Tag: securities

Meet the 10 biggest megadonors for the 2022 midterm elections

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With four weeks until Election Day, congressional candidates are on track to break midterm fundraising records, having raised nearly $2.5 billion so far this cycle. That’s already 70% more than what was raised during the 2014 cycle and just $200 million shy of the total raised during the full 2018 cycle.

This cycle has also seen record-shattering outside spending, topping $1 billion through the beginning of October, according to an OpenSecrets estimate.

The increase in spending and fundraising is due in large part to the involvement of millionaire and billionaire megadonors who have sought to influence the outcome of an election in which both chambers of Congress are in play.

“When megadonors pump millions of dollars into super PACs, they get to help call the shots,” said Michael Beckel, research director at Issue One, a nonpartisan political reform organization. “Massive spending from a megadonor can influence what issues are talked about on the campaign trail and in Congress.”

Super PACs are independent political action committees that can raise unlimited sums of money but are not allowed to coordinate with a candidate or campaign. Due to contribution limits, such as those restricting individuals’ candidate contributions to $2,900 per election per candidate, most megadonor spending goes to super PACs.

More context: These are the basics of campaign finance in 2020 — in two handy charts

A MarketWatch analysis of Federal Election Commission data through the end of September shows that these 10 business moguls and philanthropists are the biggest federal-level donors this cycle.

Read: These 3 races could determine whether Democrats or Republicans control the Senate in 2023

And see: If this seat flips red, Republicans will have ‘probably won a relatively comfortable House majority’

Top federal-level megadonors this cycle

Rank	Contributor	Total Contributions	For Republicans	For Democrats	Nonpartisan/Bipartisan
1	George Soros	$128,782,000	$0	$128,782,000	$0
2	Ken Griffin	$50,955,800	$50,955,800	$0	$0
3	Richard Uihlein	$49,117,000	$49,117,000	$0	$0
4	Sam Bankman-Fried	$39,931,000	$201,000	$37,725,000	$2,005,000
5	Jeff Yass	$32,754,000	$32,754,000	$0	$0
6	Peter Thiel	$30,189,000	$30,189,000	$0	$0
7	Fred Eychaner	$22,343,000	$0	$22,343,000	$0
8	Stephen Schwarzman	$21,870,000	$21,865,000	$0	$5,000
9	Larry Ellison	$21,003,000	$21,003,000	$0	$0
10	Ryan Salame	$18,932,000	$17,432,000	$0	$1,500,000

	Totals:	$415,877,000	$223,517,000	$188,850,000	$3,510,000

Source: MarketWatch analysis of FEC data as of Sept. 30, 2022
Note: Partisan breakdown includes non-party affiliated PACs with over 95% of their spending benefitting one party, data has been rounded to the nearest thousand

Big spending by itself doesn’t automatically mean winning. There have been notable instances of the financially strongest candidates losing (such as crypto-backed House candidate Carrick Flynn earlier this year and billionaire Michael Bloomberg’s self-financed presidential bid) — but money can certainly help put a candidate on the right track.

“Money alone doesn’t guarantee electoral success, but every candidate prefers to be the one with more money to spend,” Beckel said. He added: “Outside spending on behalf of a candidate isn’t a silver bullet that’s going to guarantee electoral success. But it goes a long way to boosting somebody’s name recognition, and to presenting them as a viable candidate — somebody who has the resources to run a competitive campaign.”

Information about the spending by the top 10 donors this cycle has been compiled from MarketWatch’s analysis of FEC data and filings, super PAC websites and previously reported comments. Read on to find out who are the top 10 biggest donors this cycle.

10. Ryan Salame — $19 million

Ryan Salame, the co-CEO of FTX Digital Markets, a subsidiary of cryptocurrency exchange FTX, founded a hybrid PAC earlier this year called American Dream Federal Action. The vast majority ($15 million) of the $19 million Salame has spent this cycle has gone into bankrolling the PAC, which has spent $2.4 million in independent expenditures supporting Illinois Republican Rep. Rodney Davis, $2 million supporting Republican Senate candidate Katie Britt from Alabama, and $1.2 million each supporting Arkansas GOP Sen. John Boozman and Brad Finstad, a GOP congressional candidate in Minnesota.

On its website, the PAC describes itself as “organization dedicated to electing forward-looking candidates — those who want to protect America’s long term economic and national security by advancing smart policy decisions now.” A representative for Salame didn’t respond to a request for comment.

9. Lawrence Ellison — $21 million

The co-founder of Oracle
ORCL,
+0.26%
has similarly bankrolled a PAC this election cycle — giving a total $20 million to Opportunity Matters Fund Inc. The super PAC has largely held onto its funds so far, recent FEC records show, having $17 million cash on hand as of the end of August. Of the independent expenditures it has made this cycle, it spent the most on Georgia Republican Senate candidate Herschel Walker ($1.3 million), Wisconsin Republican Sen. Ron Johnson ($1.3 million) and North Carolina Senate candidate and current Republican Rep. Ted Budd ($1.1 million). A representative for Ellison didn’t respond to a request for comment.

8. Stephen Schwarzman — $22 million

Billionaire Stephen Schwarzman, the CEO of private-equity giant Blackstone
BX,
-2.41%,
is the eighth biggest donor at the federal level this cycle. In March, Schwarzman gave $10 million to both the Senate Leadership Fund and Congressional Leadership Fund, super PACs aimed at obtaining a Republican majority in the Senate and House, respectively. A representative for Schwarzman didn’t respond to a request for comment.

7. Fred Eychaner — $22 million

Fred Eychaner has also contributed $22 million so far this cycle, but unlike most of the spending on this list, his has been directed toward Democratic causes. The chairman of Chicago-based Newsweb Corporation has given $9 million to the House Majority PAC and $8 million to the Senate Majority PAC, as well as just under $1.5 million to the Democratic National Committee and several hundred thousands to the Democratic Congressional Campaign Committee and Democratic Senatorial Campaign Committee. A representative for Eychaner didn’t respond to a request for comment.

6. Peter Thiel — $30 million

Venture capitalist Peter Thiel was heavily involved in backing Ohio Republican J.D. Vance’s primary bid, giving $15 million in the spring to the Vance-aligned Protect Ohio Values PAC.

The massive primary investment was “historic” and record-setting, according to Beckel, who added that Thiel’s involvement in the Ohio Senate primary could mark “a new chapter of how mega donors are choosing to play in politics.”

“I think it’s become clear for a lot of megadonors that there are high stakes to a lot of primaries, and by spending in the primary, where there is typically lower turnout than in say, a statewide general election, they can get a lot of bang for their buck by investing in a primary election,” Beckel added.

Thiel has indicated that he doesn’t intend to put any more money toward Vance’s bid as he reportedly believes the Ohio candidate is on track to win, and instead will focus his funding on Arizona Republican Blake Masters’ bid to oust Democratic Sen. Mark Kelly in the final weeks leading up to the midterm election.

Thiel, known for his roles in PayPal
PYPL,
-1.69%,
Palantir
PLTR,
-0.25%
and Facebook
META,
-3.92%,
has also given a total $15 million to the Masters-aligned PAC, Saving Arizona, with his most recent contribution in July. Both Vance and Masters are venture capitalists, but Masters has worked with Thiel. He served as chief operating officer of Thiel Capital and president of the Thiel Foundation, and he co-authored a book on startups with Thiel in 2014. A representative for Thiel didn’t respond to a request for comment.

5. Jeff Yass — $33 million

Options trader Jeff Yass, who founded trading firm Susquehanna International Group, has contributed about $33 million on a federal level this cycle. Yass has given $15 million to the School Freedom Fund, or the equivalent of 97% of the PAC’s total fundraising. The group focuses on the issue of school choice, and its website states that some bureaucrats “hindered the development and education of our youth through school closures, mask mandates, critical race theory, and more.”

Aside from the School Freedom Fund, Yass’ other biggest contributions are to the conservative Club for Action ($6.5 million), Kentucky Freedom ($5 million), Protect Freedom ($2 million) and Crypto Freedom ($1.9 million). A representative for Yass didn’t respond to a request for comment.

4. Sam Bankman-Fried — $40 million

Sam Bankman-Fried, the founder and CEO of FTX, is the main funder behind Protect Our Future PAC, giving it $27 million of the $28 million it raised this cycle.

The organization says on its website that it focuses on promoting Democratic candidates championing pandemic preparedness and prevention “so this is the last time in our lifetime, and our children’s lifetimes, that we will face the devastation that has gripped communities across the U.S. since 2020.”

The group spent more than $10 million supporting Democrat Carrick Flynn’s House bid in Oregon. Flynn lost his primary in May by 18 points despite his massive outside spending advantage. In addition to Flynn, the group has made over $1 million in independent expenditures each supporting Democratic congressional candidates Lucy McBath, a current representative from Georgia; Jasmine Crockett of Texas, Adam Hollier of Michigan, Valerie Foushee of North Carolina and Shontel Brown, a current representative from Ohio.

Most of the other $10 million Bankman-Fried spent this cycle has gone to the House Majority PAC ($6 million) and the crypto PAC GMI ($2 million).

While the vast majority of his spending has supported Democratic candidates and causes, Bankman-Fried does not classify himself as an exclusively Democratic donor — for instance he gave $105,000 to the Alabama Conservatives Fund in June and $45,000 to the NRCC in July.

He told Politico in August that he is “legitimately worried about doing things that will make people view me as partisan when it’s not how I feel … because I think it both misses what I’m trying to do and makes it harder for me to act constructively.” A representative for the FTX boss didn’t respond to a request for comment.

3. Richard Uihlein — $49 million

Richard Uihlein is the founder of the shipping and business supply company Uline, and is a longtime conservative donor. This cycle has seen nearly $50 million in political spending by him, with just over half of it going to Club for Growth Action. Uihlein has also given about $14 million to Restoration PAC, an organization that says it is “dedicated to strengthening the foundations that made America the greatest nation in the world: God, family, education, and community.”

Uihlein’s next largest contributions are to the conservative Team PAC ($2.5 million) and the Arkansas Patriots Fund ($2.2 million), which earlier this year made ad buys favoring Republican Sen. John Boozman’s primary opponent. A representative for Uihlein didn’t respond to a request for comment.

2. Ken Griffin — $51 million

With $51 million in federal-level political spending, Ken Griffin, CEO of hedge fund Citadel, is the second most prolific donor this cycle.

The biggest beneficiaries are the Republican-aligned Congressional Leadership Fund with $18.5 million in contributions, the Senate Leadership Fund with $10 million and Honor Pennsylvania, a super PAC that backed Republican Dave McCormick’s Senate bid. McCormick lost in the primary to Mehmet Oz by less than a thousand votes.

While Griffin spent about $64 million during the last cycle, his $51 million figure this year marks by far the most he has spent during a midterm cycle. During the 2018 cycle, his contributions totaled less than $8 million.

A spokesperson for Griffin told MarketWatch that Griffin “supports leaders who are committed to protecting the American Dream and pursuing policies that will create a better future for the United States.”

“The right policies will focus on creating rewarding jobs, prioritizing public safety, and investing in a strong national defense,” his spokesperson said. “Preserving the American Dream will require that every child is well educated, can access great healthcare, and has the opportunity to succeed.”

1. George Soros — $129 million

Not one donor comes close to matching the sum that billionaire philanthropist George Soros has contributed this cycle: $129 million. However, much of that money hasn’t actually been put to work this cycle.

The majority of those on this list have focused their funding on Republican causes, but Soros’ money has gone to Democratic groups — specifically Democracy PAC II, whose $125 million in contributions comprises 99% of its fundraising. The super PAC spent more than $80 million on Democratic groups and candidates during the 2020 election.

A representative for Soros pointed MarketWatch to a Politico article from January, in which Soros said the $125 million is aimed at supporting pro-democracy “causes and candidates, regardless of political party” who are invested in “strengthening the infrastructure of American democracy: voting rights and civic participation, civil rights and liberties, and the rule of law” and called his contribution a “long-term investment” that will support political work beyond this year.

So far this cycle, Democracy PAC has spent very little and holds $113 million in available cash. Contributions the PAC has made this cycle include $5 million to the Senate Majority PAC, $2.5 million to One Georgia and $1 million to both Care in Action and House Majority PAC.

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October 11, 2022

The stock market is in trouble. That’s because the the bond market is ‘very close to a crash.’

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Don’t assume the worst is over, says investor Larry McDonald.

There’s talk of a policy pivot by the Federal Reserve as interest rates rise quickly and stocks keep falling. Both may continue.

McDonald, founder of The Bear Traps Report and author of “A Colossal Failure of Common Sense,” which described the 2008 failure of Lehman Brothers, expects more turmoil in the bond market, in part, because “there is $50 trillion more in world debt today than there was in 2018.” And that will hurt equities.

The bond market dwarfs the stock market — both have fallen this year, although the rise in interest rates has been worse for bond investors because of the inverse relationship between rates (yields) and bond prices.

About 600 institutional investors from 23 countries participate in chats on the Bear Traps site. During an interview, McDonald said the consensus among these money managers is “things are breaking,” and that the Federal Reserve will have to make a policy change fairly soon.

Pointing to the bond-market turmoil in the U.K., McDonald said government bonds that mature in 2061 were trading at 97 cents to the dollar in December, 58 cents in August and as low as 24 cents over recent weeks.

When asked if institutional investors could simply hold on to those bonds to avoid booking losses, he said that because of margin calls on derivative contracts, some institutional investors were forced to sell and take massive losses.

Read: British bond market turmoil is sign of sickness growing in markets

And investors haven’t yet seen the financial statements reflecting those losses — they happened too recently. Write-downs of bond valuations and the booking of losses on some of those will hurt bottom-line results for banks and other institutional money managers.

Interest rates aren’t high, historically

Now, in case you think interest rates have already gone through the roof, check out this chart, showing yields for 10-year U.S. Treasury notes
TMUBMUSD10Y,
3.898%
over the past 30 years:

The yield on 10-year Treasury notes has risen considerably as the Federal Reserve has tightened during 2022, but it is at an average level if you look back 30 years.

FactSet

The 10-year yield is right in line with its 30-year average. Now look at the movement of forward price-to-earnings ratios for S&P 500
SPX,
-0.03%
since March 31, 2000, which is as far back as FactSet can go for this metric:

FactSet

The index’s weighted forward price-to-earnings (P/E) ratio of 15.4 is way down from its level two years ago. However, it is not very low when compared to the average of 16.3 since March 2000 or to the 2008 crisis-bottom valuation of 8.8.

Then again, rates don’t have to be high to hurt

McDonald said that interest rates didn’t need to get anywhere near as high as they were in 1994 or 1995 — as you can see in the first chart — to cause havoc, because “today there is a lot of low-coupon paper in the world.”

“So when yields go up, there is a lot more destruction” than in previous central-bank tightening cycles, he said.

It may seem the worst of the damage has been done, but bond yields can still move higher.

Heading into the next Consumer Price Index report on Oct. 13, strategists at Goldman Sachs warned clients not to expect a change in Federal Reserve policy, which has included three consecutive 0.75% increases in the federal funds rate to its current target range of 3.00% to 3.25%.

The Federal Open Market Committee has also been pushing long-term interest rates higher through reductions in its portfolio of U.S. Treasury securities. After reducing these holdings by $30 billion a month in June, July and August, the Federal Reserve began reducing them by $60 billion a month in September. And after reducing its holdings of federal agency debt and agency mortgage-backed securities at a pace of $17.5 billion a month for three months, the Fed began reducing these holdings by $35 billion a month in September.

Bond-market analysts at BCA Research led by Ryan Swift wrote in a client note on Oct. 11 that they continued to expect the Fed not to pause its tightening cycle until the first or second quarter of 2023. They also expect the default rate on high-yield (or junk) bonds to increase to 5% from the current rate of 1.5%. The next FOMC meeting will be held Nov. 1-2, with a policy announcement on Nov. 2.

McDonald said that if the Federal Reserve raises the federal funds rate by another 100 basis points and continues its balance-sheet reductions at current levels, “they will crash the market.”

A pivot may not prevent pain

McDonald expects the Federal Reserve to become concerned enough about the market’s reaction to its monetary tightening to “back away over the next three weeks,” announce a smaller federal funds rate increase of 0.50% in November “and then stop.”

He also said that there will be less pressure on the Fed following the U.S. midterm elections on Nov. 8.

Don’t miss: Dividend yields on preferred stocks have soared. This is how to pick the best ones for your portfolio.

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October 11, 2022
Will the stock market be open on Columbus Day?

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It’s a regular day of business for the U.S. stock market on Monday, October 10, as equity exchanges stay open for Columbus Day, a federal holiday that also has been recognized as Indigenous Peoples’ Day.

Bond markets, however, take the day off, which means a long weekend for the Treasury market, corporate bonds and other forms of tradable debt, starting after the close of business on Friday.

Stocks have endured a brutal selloff in the first nine months of the year as the Federal Reserve has worked to fight inflation that’s been stuck near it highest levels since the early 1980s.

See: Why stock-market bulls keep falling for Fed ‘pivot’ feints — and what it will take to put in a bottom

The central bank’s main tool to battle inflation has been to dramatically increase interest rates, while also shrinking its balance sheet, in an effort to tighten financial conditions and squelch demand for goods and services, while also bringing down stubbornly high costs of living, including food, shelter and energy prices.

The Fed’s focus in recent months also has been on cooling the roaring labor market, with strong wage gains in the past year viewed as one of several culprits behind elevated inflation.

Friday’s jobs report for September pegged the unemployment rate as matching a prepandemic low of 3.5%, dashing hopes for now of a significant trend toward a pullback in the labor market.

The S&P 500 index
SPX,
-2.80%
tumbled 2.8% on Friday, the Dow Jones Industrial Average
DJIA,
-2.11%
fell 630.15 points, or 2.1%, and the Nasdaq Composite Index
COMP,
-3.04%
dropped 3.8%. An early October rally had offered some hope for a bounce for stocks, after a brutal first nine months for investors.

Bonds also have undergone a painful repricing this year as volatility tied to the Fed’s monetary tightening campaign has eroded the value of bonds issued in the past decade of low rates.

Read: Bond markets facing historic losses grow anxious about Fed that ‘isn’t blinking yet’

The S&P 500 is down about 24% for the year, while the Dow is off 19% and the Nasdaq nearly 32%.The 10-year Treasury rate
TMUBMUSD10Y,
3.889%
was near 3.9% Friday, after recently touching 4%, it’s highest since 2010

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October 9, 2022
Dow books 630-point drop after strong jobs data rattles investors, but stocks cement weekly gains
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U.S. stocks finished sharply lower Friday, but still booked their best weekly gains in a month, after September jobs data showed an unexpected fall in the unemployment rate that’s anticipated to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.

Investors also weighed a profit warning at a leading microchip maker ahead of next week’s increase in quarterly earnings results.
What happened

The Dow Jones Industrial Average
DJIA,
-2.11%
fell 630.15 points, or 2.1%, ending at 29,296.79, but off the session low of 29,142.66.

The S&P 500
SPX,
-2.80%
dropped 104.86 points, or 2.8%, closing at 3,639.66.

The Nasdaq Composite
COMP,
-3.80%
shed 420.91 points, or 3.8%, to finish at 10,652.40.

Stocks posted back-to-back losses, trimming weekly gains, but recorded their best weekly gains since Sept. 9, according to Dow Jones Market Data.

Read: Will the stock market be open on Columbus Day?

What drove markets

Stocks recorded sharp losses Friday after the Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.

Still, a powerful rally earlier in the week boosted all three major stock indexes to weekly gains, a departure from three straight weekly losses, according to Dow Jones Market Data.

“It’s manic. We are all on edge,” said Kent Engelke, chief economic strategist at Capitol Securities Management, of the sharp market swings.

“Any piece of good news is a cause for an explosive rally,” Engelke said by phone. On the flip side, he pegged technology-based trading “in an illiquid and emotional market” as exacerbating Friday’s selloff.

“It’s a reflection that people have re-entered the mind-set that the Fed is going to be raising rates at a rapid clip, probably for longer than what they might have suspected at the start of the week,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, by phone.

Pavlik expects the Fed to keep tightening financial conditions to try to head off inflation. “But once we turn the corner, and the economy slows down, the Fed probably will be more aggressive in cutting rates on the way down.”

In addition, the Fed has been “draining liquidity from the system at a remarkable pace,” wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income, in a Friday client note, while pointing to an astounding $1.3 trillion decline in the central bank’s balance sheet since the December 2021 peak.

Pavlik at Dakota Wealth said he anticipates the Fed will start slowing interest rate hikes by mid-next year, which likely means continued pressure for the stock market, particularly with a backdrop of big oil-price
CL00,
+5.37%
gains this week after global crude producers voted to cut monthly production and with the U.S. dollar’s
DXY,
+0.44%
surge this year against a basket of rival currencies.

U.S. crude oil prices climbed for a fifth day in a row on Friday to settle at $92.64 a barrel, while booking at 16.5% weekly gain.

New York Fed President John Williams said Friday that benchmark interest rates likely need to hit 4.5% over time. The Fed’s policy rate now sits in a 3%-3.25% range, up from a zero-0.25% range a year ago.

The benchmark 10-year Treasury rate
TMUBMUSD10Y,
3.889%
climbed to 3.883% Friday, as the key metric used to gauge the affordability of credit for businesses, household and the economy posted 10 straight weeks of gains, according to Dow Jones Market Data.

Read: Bond markets facing historic losses grow anxious of Fed that ‘isn’t blinking yet’

Investors continued to hope for relief on the inflation front and will be monitoring next week’s release of the September consumer-price index, as well as corporate earnings season as it picks up.

Companies in focus

Twitter Inc.
TWTR,
-0.43%
shares fell 0.4% Friday after a judge delayed a looming trial between the company and Elon Musk to allow the Tesla Inc.
TSLA,
-6.32%
CEO more time to close his $44 billion acquisition of the social media platform.

Besides the jobs report, investors weighed a profit warning from microchip maker Advanced Micro Devices Inc. AMD, which said the PC market weakened significantly during the quarter. AMD shares fell 13.9%, and rivals including Nvidia Corp. NVDA and Intel Corp. INTC also closed lower.

U.S. cannabis stocks were choppy Friday, with the AdvisorShares Pure US Cannabis ETF
MSOS,
-2.80%
ending lower, following steep gains earlier in the week after President Joe Biden said the U.S. would consider de-scheduling cannabis from its current position as a Schedule 1 narcotic under federal law.

—Steven Goldstein contributed reporting to this article
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October 7, 2022
Will the stock market be open on Columbus Day?

[ad_1]

It’s a regular day of business for the U.S. stock market on Monday, October 10, as equity exchanges stay open for Columbus Day, a federal holiday that also has been recognized as Indigenous Peoples’ Day.

Bond markets, however, take the day off, which means a long weekend for the Treasury market, corporate bonds and other forms of tradable debt, starting after the close of business on Friday.

Stocks have endured a brutal selloff in the first nine months of the year as the Federal Reserve has worked to fight inflation that’s been stuck near it highest levels since the early 1980s.

The central bank’s main tool to battle inflation has been to dramatically increase interest rates, while also shrinking its balance sheet, in an effort to tighten financial conditions and squelch demand for goods and services, while also bringing down stubbornly high costs of living, including food, shelter and energy prices.

The Fed’s focus in recent months also has been on cooling the roaring labor market, with strong wage gains in the past year viewed as one of several culprits behind elevated inflation.

Friday’s jobs report for September pegged the unemployment rate as matching a prepandemic low of 3.5%, dashing hopes for now of a significant trend toward a pullback in the labor market.

The S&P 500 index
SPX,
-3.03%
tumbled 1.9% on Friday, the Dow Jones Industrial Average
DJIA,
-2.39%
was down 1.5% and the Nasdaq Composite Index
COMP,
-3.89%
was off 2.6%. And early October rally had offered some hope for a bounce for stocks, after a brutal first nine months for investors.

Bonds also have undergone a painful repricing this year as volatility tied to the Fed’s monetary tightening campaign has eroded the value of bonds issued in the past decade of low rates.

The S&P 500 is down about 23% for the year, the Dow off 19% and the Nasdaq off 31% since January. The 10-year Treasury rate
TMUBMUSD10Y,
3.884%
was near 3.9% Friday, after recently touching 4%, it’s highest since 2010

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October 7, 2022
Latest News – MarketWatch

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CORRECT: Services sector of U.S. economy remained strong in September

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October 5, 2022
Midterm elections: Republicans regain edge over Democrats in generic ballot, scoring biggest advantage in 2 months in key indicator

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The Republican Party has an edge again in the generic ballot, and that advantage has reached a level last seen in late July, according to a RealClearPolitics average for that closely watched indicator.

That could be another sign that the GOP may be getting back some momentum as November’s midterm elections approach, after Democratic prospects improved during the summer.

Republicans are now scoring 46.0% support in the RCP average of generic ballots, a percentage point ahead of Democrats at 45.0%.

The GOP hit a 1-point edge last Wednesday, then saw a dip, but as of Tuesday was back at that level, as shown in the chart below.

It’s not a big advantage, but it’s the best showing for Republicans in RCP’s data for generic ballots since July 28, as Democrats had the advantage for much of August and September.

Related: If this seat flips red, Republicans will have ‘probably won a relatively comfortable House majority’

Also read: ‘Republican control of the House is not a foregone conclusion,’ says political analyst

RealClearPolitics

The generic ballot refers to a poll question that asks voters which party they would support in a congressional election without naming individual candidates. Analysts tend to see it as a useful indicator.

Other websites focused on political analysis and forecasting, such as FiveThirtyEight, still show Democrats with an edge in their data for generic ballots.

Election Day for the midterm contests is now five weeks away. Democrats have focused their campaigns on abortion rights after the Supreme Court’s June decision that overturned Roe v. Wade, while Republicans have seized on Americans’ frustration with high inflation.

The additional chart below is interactive and shows RCP’s data for the generic ballot over a longer time frame.

Related: Biden to talk up Democrats’ support for abortion rights, with midterm elections now just 5 weeks away

And see: New poll finds just 30% of Americans approve of how Biden is handling inflation

Plus: Republicans’ chances for taking control of Senate rebound to 46%, a level last seen about 8 weeks ago

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October 5, 2022

21 dividend stocks yielding 5% or more of companies that will produce plenty of cash in 2023

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When the stock market has jumped two days in a row, as it has now, it is easy to become complacent.

But the Federal Reserve isn’t finished raising interest rates, and recession talk abounds. Stock investors aren’t out of the woods yet. That can make dividend stocks attractive if the yields are high and the companies produce more cash flow than they need to cover the payouts.

Below is a list of 21 stocks drawn from the S&P Composite 1500 Index
SP1500,
+3.12%
that appear to fit the bill. The S&P Composite 1500 is made up of the S&P 500
SPX,
+3.06%,
the S&P 400 Mid Cap Index
MID,
+3.18%
and the S&P Small Cap 600 Index
SML,
+3.80%.

The purpose of the list is to provide a starting point for further research. These stocks may be appropriate for you if you are looking for income, but you should do your own assessment to form your own opinion about a company’s ability to remain competitive over the next decade.

Cash flow is key

One way to measure a company’s ability to pay dividends is to look at its free cash flow yield. Free cash flow is remaining cash flow after planned capital expenditures. This money can be used to pay for dividends, buy back shares (which can raise earnings and cash flow per share), or fund acquisitions, organic expansion or for other corporate purposes.

If we divide a company’s estimated annual free cash flow per share by its current share price, we have its estimated free cash flow yield. If we compare the free cash flow yield to the current dividend yield, we may see “headroom” for cash to be deployed in ways that can benefit shareholders.

For this screen, we began with the S&P Composite 1500, then narrowed the list as follows:

Dividend yield of at least 5.00%.
Consensus free cash flow estimate available for calendar 2023, among at least five analysts polled by FactSet. We used calendar-year estimates, even though fiscal years for many companies don’t match the calendar.
Estimated 2023 free cash flow yield of at least double the current dividend yield.

For real-estate investment trusts, dividend-paying ability is measured by funds from operations (FFO), a non-GAAP figure that adds depreciation and amortization back to earnings. Adjusted funds from operations (AFFO) takes this a step further, subtracting cash expected to be used to maintain properties. So for the two REITs on the list, the FCF yield column makes use of AFFO.

For many companies in the financial sector, especially banks and insurers, free cash flow figures aren’t available, so the screen made use of earnings-per-share estimates. These are generally considered to run close to actual cash flow for these heavily regulated industries.

Here are the 21 companies that passed the screen, with dividend yields of at least 5% and estimated 2023 FCF yields at least twice the current payout. They are sorted by dividend yield:

Company	Ticker	Type	Dividend yield	Estimated 2023 FCF yield	Estimated “headroom”
Uniti Group Inc.	UNIT, +7.36%	Real-Estate Investment Trusts	8.33%	25.25%	16.92%
Hanesbrands Inc.	HBI, +5.56%	Apparel/ Footwear	8.33%	17.29%	8.96%
Kohl’s Corp.	KSS, +5.80%	Department Stores	7.68%	16.72%	9.04%
Rent-A-Center Inc.	RCII, +10.40%	Finance/ Rental/ Leasing	7.52%	17.26%	9.73%
Macerich Co.	MAC, +8.18%	Real-Estate Investment Trusts	7.43%	18.04%	10.60%
Devon Energy Corp.	DVN, +5.72%	Oil & Gas Production	7.13%	14.47%	7.33%
AT&T Inc.	T, +1.19%	Major Telecommunications	6.98%	14.82%	7.84%
Newell Brands Inc.	NWL, +5.16%	Industrial Conglomerates	6.59%	17.42%	10.82%
Dow Inc.	DOW, +2.96%	Chemicals	6.18%	15.63%	9.45%
LyondellBasell Industries NV	LYB, +3.64%	Chemicals	6.09%	16.07%	9.99%
Scotts Miracle-Gro Co. Class A	SMG, +5.01%	Chemicals	6.04%	12.68%	6.65%
Diamondback Energy Inc.	FANG, +5.23%	Oil & Gas Production	5.56%	13.63%	8.08%
Best Buy Co. Inc.	BBY, +5.86%	Electronics/ Appliance Stores	5.53%	14.08%	8.55%
Viatris Inc.	VTRS, +5.62%	Pharmaceuticals	5.50%	28.95%	23.45%
Prudential Financial Inc.	PRU, +5.66%	Life/ Health Insurance	5.38%	13.30%	7.91%
Ford Motor Co.	F, +7.76%	Motor Vehicles	5.23%	15.95%	10.72%
Invesco Ltd.	IVZ, +6.76%	Investment Managers	5.23%	14.95%	9.73%
Franklin Resources Inc.	BEN, +4.37%	Investment Managers	5.17%	13.21%	8.04%
Kontoor Brands Inc.	KTB, +0.73%	Apparel/ Footwear	5.17%	14.15%	8.98%
Seagate Technology Holdings PLC	STX, +4.09%	Computer Peripherals	5.11%	13.19%	8.07%
Foot Locker Inc.	FL, +1.35%	Apparel/ Footwear Retail	5.03%	15.52%	10.49%
Source: FactSet

Any stock screen has its limitations. If you are interested in stocks listed here, it is best to do your own research, and it is easy to get started by clicking the tickers in the table for more information about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

For the “estimated FCF yields,” consensus free cash flow estimates for calendar 2023 were used for all companies except the following:

For the REITs, (Uniti Group Inc.
UNIT,
+7.36%
and Macerich Co.
MAC,
+8.18%
), consensus AFFO estimates were used.
Consensus EPS estimates were used for Prudential Financial Inc.
PRU,
+5.66%,
Invesco Ltd.
IVZ,
+6.76%
and Franklin Resources Inc.
BEN,
+4.37%.

Don’t miss: Dividend yields on preferred stocks have soared. This is how to pick the best ones for your portfolio.

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October 4, 2022

History shows S&P 500’s bounce from 2022 low may not signal bear market’s end, cautions Bespoke

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The U.S. stock market is heading higher again Tuesday, with the S&P 500 index continuing to climb above its 2022 low, but Bespoke Investment Group cautions that history shows its recent bounce may not signal the bear market’s end.

Bespoke’s research on first-day gains from bear-market lows found that bear markets typically end with even bigger moves than the one seen Monday, when the S&P 500 jumped 2.6%. The average move higher is “actually above 4%!” the firm wrote in an Oct. 3 note.

BESPOKE INVESTMENT GROUP NOTE DATED OCT. 3, 2022

U.S. stocks are trading up this week as Treasury yields fall and the soaring U.S. dollar loses some of its strength. The market moves come as investors look for any hints that the Federal Reserve might back off from its aggressive tightening of monetary policy.

Read: A Bear Stearns moment awaits if actions like the Bank of England intervention don’t calm markets, BofA analysts say

On Monday, “markets clearly benefitted from huge declines in yields, which benefitted from Richmond Fed President Barkin echoing Governor Brainard’s speech Friday with concerns about the impact of dollar strength,” Bespoke said in its note. The reversal of the U.S. dollar, along with lower yields and higher stocks, showed investors “clearly bought that concern as the latest source of potential Fed dovishness.”

Bespoke was referring to comments by Fed Vice Chair Lael Brainard and Thomas Barkin, president of the Federal Reserve Bank of Richmond.

While the U.S. dollar’s strength has eased this week, the ICE US Dollar index
DXY,
-1.20%
is still up around 15% so far this year, according to FactSet data, at last check. The dollar has climbed as the Fed tightens monetary policy to combat high inflation.

“On balance, dollar appreciation tends to reduce import prices in the United States,” Brainard said in her speech Friday addressing global financial stability considerations. “But in some other jurisdictions, the corresponding currency depreciation may contribute to inflationary pressures and require additional tightening to offset.”

The Fed is “attentive to financial vulnerabilities that could be exacerbated by the advent of additional adverse shocks,” Brainard said in her speech. “For instance, in countries where sovereign or corporate debt levels are high, higher interest rates could increase debt-servicing burdens and concerns about debt sustainability, which could be exacerbated by currency depreciation.”

Read: U.S. dollar’s dominance tends to hurt these sectors of the stock market less, says RBC

As for the decline in Treasury yields, the 10-year Treasury note dropped 15.2 basis points Monday to 3.650%, while two-year Treasury yield fell 10.3 basis points to 4.103%, according to Dow Jones Market Data. Treasury yields continued to dip on Tuesday, with the two-year
TMUBMUSD02Y,
4.104%
at 4.08% and the 10-year
TMUBMUSD10Y,
3.621%
falling to 3.60%, FactSet data show, at last check.

Read: Why 2-year Treasury yields are ‘the base problem’ for the struggling stock market, according to this Morgan Stanley portfolio manager

Meanwhile, the ICE US Dollar index, a measure of the dollar’s strength against a basket of rival currencies, was down more than 1% around midday Tuesday.

The U.S. stock market was moving sharply higher again on Tuesday, with the Dow Jones Industrial Average
DJIA,
+2.17%
jumping 2.6%, the S&P 500
SPX,
+2.40%
climbing 2.9% and the Nasdaq Composite
COMP,
+2.66%
surging 3.3%, FactSet data show, at last check.

But after this week’s bounce, the S&P 500 remains down more than 20% this year, based on trading around midday Tuesday.

“It’s easy to read-in to very high two-way volatility across assets as signaling a Fed pivot is finally here, but we just haven’t seen any reason for that,” Bespoke said. “Until the Fed durably shifts away from their concern over inflation, headwinds for stocks and bonds alongside tailwinds for the dollar will continue.”

Also read: Rising interest rates, economic slowdown and higher unemployment will drive U.S. households to sell more stocks in 2023: Goldman Sachs

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October 4, 2022
What investors need to know about October’s complicated stock-market history

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While September lived up to its reputation as a brutal month for stocks, October tends to be a “bear-market killer,” associated with historically strong returns, especially in midterm election years.

Skeptics, however, are warning investors that negative economic fundamentals could overwhelm seasonal trends as what’s traditionally the roughest period for equities comes to an end.

Rough stretch

U.S. stocks ended sharply lower on Friday, posting their worst skid in the first nine months of any year in two decades. The S&P 500
SPX,
-1.51%
recorded a monthly loss of 9.3%, its worst September performance since 2002. The Dow Jones Industrial Average
DJIA,
-1.71%
fell 8.8%, while the Nasdaq Composite
COMP,
-1.51%
on Friday pushed its total monthly loss to 10.5%, according to Dow Jones Market Data.

Read: Stocks and bonds are ‘discounting for a disaster’ after the worst stretch for investors in 20 years

The indexes had booked modest gains in the first half of the month after investors fully priced in a large interest-rate hike at the FOMC meeting late September as August’s inflation data showed little sign of easing price pressures. However, the central bank’s more-hawkish-than-expected stance caused stocks to give up all those early September gains. The Dow entered its first bear market since March 2020 in the last week of the month, while the benchmark S&P slid to another 2022 low.

See: It’s the worst September for stocks since 2008. What that means for October.

Bear markets and midterms

October’s track record may offer some comfort as it has been a turnaround month, or a “bear killer,” according to the data from Stock Trader’s Almanac.

“Twelve post-WWII bear markets have ended in October: 1946, 1957, 1960, 1962, 1966, 1974, 1987, 1990, 1998, 2001, 2002 and 2011 (S&P 500 declined 19.4%),” wrote Jeff Hirsch, editor of the Stock Trader’s Almanac, in a note on Thursday. “Seven of these years were midterm bottoms.”

Of course 2022 is also a midterm election year, with congressional elections coming up on Nov. 8.

According to Hirsch, Octobers in the midterm election years are “downright stellar” and usually where the “sweet spot” of the four-year presidential election cycle begins (see chart below).

“The fourth quarter of the midterm years combines with the first and second quarters of the pre-election years for the best three consecutive quarter span for the market, averaging 19.3% for the DJIA and 20.0% for the S&P 500 (since 1949), and an amazing 29.3% for NASDAQ (since 1971),” wrote Hirsch.

SOURCE: STOCKTRADERSALMANAC

‘Atypical period’

Skeptics aren’t convinced the pattern will hold true this October. Ralph Bassett, head of investments at Abrdn, an asset-management firm based in Scotland, said these dynamics could only play out in “more normalized years.”

“This is just such an atypical period for so many reasons,” Bassett told MarketWatch in a phone interview on Thursday. “A lot of mutual funds have their fiscal year-end in October, so there tends to be a lot of buying and selling to manage tax losses. That’s kind of something that we’re going through and you have to be very sensitive to how you manage all of that.”

An old Wall Street adage, “Sell in May and go away,” refers to the market’s historical underperformance during the six-month period from May to October. Stock Trader’s Almanac, which is credited with coining the saying, found investing in stocks from November to April and switching into fixed income the other six months would have “produced reliable returns with reduced risk since 1950.”

Strategists at Stifel, a wealth-management firm, contend the S&P 500, which has fallen more than 23% from its Jan. 3 record finish, is in a bottoming process. They see positive catalysts between the fourth quarter of 2022 and the start of 2023 as Fed policy plus S&P 500 negative seasonality are headwinds that should subside by then.

“Monetary policy works with a six-month lag, and between the [Nov. 2] and [Dec. 14] final two Fed meetings of 2022, we do see subtle movement toward a data-dependent Fed pause which would bullishly allow investors to focus on (improving) inflation data rather than policy,” wrote strategists led by Barry Bannister, chief equity strategist, in a recent note. “This could reinforce positive market seasonality, which is historically strong for the S&P 500 from November to April.”

October crashes

Seasonal trends, however, aren’t written in stone. Dow Jones Market Data found the S&P 500 recorded positive returns between May and October in the past six years (see chart below).

SOURCE: FACTSET, DOW JONES MARKET DATA

Anthony Saglimbene, chief markets strategist at Ameriprise Financial, said there are periods in history where October could evoke fear on Wall Street as some large historical market crashes, including those in 1987 and 1929, occurred during the month.

“I think that any years where you’ve had a very difficult year for stocks, seasonality should discount it, because there are some other macro forces [that are] pushing on stocks, and you need to see more clarity on those macro forces that are pushing stocks down,” Saglimbene told MarketWatch on Friday. “Frankly, I don’t think we’re going to see a lot of visibility at least over the next few months.”

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October 1, 2022
Many young people shouldn’t save for retirement, says research based on a Nobel Prize-winning theory

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Most financial planners advise young people to start saving early — and often — for retirement so they can take advantage of the so-called eighth wonder of the world – the power of compound interest.

And many advisers routinely urge those entering the workforce to contribute to their 401(k), especially when their employer is matching some portion of the amount the worker is contributing. The matching contribution is – essentially – free money.

New research, however, indicates that many young people should not save for retirement.

The reason has to do with something called the life-cycle model, which suggests that rational individuals allocate resources over their lifetimes with the aim of avoiding sharp changes in their standard of living.

Put another way, individuals, according to the model which dates back to economists Franco Modigliani, a Nobel Prize winner, and Richard Brumberg in the early 1950s, seek to smooth what economists call their consumption, or what normal people call their spending.

According to the model, young workers with low income dissave; middle-aged workers save a lot; and retirees spend down their savings.

Source: Bogleheads.org

The just-published research examines the life-cycle model even further by looking at high- and low-income workers, as well as whether young workers should be automatically enrolled in 401(k) plans. What the researchers found is this:

1. High-income workers tend to experience wage growth over their careers. And that’s the primary reason why they should wait to save. “For these workers, maintaining as steady a standard of living as possible therefore requires spending all income while young and only starting to save for retirement during middle age,” wrote Jason Scott, the managing director of J.S. Retirement Consulting; John Shoven, an economics professor at Stanford University; Sita Slavov, a public policy professor at George Mason University; and John Watson, a lecturer in management at the Stanford Graduate School of Business.

2. Low-income workers, whose wage profiles tend to be flatter, receive high Social Security replacement rates, making optimal saving rates very low.

Middle-aged workers will need to save more later

In an interview, Scott discussed what some might view as a contrary-to-conventional wisdom approach to saving for retirement.

Why does one save for retirement? In essence, Scott said, it’s because you want to have the same standard of living when you’re not working as you did while you were working.

“The economic model would suggest ‘Hey, it’s not smart to live really high in the years when you’re working and really low when you’re retired,’” he said. “And so, you try to smooth that out. You want to save when you have relatively high income to support yourself when you have relatively low income. That’s really the core of the life-cycle model.”

But why would you spend all your income when you’re young and not save?

“In the life-cycle model, we are assuming you are getting the absolute most happiness you can out of income each year,” said Scott. “In other words, you are doing your best at age 25 with $25,000, and there is no way to live ‘cheaply’ and do better,” he said. “We also assume a given amount of money is more valuable to you when you are poor compared to when you are wealthy.” (Meaning $1,000 means a lot more at 25 than at 45.)

Scott also said that young workers might also consider securing a mortgage to buy a house rather than save for retirement. The reasons? You’re borrowing against future earnings to help that consumption, plus, you’re building equity that could be used to fund future consumption, he said.

Are young workers squandering the advantage of time?

Many institutions and advisers recommend just the opposite of what the life-cycle model suggests. They recommend that workers should have a certain amount of their salary salted away for retirement at certain ages in order to fund their desired standard of living in retirement. T. Rowe Price, for instance, suggests that a 30-year-old should have half their salary saved for retirement; a 40-year-old should have 1.5 times to 2 times their salary saved; a 50-year-old should have 3 times to 5.5 times their salary saved; and a 65-year-old should have 7 times to 13.5 times their salary saved.

Scott doesn’t disagree that workers should have savings benchmarks as a multiple of income. But he said a high-income worker who waits until middle age to save for retirement can easily reach the later-age benchmarks. “Savings for retirement probably is more in the zero range until 35 or so,” Scott said. “And then it is probably faster after that because you want to accumulate the same amount.”

Plus, he noted, the home equity a worker has could count toward the savings benchmark as well.

So, what about all the experts who say young people are best positioned to save because they have such a long timeline? Aren’t young workers just squandering that advantage?

Not necessarily, said Scott.

“First: saving earns interest, so you have more in the future,” he said. “However, in economics, we assume that people prefer money today compared to money in the future. Sometimes this is called a time discount. These effects offset each other, so it depends on the situation as to which is more significant. Given interest rates are so low, we generally think time discounts exceed interest rates.”

And second, Scott said, “early saving could have a benefit from the power of compounding, but the power of compounding is certainly irrelevant when after-inflation interest rates are 0% – as they have been for years.”

In essence, Scott said, the current environment makes a front-loaded lifetime spending profile optimal.

Low-income workers don’t need to save either

As for those with low income, say in the 25^th percentile, Scott said it’s less about the “income ramp that really moves saving” and more that Social Security is extremely progressive; it replaces a large percentage of one’s preretirement income. “The natural need to save is not there when Social Security replaces 70, 80, 90% (of one’s preretirement income),” he said.

In essence, the more Social Security replaces of your preretirement income, the less you’ll need to save. The Social Security Administration and others are currently researching what percent of preretirement income Social Security replaces by income quintile, but previously published research from 2014 shows that Social Security represented nearly 84% of the lowest income quintile’s family income in retirement while it only represented about 16% of the highest income quintile’s family income in retirement.

Source: Social Security Administration

Is it worth auto-enrolling young workers in a 401(k) plan?

Scott and his co-authors also show that the “welfare costs” of automatically enrolling younger workers in defined-contribution plans—if they are passive savers who do not opt-out immediately—can be substantial, even with employer matching. “If saving is suboptimal, saving by default creates welfare costs; you’re doing the wrong thing for this population,” he said.

Welfare costs, according to Scott, are the costs of taking an action compared to the best possible action. “For example, suppose you wanted to go to restaurant A, but you were forced to go to restaurant B,” he said. “You would have suffered a welfare loss.”

In fact, Scott said young workers who are automatically enrolled into their 401(k) might consider when they’re in their early 30s taking the money out of their retirement plan, paying whatever penalty and taxes they might incur, and use the money to improve their standard of living.

“It’s optimal for them to take the money and use it to improve their spending,” said Scott. “It would be better if there weren’t penalties.”

Why is this so? “If I didn’t understand that I was being defaulted into a 401(k) plan, and I didn’t want to save, then I suffered a welfare loss,” said Scott. “We assume people figure out after five years that they were defaulted. At that point, they want their money out of the 401(k), and they are optimally willing to pay the 10% penalty to get their money out.”

Scott and his colleagues assessed welfare costs by figuring out how much they have to compensate young workers at that five-year point so that they are OK with having been inappropriately forced to save. Of course, the welfare costs would be lower if they didn’t have to pay the penalty to cash out their 401(k).

And what about workers who are automatically enrolled in a 401(k)? Are they not creating a savings habit?

Not necessarily. “The person who is confused and defaulted doesn’t really know it’s happening,” said Scott. “Maybe they’re getting a savings habit. They’re certainly living without the money.”

Scott also addressed the notion of giving up free money – the employer match — by not saving for retirement in an employer-sponsored retirement plan. For young workers, he said the match isn’t enough to overcome the cost of, say, five years of below-optimal spending. “If you think it’s for retirement, the match-improved benefit in retirement doesn’t overcome the cost of losing money when you’re poor,” said Scott. “I’m simply noting that if you are not consciously making the choice to save, it is hard to argue you are making a saving habit. You did figure out how to live on less, but in this case, you did not want to, nor do you intend to continue saving.”

The research raises questions and risks that must be addressed

There are plenty of questions the research raises. For instance, many experts say it’s a good idea to get in the habit of saving, to pay yourself first. Scott doesn’t disagree. For instance, a person might save to build an emergency fund or a down payment on a house.

As for the folks who might say you’re losing the power of compounding, Scott had this to say: “I think the power of compounding is challenged when real interest rates are 0%.” Of course, one could earn more than 0% real interest but that would mean taking on additional risk.

“The principle is about, ‘Should you save when you are relatively poor so you can have more when you are relatively rich?’ The life-cycle model says, ‘No way.’ This is independent of how you invest money between time periods,” Scott said. “For investing, our model does look at riskless interest rates. We argue that investment expected returns and risks are in equilibrium, so the core result is unlikely to change by introducing risky investments. However, it is definitely a limitation of our approach.”

Scott agreed there are risks to be acknowledged, as well. It’s possible, for instance, that Social Security, because of cuts to benefits, might not replace a low-income worker’s preretirement salary as much as it does now. And it’s possible that a worker might not experience high wage growth. What about people having to buy into the life-cycle model?

“You don’t have to buy into all of it,” said Scott. “You have to buy into this notion: You want to save when you’re relatively rich in order to spend when you’re relatively poor.”

So, isn’t this a big assumption to make about people’s career/pay trajectory?

“We consider relatively rich wage profiles and relatively poor wage profiles,” said Scott. “Both suggest young people should not save for retirement. I think the vast majority of median wage or higher workers experience a wage increase over their first 20 years of working. However, there is certainly risk in wages. I think you could rightly argue that young people might want to save some as a precaution against unexpected wage declines. However, this would not be saving for retirement.”

So, should you wait to save for retirement until you’re in your mid-30s? Well, if you subscribe to the life-cycle model, sure, why not? But if you subscribe to conventional wisdom, know that consumption might be lower in your younger years than it needs to be.

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September 30, 2022
Weekend reads: What to expect now for home prices, stocks and bonds

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This week Freddie Mac said the average interest rate on a 30-year mortgage loan in the U.S. had climbed to 6.70% from 6.29% the week before and 6.02% two weeks ago. The average rate a year ago was 3.01%.

Would-be sellers who have low-rate mortgage loans are reluctant if it means they need to take out a new loan to fund their next home. Would-be buyers are forced out of the market, as the monthly principal and interest payment for a new 30-year loan, based on Freddie Mac’s figures, has increased 53% from a year ago.

Home-sale contracts are being canceled at a record pace in some areas.

But these factors could lead to a buyer’s market in 2023 if prices plunge. Here are the areas economists expect to see the largest home price declines.

The strong dollar and the stock market

Khaled Desouki/Agence France-Presse/Getty Images

The dollar has strengthened as the Federal Reserve has taken the lead among central banks in raising interest rates. This is reverberating across the world, making it more costly for countries to make interest payments on dollar-denominated debt and increasing the cost of any commodity traded in dollars.

The rising dollar lowers prices on imported goods for Americans and can also lower their international travel costs. But Michael Wilson, Morgan Stanley’s chief equity strategist, warns that earnings for the S&P 500
SPX,
-1.51%
would decline as a direct result of the strong dollar and called the current foreign-exchange backdrop an “untenable situation” for the stock market.

On the other hand: Companies are trying to blame weak earnings on the strong U.S. dollar, but that’s a lame excuse

This is what happens when bearish sentiment runs high

Michael Brush interviews David Baron, co-manager of the Baron Focused Growth Fund
BFGFX,
-0.76%,
who describes opportunities cropping up as institutional investors dump stocks. He also explains his winning long-term strategy, which has included a very long-term investment in Tesla Inc.
TSLA,
-1.10%.

A a positive sign for the stock market: These 12 stocks have seen strong insider buying

Time to buy bonds?

When interest rates rise, bond prices fall. But it also means that if you have money to put to work, bond yields have become much more attractive.

Khuram Chaudhry, a European equity quantitative strategist at JPMorgan in London, makes the case for buying bonds now.

What about preferred stocks?

Getty Images/iStockphoto

Preferred stocks feature stated dividend yields and prices that move the same way bond prices do. That means prices for many issues are now heavily discounted to face value and that current yields are much higher than they were at the end of 2021. Here’s an in-depth guide on how to research preferred stocks and make your own selections.

Related: 22 dividend stocks screened for quality and safety

The problem with macro market projections

Stanley Druckenmiller predicted a “hard landing” in 2023 for the U.S. economy while speaking at CNBC’s Delivering Alpha Investor Summit on Sept. 28.

Bloomberg

Stanley Druckenmiller predicted a U.S. recession in 2023 as a result of monetary policy tightening by the Federal Reserve. That may not be much of a stretch, considering that the U.S. economy contracted during the first half of 2022, according to revised GDP figures from the Bureau of Economic Analysis.

But investors should be careful — macro forecasts often turn out to be incorrect, Mark Hulbert warns.

More on stocks: It’s the worst September for stocks since 2008. What that means for October.

Recessions and your retirement plans

Getty Images

Alessandra Malito has advice on how retirees and people planning for retirement can prepare for tough economic times.

Also: Reset your retirement calculator now for today’s bleaker stock markets and make sure you’re still on track

Investors tremble and a central bank scrambles

The Bank of England’s headquarters.

Agence France-Presse/Getty Images

After the new U.K. government of Prime Minister Liz Truss announced a massive tax cut along with a new spending program to help counter rising fuel costs and new borrowing, the pound hit a new low against the dollar on Sept. 26 as investors and money managers panicked and sold-off U.K. government bonds. Steve Goldstein explains how and why the Bank of England came tot the rescue.

A closer look at reverse mortgages

Getty Images/iStockphoto

Beth Pinsker digs deeply to explain how to use a reverse mortgage as a financial planning tool.

Poking a little fun at Elon Musk

Getty Images

After Tesla CEO Elon Musk said the upcoming Cybertruck would be sufficiently waterproof to “serve briefly as a boat,” the San Francisco Bay Ferry offered this advice to patrons.

Want more from MarketWatch? Sign up for this and other newsletters, and get the latest news, personal finance and investing advice.

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September 30, 2022
Home Page – MarketWatch

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This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news.

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September 29, 2022