Business Frame Weekly – Japan shares poised to rise; Hong Kong, Australia look steady / April turned out to be great month for most S&P 500 investor

Japan shares poised to rise; Hong Kong, Australia look steady.

Chairman Jim Herbert helped pioneer mega loans in the 1980s. Buyer JPMorgan will share any mortgage losses with the FDIC.

April turned out to be great month for most S&P 500 investors. But it was stupendous for those who picked the best stocks.

In this newsletter:

• Asia Stocks Set for Mixed Start as Treasuries Drop: Markets Wrap
• First Republic’s Jumbo Mortgages Brought On Bank’s Failure
• Four Stocks Turn $10,000 Into $50,000 In Four Months
• Fed is set to raise rates yet again. After that, then what?
• Bullish investors are an 'endangered species' on Wall Street as bearish sentiment prevails. That points to big returns ahead for stocks, Bank of America says
• We are probably heading for recession: Citi CEO

May 02, 2023

Asia Stocks Set for Mixed Start as Treasuries Drop: Markets Wrap

Japan shares poised to rise; Hong Kong, Australia look steady. Meta raises $8.5 billion to lead investment-grade issuance. Asian equity futures point to a mixed opening as trading resumes in most of the region’s markets following a holiday on Monday. Investors are weighing JPMorgan Chase & Co.’s purchase of First Republic Bank along with expectations the Federal Reserve will hike interest rates once again this week. Japanese stocks are poised to rise while Hong Kong and Australian shares may open little changed. With US shares steady on Monday, attention turned to the Treasury market, where investment-grade issuance jumped to more than $22 billion in one of the busiest sessions of 2023.

First Republic’s Jumbo Mortgages Brought On Bank’s Failure

Chairman Jim Herbert helped pioneer mega loans in the 1980s. Buyer JPMorgan will share any mortgage losses with the FDIC. The seeds of First Republic Bank’s downfall were sown in the jumbo mortgages of Silicon Valley, where a unique strategy to loan wealthy individuals extraordinary sums of money blew up in spectacular fashion. “Why don’t we do a couple of these and see how they go? Can’t bankrupt the whole bank,” Herbert said to the firm’s president, according to an account of the conversation on First Republic’s website.

Four Stocks Turn $10,000 Into $50,000 In Four Months

April turned out to be great month for most S&P 500 investors. But it was stupendous for those who picked the best stocks. All told, had you invested $10,000 in January and reinvested your money into the top-performing stock currently in the S&P 500 each month in 2023, including Meta Platforms (META) in April, you'd have $50,000 now, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's an impressive four-month gain of more than 396%. It's quite a feat given the S&P 500 is up 8.4% so far this year. The same $10,000 invested in the S&P 500 would be worth just $10,840 now. That's a gain of just $840. April also continued a big bounce in massive tech stocks.

Fed is set to raise rates yet again. After that, then what?

The Federal Reserve is on track to raise its benchmark interest rate for the 10th time on Wednesday, the latest step in its yearlong effort to curb inflation with the fastest pace of hikes in four decades. Yet economists and Wall Street traders will be more interested in what the Fed and Chair Jerome Powell signal in a statement and at a news conference about a bigger question: What comes next? And on that note, they may be disappointed. Economists say Powell will likely hint that the Fed is edging closer to a long-awaited pause in its rate increases. Yet he won't necessarily send a clear sign that this week's hike will be the Fed's last. Instead, he will probably stress that further rate hikes could happen if inflation were to stay persistently high, well above the Fed's 2% target rate.

Bullish investors are an 'endangered species' on Wall Street as bearish sentiment prevails. That points to big returns ahead for stocks, Bank of America says

Bullish stock market investors are an "endangered species" on Wall Street, according to Bank of America.The overall mood on Wall Street is bearish towards stocks, but that's actually good news for investors who are positioned for upside, according to Bank of America. The bank, which tracks the equity allocation recommendations of Wall Street strategists via its Sell Side Indicator, said bullish stock market investors "are becoming an endangered species." And Wall Street has plenty to be bearish about. There have been three major bank failures over the past two months, inflation remains elevated, the Federal Reserve is still hiking interest rates, and earnings are on shaky ground with the potential for an imminent recession.

We are probably heading for recession: Citi CEO

U.S. gross domestic product (GDP) rose at an annual rate of 1.1% in the first quarter of 2023. That is the third-straight quarter of growth for the U.S. economy. The technical definition of a recession is two straight quarters of negative GDP growth. So while the U.S. is not in recession now, market leaders are warning of the possibility that a recession is on the horizon. Citi (C) CEO Jane Fraser joined Yahoo Finance’s Brian Sozzi from the 2023 Milken Institute Global Conference. Fraser said she thinks the U.S. is heading for a recession in the back half of the year. “There is likely to be credit tightening,” Fraser said. “There's some stresses ahead, commercial real estate and the like, but this should be manageable.”

Random Ramblings

• A better tax season for just about everyone.
• Accountants' 'side hustles' grow into new firms
• Corporate America focuses on cost cuts and layoffs — not growth
• For banks under stress, there’s a federal backstop that provides help without stigma.
• Stock pickers on wall street are going all-in on recession bets
• Tech, AI driving job changes for nearly a quarter of all workers.