going to be on sale before Christmas, so it’s best to shop for your puffy jackets and snow boots in the New Year, if you can. The same goes for white linen, tools and holiday decorations, said Charles Lindsey, associate professor in the Marketing School of Management at the University at Buffalo.

Most stores put their coats, hats, scarves and flannel pajamas on sale — with discounts on big-name brands of 50% or more in January — to make room for their spring collections. Similarly, buy summer clothes in the fall and winter.

“The best time to buy holiday decor is immediately after said holidays,” according to DealNews, a site offering shopping advice. “After Christmas sales are generally your best bet for snagging deeply discounted ornaments, lights, and inflatables in order to be well prepared for next year.”

Fashion-conscious shoppers inclined to snap up discounted items may want to practice patience on Black Friday. Apparel may have even deeper discounts after the holidays. If you feel compelled to buy something new to wear to the office party, invest in quality pieces. Fast fashion has a cost: It has contributed to a waste crisis, in part because such items are not meant to last very long in your closet.

But that does not mean you should not keep your eyes peeled for some seasonal goods on Black Friday. Walmart
WMT,
+0.34%,
for instance, is pushing out the boat early with some discounts on toys, including hoverboards, bicycles, remote-control cars, and karaoke machines. Similarly, Kohl’s
KSS,
+4.17%
has discounts on a range of doll’s houses.

— Quentin Fottrell and Emma Ockerman

Appliances and white goods

There might be tempting Black Friday deals on appliances, mattresses and furniture. Discounts on appliances may reach up to an 18% from the base price, Adobe said. Still, “you’re going to get another shot at them during New Year’s Eve sales and again during Presidents Day sales in February,” McGrath said.

If Black Friday is “too chaotic …you’ll have plenty of opportunities to save,” she added. Department stores usually run very attractive discounts on houseware in the days following Christmas. “Stores know they’ll be getting a lot of traffic with so many people returning gifts — and hope to convince shoppers to make an impulse self-gifting purchase or two,” McGrath said.

If you can’t wait, Costco
COST,
+1.64%
is already rolling out deals on white goods and appliances, including $70 off a Sonos
SONO,
+1.87%
WiFi speaker. However, Consumer Reports cautions consumers against falling for big deals without checking out the reliability of the brand first, as you could end up paying more in repairs down the road.

You might be tempted by offers and rebates on matching kitchen suites — typically a refrigerator, range, dishwasher, and microwave — from the same maker,” Consumer Reports said. “But price is only part of the equation when you’re purchasing appliances. Reliability is key, and it can vary within a brand’s offerings.”

— Andrew Keshner

Fitness equipment

One of the best times to buy exercise equipment is around the New Year, when people are making resolutions to improve their health, said Regina Conway, who researches sales and promotions for Slickdeals, a site that tracks retail discounts.

When you make your purchase, think twice before buying equipment that runs on proprietary technology, like Peloton
PTON,
-1.13%
or Lululemon’s
LULU,
+1.79%
Mirror exercise products, mainly because the at-home fitness boom faces an uncertain future post-pandemic, Conway noted.

However, this Black Friday is a little different than previous years, and there are some deals in categories that traditionally don’t have good Black Friday discounts, including exercise equipment. “This year we’re seeing strong Black Friday deals from industry stalwarts like NordicTrack,” Conway said.

Peloton Interactive, which is facing a challenging time since people are no longer stuck at home due to the pandemic, is currently offering $600 off this fitness bike package. However, consumers will still have to fork over $2,195 for the machine and exercise regime.

“We think consumers are likely to continue to prefer out-of-home experiences in the near-term and believe Peloton is still working through pandemic pull-forward,” Cowen & Co. analyst John Blackledge wrote in an analyst note on Tuesday, citing “limited visibility” on Peloton’s fiscal 2023 performance.

— Leslie Albrecht and Quentin Fottrell

Big-ticket items like TVs

Does Amazon
AMZN,
+0.80%
founder Jeff Bezos have a point about the dangers of splurging this year? In something of a Black Friday surprise, Bezos offered some shocking spending tips as Americans gear up for the holiday shopping season — amid four-decade-high inflation. Or, to be more accurate, he offered tips on what not to spend your money on.

‘If you’re an individual and you’re thinking about buying a large-screen TV, maybe slow that down, keep that cash, see what happens. Same thing with a refrigerator, a new car, whatever. Just take some risk off the table,” Bezos said in a recent interview on CNN
WBD,
+2.27%.
The remarks drew a significant amount of scorn on social media, with some critics advising people to avoid shopping on Amazon too.

About those TVs: “They’re normally not going to be a high-end TV brand,” Lindsey said. “It will be a lower to mid-tier brand. Companies utilize these TVS as doorbusters to get people in the store and people clicking on their website. You’re probably better off shopping around the Superbowl in late January.”

Rossman said consumers are becoming more judicious about their Black Friday splurging. “People seem to be pulling back on some big-ticket purchases,” he told MarketWatch. “For example, sellers of appliances, electronics and furniture all posted disappointing results in the most recent retail sales report.”

“Yet discretionary sectors such as travel and dining are seeing sharp increases in spending,” he added. “I think the main explanation is pent-up demand. People are prioritizing experiences over things right now, largely due to the pandemic. There was also a pull-forward in demand for many physical goods the past couple of years as many out-of-home activities were curtailed.”

— Quentin Fottrell

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November 22, 2022

This record number in Nvidia earnings is a scary sight

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Nvidia Corp.’s financial results had a bit of a surprise for investors, and not on the good side — product inventories doubled to a record high as the chip company gears up for a questionable holiday season.

Nvidia reported fiscal third-quarter revenue that was slightly better than analysts’ reduced expectations Wednesday, but the numbers weren’t that great. Revenue fell 17% to $5.9 billion, while earnings were cut in half thanks to a $702 million inventory charge, largely relating to slower data-center demand in China.

Gaming revenue in the quarter fell 51% to $1.57 billion. Nvidia said it is working with its retail partners to help move the currently high-channel inventories.

While the company was writing off the inventory for China, its own new product inventory was growing. Nvidia
NVDA,
-4.54%
reported that its overall product inventory nearly doubled to $4.45 billion in the fiscal third quarter, compared with $2.23 billion a year ago and $3.89 billion in the prior quarter. Executives cited its coming product launches, designed around its new Ada and Hopper architectures, when asked about the inventory gains.

In the semiconductor industry, high inventories can make investors nervous, especially after the industry had so many supply constraints in recent years that quickly swung to a glut of chips in 2022. With doubts about demand for gaming cards and consumers’ willingness to spend amid sky-high inflation this holiday season, having all that product on hand just amps up the nerves.

Full earnings coverage: Nvidia profit chopped in half, but tweaked servers to China offset earlier $400 million warning

Chief Financial Officer Colette Kress told MarketWatch in a telephone interview Wednesday that the company’s high level of inventories were commensurate with its high levels of revenue.

“I do believe….it is our highest level of inventory,” she said. “They go hand in hand.” Kress said she was confident in the success of Nvidia’s upcoming product launches.

Nvidia’s revenue reached a peak in the April 2022 quarter with $8.3 billion, and in the past two quarters revenue has slowed, with gaming demand sluggish amid a transition to a new cycle, and a decline in China data-center demand due to COVID-19 lockdowns and U.S. government restrictions.

For its data-center customers, the new architectures promise major advances in computing power and artificial-intelligence features, with Nvidia planning to ship the equivalent of a supercomputer in a box with its new products over the next year. Those types of advanced products weigh on inventory totals even more, Kress said, because of the price of the total package.

“It’s about the complexity of the system we are building, that is what drives the inventory, the pieces of that together,” Kress said.

Bernstein Research analyst Stacy Rasgon believes that products based on Hopper will begin shipping over the next several quarters, “at materially higher price points.” He said in a recent note that he believes Nvidia’s numbers were likely hitting a bottom in this quarter.

“We remain positive on the Hopper ramp into next year, and believe numbers have at this point likely reached close to bottom, with new cycles brewing and an attractive secular story even without China potential,” Rasgon said in an earnings preview note Tuesday.

Nvidia Chief Executive Jensen Huang reminded investors on a conference call that the company’s inventories are “never zero,” and said everyone is enthusiastic about the upcoming launches. But it doesn’t take too long of a memory to conjure up a time when Nvidia went into a holiday with an inventory backlog that included new architecture and greatly disappointed investors: Four years ago, Huang had to cut his forecast for holiday earnings twice amid a “crypto hangover” with similar dynamics to the current moment

Investors need faith that this holiday season will not be the same, even as demand for some videogame products declines after a pandemic boom just as the market for cryptocurrency — some of which has been mined with Nvidia products — hits a rough patch. Huang said that Nvidia’s RTX 4080 and 4090 graphics cards based on the Ada Lovelace architecture had an “exceptional launch,” and sold out.

Nvidia shares gained more than 2% in after-hours trading Wednesday, suggesting that some are betting that this time will be different. That enthusiasm needs to translate into revenue for Nvidia so that this big gain in inventories does not end up being part of another write-down at some point in the future.

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November 16, 2022

Tim Cook has been an excellent leader for Apple — these numbers prove it

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How good is a company’s chief executive officer at investing your money most efficiently? This is an important question for long-term investors. It may underline the difference between a steady long-term performer and a flash in the pan.

And Apple Inc.
AAPL,
-4.24%
now makes up 7% of the SPDR S&P 500 ETF Trust
SPY,
-1.03%,
the first and largest exchange-traded fund (with $360 billion in assets), which tracks the benchmark S&P 500
SPX,
-1.06%.
That’s close to an all-time record, and the iPhone maker has a whopping 14.1% position in the Invesco QQQ Trust
QQQ,
-1.95%,
which tracks the Nasdaq-100 Index
NDX,
-1.98%.
Looking at the full Nasdaq Index
COMP,
-1.73%,
which has 3,747 stocks, Apple takes a 13.5% position.

Apple now makes up 7.3% of the S&P 500 by market capitalization, close to the 8% record it set late in September.

FactSet

This is very much an Apple stock market, with the company topping the broad indexes that are weighted by market capitalization. You are likely to be invested in the company indirectly. You also might be feeling Apple’s impact in other ways. Apple’s App Store ecosystem drives more than $600 billion in annual revenue for developers.

Tim Cook’s tenure as Apple’s CEO has been nothing short of breathtaking when measured by the company’s financial performance. Apple is not one of the fastest-growing companies when measured by sales or earnings — it is too big for that. But its excellent stock performance has reflected Cook’s ability to deploy invested capital with improving efficiency. Cook has also been a market trendsetter in other important ways. He has Apple repurchasing $90 billion of its shares annually, setting the pace for stock buybacks in the market. Cook’s steady hand has also helped Apple withstand the market’s tech wreck and remain a stable pillar for the teetering Nasdaq Composite index generally. For all these reasons, Cook has earned a spot on the MarketWatch 50 list of the most influential people in markets.

Apple keeps improving by this important measure

Investors in the stock market are looking for growth over the long term. The best measure of that is whether or not a company’s share price goes up or down. But Cook isn’t just managing Apple’s stock. Digging a bit deeper into the company’s actual operating performance can provide some insight into what a good job Cook has done.

What should a corporate manager focus on? The stock price? How about the most efficient and most profitable way to provide goods and services? There are different ways to do this, and Apple has focused on quality, reliability and excellent service to build customer loyalty.

Apple’s commitment can be experienced by anyone who calls the company for customer service. It is easy to get through to a well-trained representative who will solve your problem. How many companies can say that at a time when it seems many companies cannot even handle answering the phone?

Getting back to actual performance, Cook took over as Apple’s CEO in August 2011 when Steve Jobs stepped down. The chart below shows the company’s quarterly returns on invested capital from the end of 2010 through September 2022.

Apple’s returns on invested capital have increased markedly over the past six years.

FactSet

A company’s return on invested capital (ROIC) is its profit divided by the sum of the carrying value of its common stock, preferred stock, long-term debt and capitalized lease obligations. ROIC indicates how well a company has made use of the money it has raised to run its business. It is an annualized figure, but available quarterly, as used in the chart above.

The carrying value of a company’s stock may be a lot lower than its current market capitalization. The company may have issued most of its shares long ago at a much lower share price than the current one. If a company has issued shares recently or at relatively high prices, its ROIC will be lower.

A company with a high ROIC is likely either to have a relatively low level of long-term debt or to have made efficient use of the borrowed money.

Among companies in the S&P 500 that have been around for at least 10 years, Apple placed within the top 20 for average ROIC for the previous 40 reported fiscal quarters as of Sept. 1.

As you can see on the chart, Apple’s ROIC has improved dramatically over the past five years, even as the wide adoption of the company’s products and services has led to an overall slowdown in sales growth.

A quick comparison with other giants in the benchmark index

It might be interesting to see how Apple stacks up among other large companies, in part because some businesses are more capital-intensive than others. For example, over the past four quarters, Apple’s ROIC has averaged 52.9%, while the average for the S&P 500 has been a weighted 12.1%, by FactSet’s estimate.

Here are the 10 companies in the S&P 500 reporting the highest annual sales for their most recent full fiscal years, with a comparison of average ROIC over the past 40 reported quarters:

Company	Ticker	Annual sales ($mil)	Avg. ROIC – 40 quarters	Total Return – 10 Years
Walmart Inc.	WMT, -0.02%	$572,754	11.0%	142%
Amazon.com Inc.	AMZN, -3.06%	$469,822	6.8%	693%
Apple Inc.	AAPL, -4.24%	$394,328	33.0%	721%
CVS Health Corp.	CVS, +1.03%	$291,935	6.8%	161%
UnitedHealth Group Inc.	UNH, +0.03%	$287,597	13.7%	1,031%
Exxon Mobil Corp.	XOM, +1.36%	$280,510	9.9%	85%
Berkshire Hathaway Inc. Class B	BRK.B, -1.94%	$276,094	8.2%	233%
McKesson Corp.	MKC, -0.61%	$263,966	6.6%	353%
Alphabet Inc. Class A	GOOGL, -4.07%	$257,488	16.6%	405%
Costco Wholesale Corp.	COST, +0.57%	$226,954	16.2%	558%
Source: FactSet

Among the largest 10 companies in the S&P 500 by annual sales, Apple takes the top ranking for average ROIC over the past 10 years, while ranking second for total return behind UnitedHealth Group Inc.
UNH,
+0.03%
and ahead of Amazon.com Inc.
AMZN,
-3.06%.
UnitedHealth has been able to remain at the forefront of managed care during the period of transition for healthcare in the U.S., in the wake of President Barack Obama’s signing of the Affordable Care Act into law in 2010.

Here’s a chart showing 10-year total returns for Apple, UnitedHealth Group, Amazon and the S&P 500:

Apple is only slightly ahead of Amazon’s 10-year total return. But what is so striking about this chart is the volatility. Apple has had a smoother ride. During the bear market of 2022, Apple’s stock has declined 18%, while the S&P 500 has gone down 20%, the Nasdaq has fallen 32% (all with dividends reinvested) and Amazon has dropped 45%.

The broad indexes would have fared even worse so far this year without Apple.

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November 3, 2022

20 dividend stocks that may be safest if the Federal Reserve causes a recession

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Investors cheered when a report last week showed the economy expanded in the third quarter after back-to-back contractions.

But it’s too early to get excited, because the Federal Reserve hasn’t given any sign yet that it is about to stop raising interest rates at the fastest pace in decades.

Below is a list of dividend stocks that have had low price volatility over the past 12 months, culled from three large exchange traded funds that screen for high yields and quality in different ways.

In a year when the S&P 500
SPX,
-0.40%
is down 18%, the three ETFs have widely outperformed, with the best of the group falling only 1%.

Read: GDP looked great for the U.S. economy, but it really wasn’t

That said, last week was a very good one for U.S. stocks, with the S&P 500 returning 4% and the Dow Jones Industrial Average
DJIA,
-0.32%
having its best October ever.

This week, investors’ eyes turn back to the Federal Reserve. Following a two-day policy meeting, the Federal Open Market Committee is expected to make its fourth consecutive increase of 0.75% to the federal funds rate on Wednesday.

The inverted yield curve, with yields on two-year U.S. Treasury notes
TMUBMUSD02Y,
4.540%
exceeding yields on 10-year notes
TMUBMUSD10Y,
4.064%,
indicates investors in the bond market expect a recession. Meanwhile, this has been a difficult earnings season for many companies and analysts have reacted by lowering their earnings estimates.

The weighted rolling consensus 12-month earning estimate for the S&P 500, based on estimates of analysts polled by FactSet, has declined 2% over the past month to $230.60. In a healthy economy, investors expect this number to rise every quarter, at least slightly.

Low-volatility stocks are working in 2022

Take a look at this chart, showing year-to-date total returns for the three ETFs against the S&P 500 through October:

FactSet

The three dividend-stock ETFs take different approaches:

The $40.6 billion Schwab U.S. Dividend Equity ETF
SCHD,
+0.15%
tracks the Dow Jones U.S. Dividend 100 Indexed quarterly. This approach incorporates 10-year screens for cash flow, debt, return on equity and dividend growth for quality and safety. It excludes real estate investment trusts (REITs). The ETF’s 30-day SEC yield was 3.79% as of Sept. 30.
The iShares Select Dividend ETF
DVY,
+0.45%
has $21.7 billion in assets. It tracks the Dow Jones U.S. Select Dividend Index, which is weighted by dividend yield and “skews toward smaller firms paying consistent dividends,” according to FactSet. It holds about 100 stocks, includes REITs and looks back five years for dividend growth and payout ratios. The ETF’s 30-day yield was 4.07% as of Sept. 30.
The SPDR Portfolio S&P 500 High Dividend ETF
SPYD,
+0.60%
has $7.8 billion in assets and holds 80 stocks, taking an equal-weighted approach to investing in the top-yielding stocks among the S&P 500. It’s 30-day yield was 4.07% as of Sept. 30.

All three ETFs have fared well this year relative to the S&P 500. The funds’ beta — a measure of price volatility against that of the S&P 500 (in this case) — have ranged this year from 0.75 to 0.76, according to FactSet. A beta of 1 would indicate volatility matching that of the index, while a beta above 1 would indicate higher volatility.

Now look at this five-year total return chart showing the three ETFs against the S&P 500 over the past five years:

The Schwab U.S. Dividend Equity ETF ranks highest for five-year total return with dividends reinvested — it is the only one of the three to beat the index for this period.

Screening for the least volatile dividend stocks

Together, the three ETFs hold 194 stocks. Here are the 20 with the lowest 12-month beta. The list is sorted by beta, ascending, and dividend yields range from 2.45% to 8.13%:

Company	Ticker	12-month beta	Dividend yield	2022 total return
Newmont Corp.	NEM, -0.78%	0.17	5.20%	-30%
Verizon Communications Inc.	VZ, -0.07%	0.22	6.98%	-24%
General Mills Inc.	GIS, -1.47%	0.27	2.65%	25%
Kellogg Co.	K, -0.93%	0.27	3.07%	22%
Merck & Co. Inc.	MRK, -1.73%	0.29	2.73%	35%
Kraft Heinz Co.	KHC, -0.56%	0.35	4.16%	11%
City Holding Co.	CHCO, -1.45%	0.38	2.58%	27%
CVB Financial Corp.	CVBF, -1.24%	0.38	2.79%	37%
First Horizon Corp.	FHN, -0.18%	0.39	2.45%	53%
Avista Corp.	AVA, -7.82%	0.41	4.29%	0%
NorthWestern Corp.	NWE, -0.21%	0.42	4.77%	-4%
Altria Group Inc	MO, -0.18%	0.43	8.13%	4%
Northwest Bancshares Inc.	NWBI, +0.10%	0.45	5.31%	11%
AT&T Inc.	T, +0.63%	0.47	6.09%	5%
Flowers Foods Inc.	FLO, -0.44%	0.48	3.07%	7%
Mercury General Corp.	MCY, +0.07%	0.48	4.38%	-43%
Conagra Brands Inc.	CAG, -0.82%	0.48	3.60%	10%
Amgen Inc.	AMGN, +0.41%	0.49	2.87%	23%
Safety Insurance Group Inc.	SAFT, -1.70%	0.49	4.14%	5%
Tyson Foods Inc. Class A	TSN, -0.40%	0.50	2.69%	-20%
Source: FactSet

Any list of stocks will have its dogs, but 16 of these 20 have outperformed the S&P 500 so far in 2022, and 14 have had positive total returns.

You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.

Don’t miss: Municipal bond yields are attractive now — here’s how to figure out if they are right for you

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November 1, 2022

Tag: Commentary/Opinion

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Apple keeps improving by this important measure

Apple’s returns on invested capital have increased markedly over the past six years.

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Low-volatility stocks are working in 2022

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