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Downgrade This

By Mike Zaccardi, CFA, CMT | Jul 18, 2022 03:48AM ET

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This article was originally published at The Humble Dollar

The Research Team at Bank of America put out a pair of seemingly contradictory investment notes last week. On the bullish side, the folks there pointed to extremely cheap valuations in the small-cap space. But a few days later, the economics department rocked Wall Street with a bearish forecast calling for five consecutive quarters of negative real U.S. GDP growth.

I chuckled at the sequencing: It’s often said the stock market leads the economy by about six months, give or take. Perhaps that’s no better seen than in these two research pieces. Consider that stocks—big and small, domestic and foreign—are all down bigtime so far in 2022, and yet it’s only now that we begin to hear economic downgrades from Wall Street research outfits, along with analysts lowering their year-end stock price targets.

Rarely is it the case that the professional analysts at large research firms accurately get ahead of major market moves. To me, these pessimistic outlooks should make investors more sanguine about stocks. Maybe downbeat prognostications from the pros are just what’s needed to set up the next bull market. We already see incredibly sour sentiment from investors, corporate executives, small business owners and consumers. Low valuations, analyst downgrades and general despondency are characteristics of buying opportunities, not a time to hide out in cash.

It’s hard not to be upbeat about the future—assuming you have a time horizon that stretches beyond the next few months. History tells us that returns are, on average, robust after a dismal six-month stretch like we’ve just endured, according to data gathered by Charlie Bilello. While everyone else shudders when they peek at their account balances, now might be the time to ramp up your monthly contributions to your low-cost stock index funds.

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Central Banks

Interest Rates

Next Meeting

FED

5.00%

May 03, 2023

ECB

3.50%

May 04, 2023

BOE

4.25%

May 11, 2023

SNB

1.50%

Jun 22, 2023

RBA

3.60%

Apr 04, 2023

BOC

4.50%

Apr 12, 2023

RBNZ

4.75%

May 24, 2023

BOJ

-0.10%

Apr 28, 2023

CBR

7.50%

Apr 28, 2023

RBI

6.50%

Apr 03, 2023

PBOC

3.65%

BCB

13.75%

May 03, 2023

US 30	32,878.7	+19.7	+0.06%
US 500	4,055.1	+4.3	+0.11%
Dow Jones	32,859.03	+141.43	+0.43%
S&P 500	4,050.83	+23.02	+0.57%
Nasdaq	12,013.47	+87.24	+0.73%
S&P 500 VIX	19.02	-0.10	-0.52%
Dollar Index	101.855	-0.443	-0.43%

Crude Oil WTI	74.38	+0.01	+0.01%
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U.S. 10Y	3.549	-0.002	-0.06%
U.S. 30Y	3.738	-0.008	-0.21%
U.S. 5Y	3.6750	+0.0120	+0.33%
U.S. 3M	4.8323	+0.0180	+0.38%
US 10Y T-Note	114.52	-0.06	-0.05%
Euro Bund	135.37	-0.19	-0.14%
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Apple	162.36	+1.59	+0.99%
Alphabet A	100.89	-0.50	-0.49%
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Amazon.com	102.00	+1.75	+1.75%
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