Latest news with #BenCarlson
CNBC
a day ago
- Business
- CNBC
Bonds are on pace for their worst decade, but income investors may still come out ahead
Bonds have had a terrible decade, but investors can expect better times ahead, according to Ben Carlson, director of institutional management at Ritholtz Wealth Management. A recent analysis by Deutsche Bank found that on a five- and 10-year basis, this has been the worst period for 10-year Treasury nominal returns. The same goes for the 30-year Treasury , which saw even more extreme downside, the firm said in a recent note. Carlson took it a step further, looking at returns by decade for various maturities. He found the 2020s are on pace for the worst decade in modern times. Yet, taking inflation into account, it is even worse, he said. That is reflected in bonds' real returns. "Inflation is really the biggest risk for bonds," Carlson told CNBC. "Inflation is the thing that hurts because it eats into the interest income you're getting paid back." Long-term Treasurys have been the most negatively impacted. Those that have maturities of 20 years or more, as evidenced by the iShares 20-Year+ Treasury Bond ETF , have seen a total return of more than -40% since 2022, he said. TLT 5Y mountain iShares 20+ Year Treasury Bond ETF's five-year returns A better place now However, the outlook moving forward is improved now that starting yields are higher, he said. Bond yields move inversely to prices. There is a 0.95% correlation between starting yield and the forward five- or ten-year returns for bonds — therefore, a higher starting yield means a higher expected return, he explained. He's just not calling them a "screaming buy." "It's been painful to get here," Carlson said. "[Yet], bond investors are in a much better place than they have been for probably the last 15 years or so, just because yields are higher." While there is still concern that rising rates and inflation can hurt bonds, there is also a bigger margin of safety now thanks to those yields, he said. Investors can also be protected if there is a recession or if economic growth slows, he added. "If rates fall, then you kind of get a double whammy of price appreciation and income," he said. Being more thoughtful Both short- and intermediate-term bonds can have a place in portfolios right now, as long as investors understand their roles, Carlson said. Short-term bonds, like Treasury bills and money market funds , saw an influx of investors during the bond market rout. However, the assets will see yields fall swiftly if the Federal Reserve lowers rates in response to an economic slowdown or lower inflation, he said. BIL 5Y mountain SPDR Bloomberg 1-3 Month T-Bill ETF's 5-year returns "When those rates fall, you're not going to get any price appreciation because the time frame is so much shorter," he said. "You have to think about those types of vehicles not as much for yield anymore, even though the yields are pretty respectable. It's more about, do you want protection from volatility? Do you want protection from interest-rate risk?" Meanwhile, intermediate-to-longer-term bonds can make sense for those who want to hold them and take advantage of the yield, Carlson noted. SHY IEF 5Y mountain Comparison of iShares 1-3 Year Treasury Bond ETF five-year returns to iShares 7-10 Year Treasury Bond ETF (IEF) five-year returns "If you wanted to lock in longer-term yields because you have something you want to pay for in five or 10 years, then I think that makes sense. If you're trying to guess which way rates are going to go, that's much harder to do" he said. The bottom line is that investors have to be more thoughtful about their fixed-income portfolios now, he said. "Investors just have to be a little more cognizant of what they have, and they know that these different bonds serve different purposes," Carlson said. "Maybe some more diversification is the answer, and owning different types of bonds for different environments."
Business Times
4 days ago
- Business
- Business Times
Investment myths in a fast-moving stock market
[SINGAPORE] Welcome to the most volatile decade in recent memory – and we're not even halfway through. The 2020s have already recorded 440 trading days with daily stock movements of 1 per cent or more, according to wealth manager Ben Carlson. To put that in perspective, an entire decade typically averages just 507 such days. Said another way, the 2020s have crammed nearly 10 years of stock market volatility into less than five years – an unusually heavy dose of ups and downs. So, if you feel the stock market is moving faster, you now know why. When volatility teaches the wrong lessons When markets are volatile, the common advice is to simply tune out the noise, but that's easier said than done. The problem lies in the way our brain processes information. In the book Your Money and Your Brain, author Jason Zweig said our brains are wired to recognise patterns even when none exist. Here's the rub: It's not a mechanism you can switch off at will. In other words, by watching daily stock price movements, you may be receiving the wrong signals and end up learning the wrong lessons. That's a big problem as key misconceptions may start to take shape. Take the sudden rise of China's DeepSeek AI model back in January. When the news broke, AI-related stocks were hammered, with Nvidia bearing the brunt, suffering a 17 per cent fall in a single day. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Such a sequence suggests you need to react fast to avoid such a mishap. Furthermore, it also implies the need to instantly assess new developments and act to prevent further losses. But that's not how it played out. In both cases, investors were misled into thinking that speed is the difference between making and losing money. The misguided need for speed In the hours and days after DeepSeek became mainstream, the narrative quickly centred around the Chinese AI model's development cost – under US$6 million. Why was this figure important? This low expense stood in contrast to the billions of dollars US companies were pouring into artificial intelligence (AI) models and data centres, with Nvidia taking the lion's share. Hence, the prevailing narrative suggested that the company would have the most to lose. Yet, six months later, it's becoming clear that the hasty assessment on DeepSeek is premature in more ways than one. One, DeepSeek's US$6 million development cost does not cover any prior research and experiment on data, architectures and algorithms. The actual cost is higher but unknown, effectively knocking out the main narrative. Two, major tech companies such as Alphabet, Amazon, Meta Platforms and Microsoft have continued to pour billions into data centres. More importantly, much of this spending has flowed to Nvidia. For the past two quarters, the GPU provider reported revenue gains of 78 per cent and 69 per cent year on year, respectively. To top it off, Nvidia shares have risen by 39 per cent from their January low. In other words, those who were looking to save a few dollars by exiting fast ended up leaving a lot more money on the table. Simply waiting for a couple of quarters would have done the trick. Avoiding the pitfalls of volatile markets But if moving fast is not the answer, then what should investors do instead? In my mind, there are three useful guidelines to follow. For starters, most major declines are accompanied by negative headlines. To be clear, it's not about the bad news itself. The real problem lies in the avalanche of negativity that follows, ranging from detailed articles on what went wrong to podcasts and rapid-fire social media takes. Amid the onslaught, any good news is buried and often left unmentioned. This predicament is best exemplified when Netflix lost a million subscribers in H1 2022. In the aftermath, the negative news was unrelenting, with many pointing to the crowded field of competitors and the lack of quality content. Impatient investors reacted by dumping Netflix shares, sending the stock down by 75 per cent from its 2021 peak. But here's the truth: If you believe that you shouldn't fall in love with a stock, then you should also accept that you shouldn't fall into hate with a stock. Amid the pessimism, the naysayers overlooked the positives. In particular, Netflix had a dual strategy in place to launch an ad-supported plan while cracking down on password sharing. Within six months, its new ad-supported option was launched. By the end of 2024, the company's subscriptions surpassed 300 million users, adding over 80 million new members since losing a million in H1 2022. In fact, if you zoom out and look at the loss of subscribers between January and June 2022, it would look like a minor blip in the upward trend. The lesson here is clear. When everyone is eager to tell you the bad news, you have to look for the good news yourself. Let time be the ultimate judge Not every piece of news is worthy of your attention, even when everyone's talking about it. So, here's the next thing to keep in mind: There's a limit to what you can focus on, so don't give your attention away cheaply. The current developments in the AI space are a good example. When OpenAI's ChatGPT caught fire in late 2022, the reactions went on overdrive, prophesying on the future outcomes. The problem, however, is that the outcomes suggested often veer towards the extreme. For instance, some commenters predicted the demise of Google search. The situation is further exacerbated by Microsoft's launch of an AI-powered search. When faced with such a dilemma, remember this: Let time be the judge. In my experience, disruptions do not happen immediately. In addition, there is always time for the incumbent to respond. Furthermore, the AI landscape could also play out in ways we cannot imagine ahead of time. OpenAI's recent deal with Google Cloud services is a good example. This outcome shows there can be more than one winner. You simply have to be patient and let time be the judge. Get smart: There's always time to add a winner Much of the rush to act is based on the fear of missing out, that if you don't invest now, you are sure to miss out on a huge winner in the future. Nothing could be further from the truth. For instance, you could miss the iPhone's launch by a decade and still net a nearly 470 per cent return by investing in Apple 10 years later. Sure, the gain wouldn't be as good as investing at the time of the introduction of the iPhone. But have you seen an unhappy investor with a 4.7x gain? To summarise, as the stock market fluctuates, don't let your emotions flutter along with the ride. Instead, keep these principles in mind: It's not about giving your attention to every single bit of news, it's about figuring out which new development is worth your time. It's not about how fast you react to a new business development, it's about whether or not these developments have a lasting impact. It's not about whether you have a strong opinion on technological trends but whether you can validate these trends at the business level over a long period of time. Simply said, let time do its work. The writer owns all the stocks mentioned. He is co-founder of The Smart Investor, a website that aims to help people to invest smartly by providing investor education, stock commentary and market coverage
Yahoo
23-06-2025
- Business
- Yahoo
Get Smart: Top 5 Questions by Investors Amid All-Time Highs
As of last Friday, the S&P 500 index is a whisker away from its all-time high. When markets are high, holding stocks can become uncomfortable for some. You may have questions. So, here are some answers. Yes, it will. But here's the more important question: when will it happen? No one knows. A market decline could start this week, next month, or maybe even a year from now. All we know is that market downturns have happened before, and they will happen again. History shows the S&P 500 declines by 10% or more (a market correction) every 1.5 years or so and experiences a fall of 20% or more (a bear market) every four years or so, based on data from wealth manager Ben Carlson. Knowing the odds is not the same as knowing when a decline will happen. In theory, selling your stocks at market highs sounds good. But here's the truth: your temporary relief will soon be replaced with a nagging worry: when do you get back in? It's a valid concern. As I pointed out in last week's Business Times article, if you missed the 10 best days (read: gains) in the stock market over the past 30 years, your returns would be less than half compared to being fully invested for the same period. That's the risk you will be taking. We'll revisit the topic of selling at the end again — for now, let's move on. It's certainly possible. According to Carlson, the stock market goes up roughly three out of every four years. That's a 75% chance of experiencing a gain in any year. What's more, if you hold for a 10 year period, history shows that you will have a 93% chance of coming out ahead with a positive result. Lengthen that to 20 years and the odds increase to 100%. That's as good as it gets. Yes, that's possible too. In fact, over the next 10 years, history says that you have a 95% chance of experiencing a bear market. Oh dear … … but wait, didn't the statistics also say that there is a 93% chance of scoring a gain over the next decade? How can that be? Here's the truth: the market will be volatile even if it goes up over the long run. In all likelihood, there will be pullbacks, including a high chance of 20% downturns or more over the 10 years — it's the price to pay for long-term returns. Sounds terrible? Well, downturns are not as bad if you can keep your nerve. As shares become cheaper, you have a higher chance of getting better returns too. For instance, The Smart All Stars Portfolio managed to pick up shares of Meta Platforms (NASDAQ: META) back in January 2022 and again in February 2022. The two buys are up nearly 115% and over 243%, respectively. Now, that doesn't sound too bad, ain't it? Of course, you can — that is, if you do so for the right reasons. There's nothing inherently wrong with buying bonds. For instance, the cut-off yield for a six-month Singapore Government Securities Treasury Bill (SGS T-Bill) on 5 June 2025 was 2.35%. It's a decent yield, albeit lower than last year. Bonds also offer capital protection which makes it a good option to park your money. But like any investment vehicle, this idea can be taken too far. The problem starts when impatient investors try to treat bonds like stocks. Some will try to guess whether bonds or stocks will bring better returns in 2025. Others will attempt to squeeze out an extra percentage or two from bonds so that they can get a slightly higher yield from their bonds. That's when the trouble starts. Some may swap out stocks for bonds, thinking that bonds will provide higher returns in the near term. They may be relieved at first, but if the stock market continues to go up, envy creeps in, and that's where mistakes happen. On the flip side, if the market goes down, the initial contentment will give way to the familiar nagging worry of when is the right time to re-enter the market. That's trading, not investing. Ultimately, you should buy bonds for the right reasons: capital protection with a decent yield. Ideally, you should sell your shares when you hit your financial goals. That's truly the best reason to let go. Here at The Smart Investor, we're lifelong students of the investing game. We firmly believe investing can add so much to our lives. But let's not lose sight of a simple truth: investing is a vehicle, a way to get you to where you want to go. So, when you arrive there, it's okay to step off. As I have always said: you're not successful when you beat the market or outshine your friends. You're successful in investing when you achieve the goals you set out to achieve. It's as simple as that. Good luck. Tired of articles that just say 'do your own research'? Get Smart, our weekly investing newsletter shows you how. You'll learn simple ways to size up a stock, like what signs to look for and how to know if it's worth your money. These are tools our team uses, and you can use them too. Sign up here for free and start investing with more confidence. Follow us on Facebook, Instagram and Telegram for the latest investing news and analyses! Disclosure: Chin Hui Leong owns shares of Meta Platforms. The post Get Smart: Top 5 Questions by Investors Amid All-Time Highs appeared first on The Smart Investor. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
05-05-2025
- Business
- Forbes
How To Find Beaten-Down S&P 500 Stocks With Upside
Evolving U.S. tariff policies have made waves in the stock market. In April, the S&P 500, a benchmark index for large-cap stocks, fell 20% from a February high before rallying back to a 3% loss for the year. The volatility may wreak havoc on your portfolio returns, but it also creates opportunities for long-term investors. This guide explains how to use a simple, free stock screener to find those opportunities—good stocks with upside—in minutes. Also included are tips for researching those stocks to ensure they align with your investment goals. Stock screeners are applications that filter equities by parameters you set. Screeners can be incredibly powerful in two scenarios: and have popular and free online stock screeners. You can screen for beaten-down S&P 500 stocks with upside using four parameters: Once the screener returns the list of stocks matching these parameters, you can sort and filter the results to find your best options. For example, to review the worst-performing S&P 500 stocks, sort the list by highest to lowest year-to-date price change. The real work of investing—research—begins after the screening process. Research helps you make confident investing decisions by answering these key questions: Your investing timeline is how long you will keep your funds invested before liquidating. When buying stocks, you should plan on remaining invested for at least five to 10 years. The longer you remain invested, the lower your risk of loss. This is because the stock market can be volatile over short time frames, but normally trends up over longer periods. Two fun facts from an analysis by Ben Carlson crystallize this point: With a long investing timeline, you don't have to worry too much about short-term volatility. You can choose to remain invested until the market returns to growth. In doing so, you avoid realizing losses and keep yourself positioned to benefit from a recovery. Risk tolerance refers to how much price volatility you can accept. Investing within your risk tolerance parameters helps you make informed, logical decisions rather than emotional ones. If you prefer safer investments, lean into: Identifying what's prompting a stock price decline usually isn't hard. First, review the stock's price history relative to the S&P 500. If the two trajectories are similar, macro trends may be prompting the stock price decline—rather than circumstances specific to the company. Macro trends are cyclical, meaning they resolve and repeat over time. Next, look for negative headlines about the company that align with dates the price fell. Ratings changes and disappointing earnings reports are common reasons a stock's price can decline suddenly. Use investing websites like or Yahoo Finance to review analysts' rating changes and recent sales and earnings performance compared to expectations. It's also smart to review the company's earnings releases and earnings call transcripts. The leadership team's characterization of the business climate and the outlook, while subjective, can be instructive. From there, you should start to form an opinion about how permanent the stock price decline is. If three conditions are true, you may be looking at a nice buying opportunity: This framework describes a powerful investing strategy that only some investors have the discipline to implement. Buy good companies when their stock prices fall and wait patiently for a recovery. Investing for long-term wealth can be that simple.
Yahoo
17-03-2025
- Business
- Yahoo
The NASDAQ and S&P 500 Have Suffered a Correction: Danger or Opportunity?
US stock markets are in turmoil following Trump's barrage of tariffs. The technology-heavy NASDAQ Composite Index suffered a correction two weeks ago as share prices tumbled over fears of escalating geopolitical tensions. A correction is defined as a fall of 10% from the previous high, and the NASDAQ's record high was reached back in December last year. Just last week, the bellwether S&P 500 Index joined the NASDAQ as the former also suffered a correction as Trump upped the ante on tariffs, sparking fears of a long-drawn trade war. Should investors head for the exits? Or is this the perfect opportunity to load up on more shares? News headlines love to feature dramatic headlines about market plunges amid a wave of worries and fears. It may sound surprising, but corrections happen more often than you would expect. According to wealth manager Ben Carlson, the NASDAQ historically undergoes a market correction once every two years. As for the S&P 500, it suffered five corrections during the spectacular bull run from March 2009 (the end of the Global Financial Crisis) to February 2020 (the beginning of the COVID-19 pandemic). In fact, the S&P 500's last correction was just less than two years ago in October 2023. Bear markets, which are defined as a 20% plunge from the high, occur once every four years. The last correction that led to a bear market was back in 2022 when the US Federal Reserve hiked interest rates at the fastest pace ever to combat inflation. No one knows if the current correction will result in a bear market, because that's something that will only be known in hindsight. Think about this – if corrections occur fairly frequently, why should they scare you into selling at the lows? Phrased another way – corrections should be viewed as a healthy mechanism for the stock market to regain some sanity. Rampant optimism can cause share prices to rise to unsustainably high levels with companies trading at nosebleed valuations that imply that nothing can go wrong. Corrections, therefore, serve as a reality check to temper over-enthusiastic investors who may believe that 'no price is too high' to own a hot stock. Remember that selling in panic also means that you will be locking in your losses. As long as the businesses you are invested in continue to churn out rising revenue and profits, you should stay put and do nothing. It may even make sense to buy selectively into stocks that you have been eyeing for some time but hesitated because you felt that they were too expensive. A correction provides that golden opportunity for you to accumulate stocks that have been on your radar. It's a classic case of patience paying off as the market provides you with attractive bargains. Of course, you mustn't just buy any stock out there as many stocks may seem cheap after a correction. Be selective and go for businesses in sectors that enjoy long-term tailwinds. You should also select companies that possess catalysts that can enable them to grow their revenue and earnings for many years to come. Some promising sectors include artificial intelligence (AI), cybersecurity, and electric vehicles. Meta Platforms (NASDAQ: META) is an example of a trillion-dollar technology stock that is riding on the AI wave. For 2024, the social media behemoth saw revenue climb 22% year on year to US$164.5 billion while net profit surged 59% year on year to US$62.4 billion. CEO Mark Zuckerberg has committed to spend up to US$65 billion this year to power his AI objectives. Then there's Crowdstrike (NASDAQ: CRWD). The cybersecurity firm saw its revenue rise 29.4% year on year to US$3.95 billion for its fiscal 2025 (FY2025) ending 31 January 2025. Crowdstrike also churned out a positive free cash flow of US$1.07 billion, 13.6% higher than a year ago. The company believes that it has a massive opportunity to continue growing with a total addressable market of US$116 billion. The above are just several examples of companies reporting robust financials along with plans to continue growing their businesses. Corrections should be viewed as a golden opportunity to load up on stocks for the long term. Investors, however, should ensure that they have adequate cash on hand to take advantage of any corrections that occur. Because such events are unpredictable, it's always recommended that you keep spare cash for investments. This is known as an opportunity fund, and it should be in excess of your emergency fund, which should comprise at least six to 12 months of your expenses. Armed with an opportunity fund, you can then deploy cash into the companies you have been eyeing when a correction hits. Dive into the future of technology with our newest FREE report, 'The Rise of Titans.' Discover how the big 7 US tech stocks can be your ticket to huge long-term gains. Download your copy today and see how easy it is to supercharge your portfolio. Follow us on Facebook and Telegram for the latest investing news and analyses! Disclosure: Royston Yang owns shares of Meta Platforms. The post The NASDAQ and S&P 500 Have Suffered a Correction: Danger or Opportunity? appeared first on The Smart Investor.
