2022 has been a tough year for the stock market. While some stocks have managed to thrive (such as Big Oil), all major indexes and many blue-chip stocks have seen their stock prices drop by double-digit percentages this year.

Bear markets can be tough on portfolios, but they can have a silver lining. There's opportunity in the chaos for all investors during bear markets, but it's especially true for dividend investors.

It's easier to ignore stock price volatility

The great thing about dividends is they reward investors for being patient. The investing saying "time in the market is better than timing the market" holds true for two reasons. First, it points to how trying to time the market is counterproductive. Also, it highlights the benefits of holding on to stocks -- especially those that pay dividends.

As an example, let's take a look at two blue chip stocks, JPMorgan Chase (NYSE: JPM) and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). As of 18 October, both companies are down over 26% and 6% year to date, respectively. However, JPMorgan Chase shareholders have earned $4 per share in dividends since the start of 2022 to help offset their losses; Berkshire Hathaway shareholders have earned $0.

In the five years leading up to 1 October 2022, JPMorgan Chase's stock price was only up around 6%, yet during that span, the bank has paid out $17.64 per share in dividends.

Now, am I saying JPMorgan Chase is a better investment than Berkshire Hathaway? Not at all. But what I am pointing to is that during bear markets and down periods in the stock market, dividend investors can take peace in knowing they'll get tangible rewards in the form of dividend payouts regardless of how stock prices are performing (especially if they're investing in Dividend Aristocrats).

Be opportunistic

One thing you should use to your advantage -- especially if you've been purchasing stocks during the latest bull run -- is the chance to purchase more shares and potentially lower your cost basis. Your cost basis is the average price you've paid per share of stock. For example, if you bought 20 shares at $200 each, your cost basis would be $200. If you bought 20 more shares at $150, your cost basis would be $175.

Many stocks right now are the cheapest they've been in the past couple of years. By lowering your cost basis, you can (hopefully) lock in higher profits when you eventually sell shares down the road. And if you've been investing set dollar amounts, you're now getting more bang for your buck.

Warren Buffett once said, "Be fearful when others are greedy, and greedy when others are fearful." Bear markets are usually a sign investors are fearful, but instead of panicking and making the mistake of slowing down or stopping your investing, you should do the opposite. For long-term investors with time on their side, bear markets should be viewed as an opportunity to purchase great stocks at a discount.

Take advantage of higher dividend yields

When companies announce their dividend payouts, they do so in per-share dollar amounts, so a stock's dividend yield is relative to its stock price. For example, if a company's yearly dividend payout is $2 per share and its stock price is $100, its dividend yield would be 2%. If its stock price dropped to $50, its dividend yield would now be 4%.

Generally, you want to be suspicious of too-good-to-be-true dividend yields because you have to wonder why the yield is so high. In this example, investors should wonder why the stock price dropped by half. During bear markets -- when the stock market as a whole is experiencing drops and nothing is fundamentally changing with many great businesses -- these high dividend yields can be a blessing. Again: more bang for your buck.

Focus on being consistent

One of the best things you can do as an investor is remain consistent. This can be hard to do while stock prices are falling, but it's in your best interest if you have the means. You may think you can wait until stock prices hit bottom before buying, but that's attempting to time the market, which you should never do. Even if you're "right" this time, it sets a bad precedent.

Focus on the bigger picture and use this time to your advantage.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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When Jamie Dimon talks, the market listens. As the longtime CEO of JPMorgan Chase (NYSE: JPM), the largest bank by assets in the U.S., not only has Dimon successfully navigated the company through multiple recessions and made JPMorgan a best-in-breed bank stock, but he always has a good pulse on the economy.

With more than $3.8 trillion of assets, JPMorgan is exposed to every part of the economy from consumers to small businesses to the largest corporations -- and in almost every sector, too. 

In an interview today on CNBC, Dimon said he expected the U.S. to enter a recession in six to nine months. He also said that while he doesn't know the future, the S&P 500, which has fallen roughly 25% from its all-time highs earlier this year, could fall "another easy 20%." Let's take a look at why Dimon is concerned and what investors should know.

High inflation and rates could drain the consumer

There are several reasons why Dimon is concerned, beginning with inflation. The Consumer Price Index (CPI), which tracks the prices on a market basket of consumer goods and services, rose a jaw-dropping 9.1% in June on a year-over-year basis. And there is no clear evidence that inflation has peaked yet. The CPI ticked up 0.1% in August from July, and economists expect the CPI to tick up another 0.2% from August when September inflation data comes out Thursday morning. Prices for things like rent have remained stubbornly high.

High inflation has forced the Fed to aggressively raise its overnight benchmark lending rate, including three consecutive 0.75-percentage-point hikes at its last three meetings. 

Rising interest rates increase the cost of consumer debt, which is why mortgage rates have soared lately. Payments on student loans are also expected to resume for the first time in more than two years, another burden for consumers.

Dimon does believe the economy is still relatively healthy right now, but rate hikes can take time to work their way through the economy, so the economy has not felt their full impact yet. Hopefully, though, they will also slow the growth of prices or bring them down.

Stocks face their own concerns

If consumer demand dampens, companies are likely to feel the sting on their sales and profitability. Companies will also face a higher cost of debt and a higher cost of doing business. Many investors think analyst earnings projections are still too rosy, so if third-quarter earnings and guidance disappoint, expect downward revisions, which will potentially lead to lower valuations and lower stock prices.

Dimon also worries about how Russia's ongoing invasion of Ukraine will continue to impact the economy and markets. Previous oil sanctions as a result of the invasion sent oil prices soaring and rocked markets.

"I mean, Europe is already in recession -- and they're likely to put the U.S. in some kind of recession six to nine months from now," Dimon said today. Global economies are very interconnected, and large companies headquartered in the U.S. could very well be doing a big chunk of their business in Europe, so what happens abroad could spill over to the U.S.

Finally, Dimon is concerned about the impact of quantitative tightening. The Fed is currently in the process of reducing its massive balance sheet by letting its bond holdings mature and run off. This effectively pulls liquidity out of the economy. The last time the Fed did this, in 2019, it contributed to a spike in interest rates on short-term loans between banks -- an obscure but important part of the financial system known as the repo (short for "repurchase") market -- and it had to step back in to aid the market. Dimon is largely concerned because he doesn't know exactly what to expect.

What investors should know

What can you do with all this as an individual investor?

First, prudent management includes preparing for the worst. What happens next in the U.S. will depend on the state of the economy after the Fed is done with its rate hikes. Dimon did say that the U.S. economy is "actually still doing well," and this is not the first time Dimon has spoken about potential struggles ahead. But a deep global recession may not be fully priced into stocks yet. And the one thing Dimon expressed certainty about was more market volatility. 

I think it's certainly normal to be nervous right now. But if you invest in companies with strong fundamentals and with a long-term horizon in mind, you are very likely to ride out any potential storm.

Second, remember that Dimon is talking about what will happen in the short term. If you can afford to wait -- at least three to five years -- history shows that markets almost always go up over the long haul.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This expert thinks the US stock market could fall another 20%: What should investors know? appeared first on The Motley Fool Australia.

The S&P/ASX 200 Index (ASX: XJO) is having a rather dreadful end to the trading week so far this Friday.  At the time of writing, the ASX 200 has lost a painful 1.34% and is back to around 6,560 points. With a fall like that, it's no real surprise to see most of the ASX 200 bank shares are also having a sad day on the markets.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) seems to be copping the worst of it (as seems to be the case more often than not these days). ANZ shares are presently down a nasty 2.14% at $21.46.

Westpac Banking Corp (ASX: WBC) shares have lost 1.76% at $19.59 each., while the National Australia Bank Ltd (ASX: NAB) share price is down 1.63% at $27.84.

The ASX's biggest bank share, Commonwealth Bank of Australia (ASX: CBA), has lost 1.48% at $91.85.

So what might be causing this late-week loss of confidence in the ASX banks today?

Why are ASX 200 bank shares getting smashed on Friday?

Well, it's always possible that the bank shares are just getting caught up in the market's pessimism today. It's not like banks are the only losers this Friday. Other ASX 200 blue chips like BHP Group Ltd (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS) are also down heavily.

But we do have some banking news that could be playing a role here.

As our Fool colleagues over in the United States covered, US earnings season has just kicked off. And, as it always does, it started with the US banking giant JPMorgan Chase & Co. As our colleagues reported, JPMorgan's earnings were a disappointment. Here's some of what was said:

…the bank reported earnings and revenue that missed analyst estimates and then suspended share repurchases for the time being…

JPMorgan reported softer investment banking results than the Street had been anticipating. Nobody expected a good quarter, given the lack of initial public offerings and other issuances, but revenue in investment banking fell short of expectations.

JPMorgan shares fell a nasty 3.49% in last night's (our time) trading session. So these earnings from one of the world's biggest banks may have dented confidence in our own big four this Friday. Either way, it is certainly not a good session for CBA, NAB and the other ASX 200 banks today.

The post Setting the pace: Why ASX 200 bank shares are feeling the pinch on Friday appeared first on The Motley Fool Australia.

Fortescue is a major iron ore ASX mining share. As such, the movement of the iron ore price has a significant impact on the company's profitability.

But the founder of Fortescue, and one of the country's prominent business leaders, Andrew Forrest is not worried about what might happen next.

Forrest optimism

According to reporting by the Australian Financial Review, Forrest said there is "not a snowflake's chance in hell" of a global recession this year. While individual countries could see a recession, he thinks that pent-up demand after COVID will help things.

But Forrest conceded markets might be "choppy and uncertain" for up to three years, the report said.

Forrest pointed to a couple of areas that will enable Fortescue to get through the current problems of rising interest rates, elevated inflation, and slower growth. Those advantages are Fortescue's low-cost base and its green energy plans.

Another factor that could impact the iron ore price — and the Fortescue share price — is the potential of a 'central ore buyer' in China to try to control the iron ore price, according to the Australian Financial Review.

Forrest's response? He said it was "a story which gets trotted out every three years". So, we'll see how that one plays out.

Green energy ambitions to offset inflation?

Forrest thinks that Fortescue will be able to weather inflation and higher interest rates. He believes the company can still raise capital and get through a period of lower commodity prices. Forrest said:

Demand for our product has remained strong. And if global demand for iron ore goes down, the last man standing will be the lowest cost producer. And that is Fortescue.

Fortescue is looking to build a global portfolio of projects to enable it to produce millions of tonnes of green hydrogen (which is made using renewable energy). Forrest said:

We smoke $3.5 billion worth of fossil fuel into the atmosphere every year. That is one hell of a pool of capital annually to invest into your own fuel production and green iron systems.

The AFR noted that there is lots of capital looking for investible projects, with Forrest saying a large part of that is looking for green projects.

Is the Fortescue share price an opportunity?

Forrest might answer yes to that question.

But some brokers recently gave a different view. Morgan Stanley currently rates it as 'underweight', which is like a 'sell'. The price target is $15.95, suggesting a decline of around 10%. However, a recent change in Indian tariffs could provide a boost for lower iron ore grade miners, such as Fortescue.

The broker Ord Minnett rates it as a 'hold', with a price target of $19. That suggests a potential rise of around 7.5%.

Looking at the projected grossed-up dividend yield, Ord Minnett thinks it could be 16.7% in FY22 and 14.4% in FY23.

The post Can the Fortescue share price hold up if the iron ore price falls? appeared first on The Motley Fool Australia.

In its recently released minutes from its May meeting, the Federal Reserve indicated that it may need to raise its benchmark overnight lending rate, the federal funds rate, potentially even more aggressively than the market had anticipated. Rising rates increase the cost of debt for consumers, whether it's for a mortgage, a credit card, or another type of consumer loan. Rising bond yields, which tend to move with the federal funds rate, could also continue to create volatility in the stock market, which is why investors pay such close attention to how the Fed moves the federal funds rate. 

The Fed's recent meeting minutes have investors wondering just how much it will raise rates this year. Luckily, JPMorgan Chase (NYSE: JPM) just dropped a big hint at its recent investor day about where the federal funds rate could land at the end the year. Let's take a look. 

JPMorgan's hint

So far, the Fed has raised the federal funds rate to a range of 0.75% and 1%, which has included a 25-basis-point hike (0.25%) at its March meeting and then the big half-point move earlier this month. Not too long ago, many experts might have said that this is the range where the federal funds rate would end the year. But inflation has been much more aggressive than the Fed seems to have anticipated, and now the agency looks to be playing catch-up with every intent of getting consumer prices back under control. 

Prior to the release of the Fed's meeting minutes, the market anticipated that the federal funds rate would end 2022 inside a range of 2.5% to 2.75%. Baked into this estimate is the Fed raising rates by a half-point at both of its meetings in June and July. But now the market seems to think it may have been too conservative with those estimates. 

In its meeting minutes, the Fed stated that "most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings." The Fed added that "a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook."

JPMorgan Chase held its annual investor day earlier this week, during which the bank raised its outlook for net interest income (NII), which is a key source of revenue for banks. Baked into JPMorgan's assumptions is the upper bound of the federal funds rate reaching 3% by the end of the year, meaning the range would be between 2.75% and 3%, higher than the broader market's prior assumptions.

The Fed has five remaining meetings left in June, July, September, November, and December. That means to get to a range of 2.75% to 3%, the Fed would need to do half-point hikes in three of its remaining meetings and then 25-basis-point hikes at the other two. If you had asked a lot of intelligent investors at the end of 2021 if the Fed would do four half-point hikes this year, I think a lot of them would have answered with a decisive "No."

Banks are conservative

Banks are not all-knowing and have missed their fair share of financial estimates and guidance over the years. However, banks have the pulse of the economy because they serve so many different businesses across various sectors and so many different consumer segments. As the largest bank in the U.S., JPMorgan Chase has arguably the most comprehensive view of the economy. Furthermore, banks are conservative. If they are providing financial guidance like JPMorgan Chase just did, they know they are now under a microscope. That's why JPMorgan saying the federal funds rate will end the year with the upper bound of the range at 3% means management could actually be thinking higher if they're being conservative. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How high will interest rates rise in 2022? JPMorgan Chase just dropped a big hint appeared first on The Motley Fool Australia.

During the COVID-19 crash of early 2020, the Telstra share price did not fall as dramatically as many other ASX shares did.

Over the last month, Telstra shares have dropped around 2% while the S&P/ASX 200 Index (ASX: XJO) share price has declined around 6% in that time.

Telstra generates relatively consistent profit and cash flow every month, thanks to the essential nature of its services to Australians.

But inflation and interest rates rising present a different conundrum for investors compared to a global pandemic. Is the telecommunications business an opportunity?

Broker opinions on the Telstra share price

As one of the biggest businesses on the ASX, there are plenty of analysts that look at the company.

One of the most recent ratings comes from the broker Morgan Stanley, with a price target of $4.60 and a buy rating. That implies a possible rise that's comfortably more than 10%.

One of the reasons for its optimism is that in the US, 5G telco peer T-Mobile is seeing good operational progress with customers quickly taking to fixed wireless home internet. So far, the changing economic environment in the US is not hurting consumer demand for telco services.

Another broker that rates Telstra as a buy is Ord Minnett. The price target is $4.50, also implying more than 10% upside. One of the positives that the broker has pointed out is the potential for the telco to sell more of its telco tower assets.

Recent updates

One of the major ways that investors like to value businesses is by looking at the profit direction.

Telstra is now expecting its profit to start rising after years of being impacted by the shift to the NBN.

A few months ago, the company said in its T25 strategy to FY25 that it's expecting a compound annual growth rate (CAGR) of mid-single digits for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and a high-teen growth rate for underlying earnings per share (EPS).

In the recent FY22 half-year result, the company reported "strong" mobile growth with EBITDA rising 25%, post-paid average revenue per user (ARPU) rising 5%, and post-paid services increasing by 84,000.

It also reported that underlying EBITDA rose 5.1% to $3.5 billion, while underlying EPS went up 55% to 6.2 cents.

The company said that it is continuing to see growth in the mobile market on the back of its investment in customer-centric plans.

Telstra also boasts that its 5G network is now more than twice the size of Telstra's nearest competitor, with more than 77.5% of the population covered and almost 2.8 million 5G devices connected to its mobile network.

The business has also made other moves, such as the acquisition of the Digicel Pacific company. Digicel Pacific has 2.5 million customers and leading businesses in PNG, Fiji, Vanuatu, Tonga, Nauru, and Samoa.

Telstra dividend

The board of Telstra has an intention to grow its dividend over time, as earnings and cash flow grow.

At the current Telstra share price, it's expecting to pay a grossed-up dividend yield of 5.8%.

The post Is the Telstra share price a safe haven buy right now? appeared first on The Motley Fool Australia.

Jamie Dimon has been in charge of JPMorgan Chase for almost two decades. He steered the bank through the GFC and then COVID-19.

Dimon just released his annual letter and his comments about interest rates may be of interest to investors.

A shift in the economic landscape with interest rates

The JPMorgan Chase CEO wrote that persistent inflation will require rising interest rates and a massive, but necessary, shift from quantitative easing to quantitative tightening.

In the wake of the impacts of COVID-19, the western world, including the US Federal Reserve, took "bold dramatic actions" to combat the impacts of the pandemic. Dimon said that this worked, but the stimulus and quantitative easing may have been too much for too long.

In what could be a warning for the (ASX) share market, Dimon then said:

I do not envy the Fed for what it must do next: The stronger the recovery, the higher the rates that follow (I believe that this could be significantly higher than the markets expect) and the stronger the quantitative tightening (QT).

If the Fed gets it just right, we can have years of growth, and inflation will eventually start to recede. In any event, this process will cause lots of consternation and very volatile markets. The Fed should not worry about volatile markets unless they affect the actual economy. A strong economy trumps market volatility.

So, according to Dimon, share markets could become "very volatile".

He went on to say:

The shift from QE to QT will cause a massive change in the flow of funds in and out of Treasury bonds and, therefore, all securities. Our situation today is completely unlike the monetary policy adjustments following the great financial crisis of 2008.

Many ASX shares have already fallen

The prospect of higher interest rates to combat fast inflation has been making headlines for a few months now.

Many Australian companies have already seen sizeable double-digit declines in their share prices in 2022.

The Xero Limited (ASX: XRO) share price is down by 28%, the Aristocrat Leisure Limited (ASX: ALL) share price is down 25%, the REA Group Limited (ASX: REA) share price is down 23%, the SEEK Limited (ASX: SEK) share price is down 15%, the Carsales.Com Ltd (ASX: CAR) share price is down 19%, and the Zip Co Ltd (ASX: Z1P) share price has dropped 66%.

There are plenty of other ASX shares that have also seen a noticeable decline.

Why do interest rates matter?

Legendary investor Warren Buffett once said about interest rates at the 1994 Berkshire Hathaway annual general meeting:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature … its intrinsic valuation is 100% sensitive to interest rates.

The post Bank CEO: Interest rates are headed higher than markets expect. How could this affect ASX shares? appeared first on The Motley Fool Australia.

Investors are breathing a sigh of relief on Dec. 2 following yesterday's Dow Jones Industrials (DJINDICES: ^DJI) 462-point decline. At 2:11 p.m. ET, the Dow Jones is up 680 points, or 2% higher, as investor worry about the Omicron variant of the coronavirus fades. Today's gains are broad, with 26 of the Dow Jones' 30 component stocks, including Boeing, higher today. 

Today's gains are led by aerospace giant Boeing (NYSE: BA), one of yesterday's worst performers. Shares are up more than 5% on both the reduced fears that Omicron will lead to broad travel bans and news that Chinese regulators are set to recertify the 737 MAX for commercial operation in that country. 

Following on Boeing's heels are payments and credit card giants Visa (NYSE: V) and American Express (NYSE: AXP), with shares up more than 4% on a hopeful outlook about the recovery of global travel and spending. Shares of yesterday's biggest loser, Salesforce.com (NYSE: CRM), are also up almost 3% today following yesterday's double-digit drop after giving underwhelming guidance for its fourth quarter. 

Today's worst-performing Dow stock is Apple (NASDAQ: AAPL), down more than 1% on rumors that demand for the iPhone 13 is falling. 

Boeing investors hopeful on China and continued travel recovery

Word first got out a couple of weeks ago that the Civil Aviation Administration of China (CAAC) was getting closer to letting the company's flagship, narrow-body jet return to commercial service. But a report in The Wall Street Journal on Thursday offered more detail, including what looks like a complete list of changes it requires Boeing to make. That's a serious step toward recertification that would also likely lead to a big jump in orders for Boeing aircraft to service Chinese markets after a multiyear freeze on sales to Chinese operators. 

Boeing's gains, exceeding most stocks today, weren't just a product of good news out of China. Like the other consumer and travel-related companies that gained sharply today, investors are also betting that travel and spending will continue to trend higher, and the initial worries about the Omicron coronavirus variant are probably overdone. 

Omicron bull market?

It seems that many investors believe that to be the case, with most of yesterday's biggest losers and many of the Dow Jones stocks that fell yesterday reporting gains. These include Visa and American Express, which have seen most of their in-country payment volume recover and surge past 2019 levels. However, both have seen cross-border transactions from travel continue to lag pre-COVID numbers. Investors also sent bank stocks up today, with Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) up more than 2.5% on hopes for continued economic health and the potential that interest rates will move higher sooner rather than later. That's a positive for lenders. 

Shares of Caterpillar (NYSE: CAT) and Walt Disney (NYSE: DIS) also gained more than 2.5% today, on expectations that businesses will continue to buy heavy equipment, and consumers will continue to spend and increasingly travel, ideally to Disney resorts and theme parks. Home Depot (NYSE: HD), one of yesterday's biggest winners, gained another 2% today as investors remain convinced that the home improvement giant will continue to win customers looking to improve their current home or update the home they just bought. Housing demand continues to remain sky-high, a positive indicator for the home improvement giant's prospects. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The third-quarter earnings season is well underway in the United States, already with a week of results under its belt.

Since the beginning of the US earnings season, the S&P 500 Index has pushed a further 3.6% higher on optimistic sentiment among investors. In fact, the iconic US index has rallied for five consecutive sessions — indicating the market is fairly satisfied with the calibre of earnings so far.

Let's recap some of the companies which have already reported, and take a look at what is coming up.

US earnings standing in the limelight

Last week kicked off third-quarter results with a barrage of numbers from some of the biggest financial institutions in the world. This included JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corp (NYSE: BAC), Citigroup Inc (NYSE: C), and Wells Fargo & Co (NYSE: WFC).

Setting a high standard, all of these US names beat both revenue and earnings expectations. Unsurprisingly, being the biggest of the companies listed above, JP Morgan posted the highest revenue for the quarter — coming in at US$30.44 billion. This was slightly above estimates of $29.8 billion, despite a dampening from the delta variant.

The commonality among these financial players was the additional boost from reserve releases during the quarter. As a result, the banks have cautioned that earnings in the future will be on the shoulders of their core earnings. This will mean heightened importance on growing loans and increasing interest rates to deliver larger profits.

Changing gears, this week has started with the highly anticipated third-quarter earnings from Netflix Inc (NASDAQ: NFLX). Last night the video streaming behemoth revealed it had added a further 4.4 million subscribers during the last quarter, which was 560,000 more than analysts had expected. Likewise, the company delivered expectation-beating earnings per share (EPS) of $3.19.

Commenting on the results, Netflix co-CEO Reed Hastings said:

We're in uncharted territory. We have so much content coming in Q4 like we've never had, so we'll have to feel our way through and it rolls into a great next year also.

The result follows the hugely successful show, "Squid Game". The Korean dystopian show has amounted to 142 million member household views in the first four weeks.

What's coming up next?

The rest of this week's US earnings will include some recognisable tech brands. For instance, Telsa Inc (NASDAQ: TSLA) will post its quarterly earnings tonight. This comes after the company shared its quarterly production and delivery numbers at the beginning of the month.

Following on from that, Snap Inc (NYSE: SNAP) is expected to share its quarterly results on Thursday night. Analysts are forecasting revenues around US$1.09 billion, indicating a 60% increase year on year for the social media giant.

Finally, to put it into perspective, 82% of S&P500 companies that have reported so far have topped estimates.

The post What's the latest from the current US earnings season? appeared first on The Motley Fool Australia.

WAM Global is one of WAM's newer LICs, only hitting the ASX back in 2018. It was a first for the fund manager, considering WAM Global would be the first Wilson LIC to focus on companies outside the ASX (hence the name).

Since its ASX IPO back in June 2018, WAM Global has gone on to deliver an average performance of 12.1% per annum since. This includes some healthy dividend growth as well. WAM Global shares today offer a fully franked trailing yield of 3.5%.

WAM's ASX wedding bells toll

Well today, it seems WAM Global is set to grow even larger. In an ASX announcement this morning, WAM Global told investors it has entered into a scheme with Templeton Global Growth Fund Ltd (ASX: TGG). This will allow the two funds to merge. Under the scheme, all Templeton shareholders will receive WAM Global shares and options. Shareholders can also choose to have their shares bought back by WAM for a cash consideration if the scrip offer isn't appealing.

The exact cash/scrip numerations have yet to be determined. But WAM Global has stated that the scrip offer will be "calculated by reference to the relative NTA [net tangible assets] per share after tax, but before deferred taxes of WAM Global and TGG". The cash offer, should investors choose to take it, will consist of shareholders receiving "cash equal to the NTA per [Templeton] share after all current and deferred taxes and associated transaction costs".

Until the review of an "independent expert" over the deal, Templeton Global Growth Fund's board has given their initial approval. They have told investors that they intend to vote in favour of the merger.

WAM Global founder and chair Geoff Wilson stated the following:

The WAM Global Board of Directors believe that the Scheme will be beneficial to both companies and result in a superior merged entity leveraging Wilson Asset Management's proven investment strategy. We look forward to welcoming TGG shareholders to the Wilson Asset Management family as we continue to grow WAM Global.

WAM Global estimates that if all goes to plan, the merger can be implemented by the end of October 2021.

What would a combined LIC look like?

As we touched on earlier, WAM Global invests in companies mostly outside the ASX and Australia. Its current portfolio (as of 31 May 2021) is weighted 56.4% to US companies, 10.4% to German companies and 7.5% to British shares, amongst others. Some of WAM's top holdings at the current time include Chinese giant Tencent Holdings ADR (OTCMKTS: TCEHY). As well as payments behemoth Visa Inc (NYSE: V) and gaming titan Electronic Arts Inc. (NASDAQ: EA).

Meanwhile, Templeton Global Growth's top holdings (also as of May) include JPMorgan Chase & Co. (NYSE: JPM), Samsung Electronics Co Ltd (OTCMKTS: SSNLF), American Express Company (NYSE: AXP) and Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM). Templeton is also weighted heavily to the USA, which has a 36.9% weighting in the fund. Other significant geographical exposures come from Britain, Germany, Japan and South Korea.

The post WAM Global (ASX:WGB) swallows Templeton in massive ASX merger appeared first on The Motley Fool Australia.

Value shares or growth shares?

Rarely over the many years that I've covered share markets has that debate been as prevalent as it is today.

That's largely because the modern world finds itself in a wholly novel position. One with near-zero interest rates, seemingly inexhaustible levels of quantitative easing (QE), and massive pent up demand from businesses and consumers exiting pandemic lockdowns.

With growth shares broadly seen to be more dependent on easy money, value shares are increasingly in focus as rising inflation figures raise the spectre of rising interest rates.

The name of the game is patience

Growth shares can potentially deliver outsized gains in a relatively shorter time frame. That's often because investors are betting on big growth in future earnings.

Investors in value shares, on the other hand, need to be patient.

Josh Gilbert, eToro market analyst, told The Motley Fool that the strategy behind investing in value shares "is all about waiting out short-term market fluctuations in order to benefit from long-term returns. Beyond that, value investors require an eagerness to learn, and the ability comprehend a company's fundamental information and white papers".

Value shares are also a great means to tap into the power of compounding. 6% annual gains may not sound terribly exciting after the year we've just had. But via the magic of compounding, 6% annual gains will see you double your money in 12 years.

As Gilbert points out, "When you reinvest the returns and dividends earned from value stocks, your profit will grow significantly over time and your earnings will eventually begin to generate earnings of their own, with minimal extra work required."

He also told us that investing in value shares is generally less risky than most short-term investment strategies. That goes back to patience. Value investors with long-term horizons don't need to get ensnared in daily share price moves.

The downside to investing in value shares

"The biggest con is that generally value companies hide from plain site and undervalued shares worth investing can be difficult to identify," Gilbert said. "It can also take a long time for an undervalued stock to return to its intrinsically fair price. Value investors may have to hold their positions for years until the market sentiment changes in their favour."

The post-pandemic market rout was particularly painful for investors in value shares, which tend to be more closely aligned to overall economic health. With economies across the world going into reverse last year, most traditional value companies sold off heavily.

5 international value shares with a positive outlook

Gilbert left off with a list of 5 US-listed traditional value stocks.

Target Corporation (NYSE: TGT) and Walmart Inc (NYSE: WMT), he said, "are dividend-paying retail stocks that often perform well when the economy is booming".

In the financial sector, he said that JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co (NYSE: WFC) are popular value stocks:

These companies' price to earnings ratios are very low compared to the market average. JPMorgan Chase & Co's PE ratio is also currently lower than the average PE ratio of the financial sector. This is often a flag for investors that the stock may still be undervalued.

Then there's Johnson & Johnson (NYSE: JNJ).

According to Gilbert:

Healthcare stocks such as Johnson & Johnson are also known as value shares. Healthcare is one of the most recession-proof sectors in the economy. Johnson & Johnson are currently developing a COVID-19 vaccine, but its primary revenue source comes from pharmaceutical sales. The company has a steady revenue stream and also pays a dividend.

Gilbert said that, overall, the outlook for value shares is positive. "Value stocks have effectively been out of favour for many years as most investors focused on tech. However, we now see that investors are picking up value shares with cheaper valuations after a difficult 2020."

The post 5 international value shares with a positive outlook: analyst appeared first on The Motley Fool Australia.

JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon recently released his annual letter to shareholders, a piece of literature widely read by the investing community. The 66-page, 35,000-word letter discussed a broad variety of events, topics, and policies, ranging from the coronavirus pandemic to banking regulation to what to expect from the U.S. economy.

Having now successfully steered JPMorgan Chase -- America's largest bank by assets -- through two recessions, Dimon is viewed as a leader in the banking and finance communities. Here are five important things Dimon said in his letter pertaining to banking and the economy.

1. The U.S. economy will likely boom

Like other economists and the Federal Reserve, Dimon expects the U.S. economy to surge as the coronavirus pandemic winds down. "I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE [quantitative easing], a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom," he wrote.

While the length of the boom can't be known at this time, Dimon said it could easily extend into 2023. He also said that a multiyear booming economy could justify current high equity valuations, with investors potentially pricing in big economic growth and excess liquidity finding its way into the market.

2. Inflation might not be temporary

Dimon called the possibility of longer-term inflation "not unreasonable." The statement came after officials from the Federal Reserve appeared to be divided on the outlook for inflation in their recent March meeting. "Rapidly raising rates to offset an overheating economy is a typical cause of a recession," Dimon wrote.

Fears of inflation have been driving a lot of market trends this year because inflation often leads to rate hikes, which makes riskier investments like tech stocks less appealing when safer investments like U.S. Treasury bonds are paying a better yield. Dimon said the hope is for a "Goldilocks moment," which he described as fast and sustained growth during which inflation and rates rise modestly but not too much. But the possibility for sustained inflation and rate hikes is very real, which could drive up the cost of interest on U.S. debt fairly significantly, he said.

3. Banks are a smaller part of the financial system

Dimon said that banks have become a smaller part of the overall financial system. Data compiled by JPMorgan shows that U.S. bank market capitalization grew $1 trillion between 2000 and 2020, while the market cap of global systemically important banks (GSIB) grew by $300 billion. U.S. bank loans grew by nearly $7 trillion in that time frame as well. While it might sound like a lot, shadow banking has grown more, with total private direct credit jumping from $7.6 trillion in 2000 to $18.4 trillion in 2020.

Meanwhile, huge tech companies like Alphabet, Amazon, Facebook, and Apple have seen their size jump from a nonmaterial amount in 2000 to $5.6 trillion at the end of 2020. The size of payments companies has grown to $1.2 trillion, and the size of private and public fintech companies is now $0.8 trillion.

Dimon views this as a bad trend, considering banks are reliable, less expensive, and consistent lenders through good and bad economic times. He added that transactions made by "well-controlled, well-supervised and well-capitalized banks may be less risky to the system than those transactions that are pushed into the shadows."

4. Regulation remains a struggle

One of the main reasons banks are becoming a smaller part of the financial system can be attributed to regulation, Dimon told shareholders. While Dimon acknowledges that the new Dodd-Frank regulatory framework put into place following the Great Recession succeeded in keeping banks healthy through the brunt of the coronavirus pandemic, he still sees major issues with it. This is not new, of course, as Dimon has long lobbied for regulatory reform.

One issue he sees is with a Dodd-Frank rule called the liquidity coverage ratio (LCR), which made more stringent rules around liquidity and, according to Dimon, effectively prevents larger banks from lending out all of their deposits. For instance, Dimon points out the fact that prior to the pandemic, banks had $13 trillion in deposits but only $10 trillion in outstanding loans. He believes that the $3 trillion in "lost lending" is directly related to the LCR requirement and may very well have contributed to stagnation in the U.S. over the last decade.

Dimon also believes fintechs and other nonbanks have several advantages over traditional and more heavily regulated banks. One example he points to is that banks with more than $10 billion in assets are subject to the Durbin Amendment, which limits the portion of debit card interchange fees they can collect on transactions. Dimon said that a bank servicing a checking account that spends $20,000 per year only makes $120 in debit revenue, whereas a small bank or nonbank would make $240. "This difference may determine whether you can even compete in certain customer segments," he wrote.

5. Banks are very well capitalized

Although a very different kind of recession, the pandemic served as the first real test since the dreadful Great Recession. While they certainly had some necessary help from the federal government's stimulus bills, banks performed very strongly, and JPMorgan is a great example.

If you look at the chart below, new accounting rules and the pandemic forced JPMorgan to boost its total reserves for potential loan losses by 143% from the fourth quarter of 2019, all the way to $34 billion at its peak in 2020. That still didn't stop JPMorgan from generating a 14% return on tangible common equity last year.

Image source: JPMorgan Chase 2021 Letter to Shareholders.

Perhaps even more impressive is that the bank prepared for a situation in which unemployment over a one-year period would remain at or above 12.5%, a scenario worse than what it was put through in the Federal Reserve's stress testing last year. And that scenario doesn't seem to have fazed Dimon. "I also have very little doubt that if the severely adverse scenario played out, JPMorgan Chase would perform far better than the stress test projections," he wrote.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. The Motley Fool recommends the following options: long January 2022 $1920.0 calls on Amazon, long March 2023 $120.0 calls on Apple, short January 2022 $1940.0 calls on Amazon, and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 5 things Jamie Dimon said in his annual JPMorgan shareholders letter appeared first on The Motley Fool Australia.

All of us would like to know what the future holds. Unfortunately, predicting the future is not something most investors are very good at, at least in the short term. The share market is supposed to be a rational market mechanism. And it does function that way, most of the time. But, as the old saying goes, 'markets can remain irrational longer than you can remain solvent'. Hence why making short-term bets usually doesn't work out that well. But there are some investors out there that are usually worth listening to when it comes to what the economy and share market have in store all the same. Warren Buffett is one, Ray Dalio is another. And Jamie Dimon is a third.

Mr Dimon is head of JPMorgan Chase & Co (NYSE: JPM), one of the largest banks in the United States, and the world for that matter. Mr Dimon has amassed a reputation as a stellar leader, CEO and investor over the years. And that's why his latest letter to the shareholders of JPMorgan is well worth a read.

Dimon: US economy looks set to boom

In this letter, Mr Dimon lays out why he thinks the US economy is set for some good days ahead. Here's some of what he had to say:

I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom. This boom could easily run into 2023 because all the spending could extend well into 2023.

A booming US economy will of course be great news for Australia and the rest of the global economy. As the largest economy in the world, what happens in the US tends to spill over into other markets.

Inflation and rates

But if you think a booming US economy might be good news for ASX shares, Mr Dimon threw in a caveat:

Conversely, in this boom scenario, it's hard to justify the price of U.S. debt… the increase in inflation may not be temporary and may not be slow, forcing the Fed to raise rates sooner and faster than people expect…. Also in this case, the cost of interest on U.S. debt could go up fairly dramatically making things a little worse.

So he's telling investors that all will go well unless the US Federal Reserve is forced to raise interest rates earlier and more rapidly than is currently expected. Not only will rising rates have the potential to derail an economic boom, but they will also almost certainly result in lower US stock prices. And if US rates rise, you can probably bet our own Reserve Bank of Australia (RBA) will have to follow suit.

However, Mr Dimon argues that that is not necessarily a given. Here's his outlook for US shares:

While equity valuations are quite high (by almost all measures, except against interest rates), historically, a multi-year booming economy could justify their current price. Equity markets look ahead, and they may very well be pricing in not only a booming economy but also the technical factor that lots of the excess liquidity will find its way into stocks.

Whatever happens, it certainly looks like we ASX investors are in for an interesting couple of years ahead.

The post US bank boss Dimon says economy will boom until 2023 appeared first on The Motley Fool Australia.