Latest news with #Volatility
Globe and Mail
2 days ago
- Business
- Globe and Mail
Forget About Inflation! This Is a Much Bigger Threat to Wall Street.
Key Points Volatility has been readily apparent for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite since 2025 began. Inflationary fears have been heightened by President Donald Trump's tariff and trade policy, as well as the rapid expansion of M2 money supply. However, there's no bigger threat to the stock market's rally than the earnings quality of Wall Street's most-influential businesses. These 10 stocks could mint the next wave of millionaires › Over the last century, the stock market has been a surefire moneymaker for patient, long-term-minded investors. Although other asset classes have increased in value over extended periods, including real estate, Treasury bonds, and commodities like gold, silver, and oil, none have come close to matching the annualized return of stocks. But just because the stock market offers a lengthy track record of making long-term investors richer doesn't mean Wall Street is free of volatility. Since the curtain opened for 2025, the benchmark S&P 500 (SNPINDEX: ^GSPC) and growth-focused Nasdaq Composite (NASDAQINDEX: ^IXIC) have both hit new highs. Additionally, the iconic Dow Jones Industrial Average (DJINDICES: ^DJI) and S&P 500 fell into correction territory, with the Nasdaq Composite enduring a short-lived bear market. Volatility tends to be driven by investor uncertainty and emotions. Though there's clear uncertainty at the moment concerning the prevailing rate of inflation and how rising prices might adversely impact stocks moving forward, a strong argument can be made that there's a much bigger threat to Wall Street than inflation. Inflationary fears are mounting on Wall Street Let me preface this discussion by noting that a modest level of inflation is normal, healthy, and expected. When the U.S. economy is firing on all cylinders and expanding, it's expected that businesses will possess some level of pricing power that allows them to charge more for their goods and services. Historically, the Federal Reserve has targeted a prevailing rate of inflation of 2%. What has professional and everyday investors concerned is the potential for two variables to significantly increase the domestic inflation rate, which can have adverse consequences on corporate America, the U.S. economy, and the stock market. The first of these issues is President Donald Trump's tariff and trade policy. Following the close of trading on April 2, Trump unveiled his grandiose plan, which included a 10% sweeping global tariff, as well as higher " reciprocal tariff rates" on dozens of countries that have historically run unfavorable trade imbalances with America. For what it's worth, Trump has paused reciprocal tariffs on most countries until Aug. 1. The implementation of global tariffs comes with a host of potential problems, ranging from worsening trade relations with our allies to the possibility of foreign countries and/or consumers not buying American-made goods. But arguably the biggest worry of all with tariffs is their inflationary impact. Whereas output tariffs are applied to finished products imported into the country, input tariffs are duties assigned to goods used to complete the manufacture of products in America. Input tariffs run the risk of making U.S. goods costlier, and Trump's tariff and trade policy doesn't do a very good job of differentiating between output and input tariffs. An expected increase in the prevailing rate of inflation from Donald Trump's tariff and trade policy has even resulted in something of a " Trump bump" in Social Security's 2026 cost-of-living adjustment (COLA) forecast. M2 money supply is expanding at its fastest pace in three years. US M2 Money Supply data by YCharts. The second variable that can cause the inflation rate to accelerate and remain well above the Fed's 2% target is the expansion of U.S. money supply. Similar to the prevailing rate of inflation, money supply is something we want to see growing at a modest rate. Expanding economies require added capital to facilitate transactions. Steady growth in money supply is one of the key markers of a healthy economy. What's specifically worth noting about U.S. money supply is the expansion we're witnessing in M2. This measure of money supply includes cash and coins in circulation, demand deposits in a checking account, money market accounts, savings accounts, and certificates of deposit (CDs) under $100,000. It's money that can be spent, but requires a little effort to get to. Over the trailing year, through May 2025, M2 money supply has increased by precisely 4%. It's the fastest year-over-year expansion in M2 since 2022 -- likely a result of the Fed kicking off a rate-easing cycle and making borrowing rates more attractive -- and it suggests a strong possibility of the U.S. inflation rate remaining stubbornly above 2%. But there's a much bigger downside threat to the stock market than inflation. Earnings from Wall Street's most-influential businesses aren't all they're cracked up to be The surface-scratching red flag for Wall Street is its valuation. When 2025 began, the S&P 500's Shiller price-to-earnings (P/E) Ratio, which is also known as the cyclically adjusted P/E Ratio (CAPE Ratio), was at its third-highest multiple when back-tested 154 years. Based on what history tells us, the previous five times when the S&P 500's Shiller P/E Ratio surpassed 30 and held this multiple for at least two months were eventually followed by declines ranging from 20% to 89% in the Dow Jones Industrial Average, S&P 500, and/or Nasdaq Composite. In short, the stock market has a track record of struggling when valuation premiums become extended to the upside. When stocks, collectively, trade at aggressive valuation premiums, it's often reflective of investor excitement over a next-big-thing innovation (e.g., artificial intelligence), as well as the result of strong earnings growth. But herein lies the real threat to Wall Street: Earnings growth has been a bit of a smoke-and-mirrors show for some of the stock market's leading businesses. Don't get me wrong -- some of Wall Street's most-influential businesses have blown the doors off of growth expectations with consistency for years. This includes Nvidia and Microsoft. But some of the stock market's top companies aren't nearly as operationally sound as they might appear -- and that's a problem. Electric vehicle (EV) maker Tesla (NASDAQ: TSLA) serves as a perfect example. On the surface, it's been profitable for five consecutive years and has relied on its first-mover advantages in the EV space, as well as its expansion into energy generation and storage, as a means to grow its sales and profits. But you might be surprised to learn that more than half of Tesla's pre-tax income has consistently derived from unsustainable sources, not from selling EVs or energy generation and storage equipment. In the March-ended quarter, Tesla reported $589 million in pre-tax income, of which $595 million came from selling regulatory automotive credits (which are given to it for free by federal governments) and $309 million in net interest income earned on its cash (less interest expenses). Without regulatory credits and interest earned on its cash, Tesla would have produced a $315 million pre-tax loss for the first quarter. Worse yet, President Trump's One Big Beautiful Bill, which was signed into law on Independence Day (July 4), is getting rid of automotive regulatory credits for EVs. Tesla is about to lose a 100% gross margin line item, which further exposes how poor its earnings quality truly is. Something similar can be said about Apple (NASDAQ: AAPL), but for different reasons. Apple's earnings quality comes under significant scrutiny if you back out the impact of its market-leading share buyback program. Since 2013, Apple has repurchased an almost unfathomable $775 billion worth of its common stock and retired in excess of 43% of its outstanding shares. Dividing net income by a shrinking number of outstanding shares has pushed earnings per share (EPS) higher and made the stock more fundamentally attractive to value seekers. But here's the issue: Apple's growth engine has stalled for years, and it's being completely masked by the company's outsized buyback program. In fiscal 2021 (ended Sept. 25, 2021), Apple delivered $94.7 billion in net income. For fiscal 2024 (ended Sept. 28, 2024), net income tallied $93.7 billion. Despite a $1 billion decline in net income over three years, Apple's EPS rose from $5.67 to $6.11, and its stock has rallied 44% since fiscal 2021 ended. In other words, the business has worsened from an income standpoint, but the company has added close to $750 billion in market value, which makes no sense. Therefore, although inflation is a headline story, it's the earnings quality of Wall Street's most-influential businesses that's the unequivocal threat to the stock market. Don't miss this second chance at a potentially lucrative opportunity Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $425,583!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $40,324!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $674,432!* Right now, we're issuing 'Double Down' alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon. See the 3 stocks » *Stock Advisor returns as of July 7, 2025
Yahoo
2 days ago
- Business
- Yahoo
What Are Some Good Energy Stocks to Buy Now?
Written by Joey Frenette at The Motley Fool Canada Energy stocks can be quite volatile, especially if macro events send prices viciously in either direction. Undoubtedly, timing the price moves of various commodities can be incredibly hard to do. There are just too many variables to make it worth the while to predict what a specific commodity (especially oil, uranium, or anything else tied to energy) is going to do over the short- to medium-term. Heck, even the long-term forecast can be quite cloudy, given just how unpredictable the future can be. Black swans happen, and unless you've got some sort of crystal ball, you're going to need to be prepared to deal with them as they swim by. Like it or not, the magnitude of volatility facing the top energy plays isn't going anywhere. But for those who do have a strong stomach for high-beta volatility (higher beta entails more correlation to the TSX), I do think it's a smart move to be a net buyer of the highest-quality energy stocks during their moments of immense weakness. In this piece, we'll have a quick look at two names in the oil patch that have been reeling lately. Indeed, oil prices aren't skyrocketing. But they don't have to be for the following operationally-efficient players to do well and continue producing immense amounts of cash flow for reinvestment and distribution (in the form of dividends). Suncor Energy (TSX:SU) is a $66 billion relative value play in the Canadian energy patch. And while the longer-term chart (think the 10-year) may be less impressive than that of many of its peers (big and small), I do see serious value for those willing to buy and hold for at least the next five years. Indeed, getting paid a fat 4.5%-yielding dividend while you wait certainly makes the long-term hold that much easier! And if oil prices experience a sudden surge due to some unforeseen event, perhaps the dividend stands to grow at a rate that's slightly above what investors have come to expect. Either way, I'm a big fan of the value to be had from the name while it's going for just 11.2 times trailing price-to-earnings (P/E). That's too cheap for a misunderstood blue-chip stock that has what it takes to ride out periods when oil prices are on the lower end. Sure, Suncor goes for a hefty discount to its peers, but if long-term value is what you seek, I think it's time to stash the name on your radar. It's one of my top long-term value plays in the energy patch, and it's worth considering while its yield is well above 4%. Cenovus Energy (TSX:CVE) has had a terrible start to 2025, now down 11% year to date, putting the name around 35% away from its 2022 all-time highs. The $35.6 billion firm has a 4.3% dividend yield and a similar beta (1.27) to Suncor. And while the negative momentum has been tougher to get behind of late, I still think the name could be a great bounce-back option once oil prices get going again. For now, the company is in cost-cutting mode, even after posting some decent Q1 earnings to go with a nice dividend hike. All considered, CVE stock looks deeply undervalued at a 12.9 times trailing P/E. It's tough to tell how much room there is for the latest bounce off multi-year lows to run. Either way, newer investors should look to buy incrementally over time for the passive income and decent value proposition. The post What Are Some Good Energy Stocks to Buy Now? appeared first on The Motley Fool Canada. Before you buy stock in Cenovus Energy, consider this: The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Cenovus Energy wasn't one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years. Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the 'eBay of Latin America' at the time of our recommendation, you'd have $24,927.94!* Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 30 percentage points since 2013*. See the Top Stocks * Returns as of 6/23/25 More reading 10 Stocks Every Canadian Should Own in 2025 [PREMIUM PICKS] Market Volatility Toolkit A Commonsense Cash Back Credit Card We Love Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. 2025 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
Zawya
03-03-2025
- Business
- Zawya
DIFC and leading global hedge fund Verition, launch search for world-class interns
Dubai: Verition Fund Management LLC ('Verition'), a leading global multi-strategy hedge fund, today announced the launch of its inaugural internship programme for its office in Dubai, in collaboration with Dubai International Financial Centre (DIFC). DIFC's inaugural Future of Finance report (released in February 2024), which was developed using network-based research and discussions with leaders from the industry including Verition, identified the importance of overcoming potential talent shortages by attracting and retaining professionals through competitive compensation, continuous training programmes and partnerships with educational institutions. Verition's internship initiative helps address some of the findings by providing talented university students, including UAE Nationals with valuable hands-on experience in the world of global finance. With USD 12bn in assets under management (AUM) and a team of over 700 employees worldwide, Verition operates offices across the US, UK, Hong Kong, Singapore, and Dubai. Since establishing in DIFC in 2023, the firm has steadily expanded its presence in the region, quickly growing its employee base and diversifying the number of strategies managed from Dubai. As part of Verition's commitment to cultivating the talent pool within the United Arab Emirates, the 16-week immersive and highly selective internship programme will welcome students from Zayed University, American University in Dubai, American University of Sharjah, among other top UAE universities. Participants will rotate across various investment-focused groups, including Credit, Fixed Income & Macro, Convertible & Volatility Arbitrage, Event-Driven, Equity Long/Short & Capital Markets, and Quantitative Strategies. Additionally, they will gain insight into critical non-investment functions such as treasury, operations, legal/compliance, and more. The internship programme will be hosted in-person at Verition's Dubai office, located in DIFC. Participants will benefit from personalised mentorship by seasoned professionals, a collaborative learning environment, and exposure to Verition's entrepreneurial culture, which values open communication and innovation across its strategies. Applications for the internship programme will open within the coming weeks. Students enrolled in undergraduate programmes studying finance, economics, or related fields are encouraged to apply. About Verition Fund Management Verition Fund Management LLC ('Verition') is a multi-strategy, multi-manager hedge fund founded in 2008. Verition focuses on global investment strategies including Credit, Fixed Income & Macro, Convertible & Volatility Arbitrage, Event-Driven, Equity Long/Short & Capital Markets, and Quantitative Strategies. About Dubai International Financial Centre Dubai International Financial Centre (DIFC) is one of the world's most advanced financial centres, and the leading financial hub for the Middle East, Africa, and South Asia (MEASA), which comprises 77 countries with an approximate population of 3.7bn and an estimated GDP of USD 10.5trn. With a 20-year track record of facilitating trade and investment flows across the MEASA region, the Centre connects these fast-growing markets with the economies of Asia, Europe, and the Americas through Dubai. DIFC is home to an internationally recognised, independent regulator and a proven judicial system with an English common law framework, as well as the region's largest financial ecosystem of 46,000 professionals working across over 6,900 active registered companies – making up the largest and most diverse pool of industry talent in the region. The Centre's vision is to drive the future of finance through cutting-edge technology, innovation, and partnerships. Today, it is the global future of finance and innovation hub offering one of the region's most comprehensive FinTech and venture capital environments, including cost-effective licensing solutions, fit-for-purpose regulation, innovative accelerator programmes, and funding for growth-stage start-ups. Comprising a variety of world-renowned retail and dining venues, a dynamic art and culture scene, residential apartments, hotels, and public spaces, DIFC continues to be one of Dubai's most sought-after business and lifestyle destinations.
