While fully acknowledging that Elon Musk’s acquisition is the biggest news currently surrounding Twitter (TWTR), the stock has been on quite the path since the start of 2021. Twitter shares set a new all-time high early in the year, drew down 30%, then mostly recovered. When management announced a $4 billion buyback plan in late 2021, shares declined in what would become a 50% slide. Around the same time, $2 billion worth of Twitter stock was repurchased by the company and Elon Musk’s takeover plans materialized. And now, Twitter’s stock price is basically right back where it started 2021. So… all of that for nothing?
With interest rates on the rise, fixed income funds’ net asset value (NAV) returns are suffering. And this chart clearly shows why floating rate bond funds (also called bank loan funds) are so popular right now. Floating rate bonds are uniquely positioned to maintain their yield spreads while rates are rising, and they are gaining a lot of attention from yield-hungry investors.
A major trend in the post-COVID-19 stock market has been the contraction, then rapid expansion of corporate earnings. This chart shows that earnings growth eventually caught up with price growth in 2021, bringing the market price-to-earnings (P/E) ratio back in line with 2018’s high. Looking ahead in 2022, as prices begin to pull back, will the S&P 500’s P/E ratio continue declining, as it’s forecasted to? And if so, will that decline be caused by further earnings expansion? Or a worsening sell-off for stocks?