Colin's note: All week on The Bleeding Edge, I've been talking about how the next four weeks will be the most important weeks of 2024 for investors… and how you can get through them.
On Monday I discussed what makes the next four weeks so critical… And on Wednesday I shared with you your guide to surviving potential dips and falls…
Today I'm putting on your radar some alarming data that I've noticed lately that suggests we may be heading straight for a decline…data points that we've seen since just before the 2022 market crash that surprised so many , haven't seen anymore.
That's why I'll show you what you should pay attention to. This way you will be prepared for whatever the next four weeks – and the weeks beyond – throw at you.
Just click below to watch…or read on to read the transcript my team and I edited for Flow.
Bleeding Edge subscribers, happy Friday. Hope you have a great day.
If you've been following us all week, you know that I called the month of April – actually the next four weeks – the most important development we'll see in the stock market all year.
Look, these next four weeks will determine where markets head for the rest of the year. Because we're heading into an important earnings season that officially begins next week.
Publicly traded companies report their profits quarterly. Think of it as a report card on a company's performance. Perhaps more importantly for investors, we are inundated with financial data and data that can drive stocks and the stock market up or down.
Next week – early Friday morning before the market opens – we'll get some of the most important data we'll get all of earnings season. The data is so important that it can provide insight into where the markets will go in the next few months.
In fact, the last time markets recorded data points at this level was just before the 2022 stock market crash that wiped out many investors.
In many ways, this data point can be said to predict a stock market crash. And today I'm going to discuss what you can look out for.
One of the largest financial institutions in the world reports earnings next Friday, April 12th. And there's data in this financial report that could signal where markets are heading for the rest of the year, and perhaps even beyond.
JPMorgan is a bank that is so dominant – and manages so many assets – that even if you have little or no interest in ever owning shares in the company, you need to pay attention when the company reports its quarterly earnings.
I have been reporting about the company on YouTube for years. And I've always emphasized that it gives us insight into the consumer market and other companies.
The company manages nearly $4 trillion – the largest bank of its kind. There are many aspects of JPMorgan's financial report that are worth paying attention to – including CEO Jamie Dimon's few paragraphs early on filled with one-liners and filled with headline-grabbing quotes.
But the most important line is often overlooked by many investors.
Of course, I will be paying close attention to this metric in a week's time because, as I alluded to, the last time we saw it at these levels was just before the stock market crash in 2022.
But I'm talking about provisions for loan losses.
It's not something many financial experts discuss on a regular basis… but the “loan loss reserve” figure is money that JPMorgan sets aside to cover loans that are either in default – in default – or need to be renegotiated.
JPMorgan determined the level of loan loss reserves taking into account past loan performance, current economic conditions and expected future economic conditions or future losses. Loan loss provisions are recorded as an expense in the company's financials, meaning they can directly impact the company's profitability and its stock price.
But provisions for loan losses paint a picture of the overall health of consumers and businesses. Higher credit losses mean the companies' consumers may have difficulty paying off their debts.
Due to the economic uncertainty brought on by the pandemic, loan loss reserves at all major banks increased rapidly in 2020. However, thanks to government stimulus measures and low interest rates, banks did not notice much stress during this time.
But that is currently not the case.
We saw last year that loan loss provisions are steadily rising again. We have reached levels not seen since 2022… right before the stock market took a big crash.
The fact that banks are setting aside more money to cover defaults and charging data means things really aren't looking good.
Consumers are delinquent on their credit cards at a rate not seen in more than a decade. Commercial real estate loans find themselves in a similar situation. Unlike the federal government, businesses and consumers cannot simply print dollars to pay their bills.
The impact of persistent inflation and higher interest rates is taking its toll on the economy. And financial markets, which are near all-time highs, have largely not priced in much of this news.
Next Friday could be the first sign that markets are starting to pay attention to this all-important data. We'll definitely be there to cover it here on The Bleeding Edge. I wish you a nice and safe weekend. We'll see you again next week.
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