Colin’s Note: All week at 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 navigate them.
On Monday, I got into what makes the next four weeks so critical… And on Wednesday, I shared your guide for riding out any dips and dives that may come…
Today, I’m putting on your radar some alarming data that has caught my eye recently that suggests we may be heading straight for a fall… data points we haven’t seen since right before the 2022 market crash that caught so many off guard.
So I’m going to show you what to watch for. This way, you’ll be prepared for anything the next four weeks – and the weeks beyond – can throw at you.
Just click below to watch… or read on for the transcript my team and I have edited for flow.
Bleeding Edge subscribers, happy Friday. Hopefully, you guys are having a great day.
If you’ve been following us all week, you’ll know I’ve been calling the month of April – the next four weeks, really – the most important stretch we’ll see in the stock market all year.
Look, these next four weeks will define where the markets are heading for the remainder of the year. That’s because we’re heading into an important earnings season, which officially kicks off next week.
Public companies report their earnings every quarter. Think of it as a report card of how a company is performing. Probably more important for investors, we’re inundated with financials and data, which can drive stocks and the stock market up or down.
Next week – early Friday morning before the market opens – we’ll receive some of the most important data we’ll get all earnings season. The data is so important, it can indicate where markets are heading over the next several months.
In fact, the last time markets saw data points at these levels was right before the 2022 stock market crash that wiped out many investors.
In many ways, you can say this data point can predict a stock market crash. And today I’m going to discuss what you can look for.
One of the largest financial institutions in the world reports earnings next Friday, April 12. And inside that financial report is data that could signal which way the markets are heading for the rest of the year, potentially even beyond that.
JPMorgan is a bank so dominant – and with so many assets under its management – that even if you have zero interest, no interest whatsoever, in ever owning shares of the company… you must pay attention when the company reports its quarterly earnings.
For years, I’ve been covering the company on YouTube. And I’ve always emphasized that it gives us a window into the consumer and other businesses.
It’s got nearly $4 trillion under management at the company – the largest bank of its kind. There are many aspects of JPMorgan’s financial report worth paying attention to – including CEO Jamie Dimon’s handful of paragraphs right at the beginning filled with one-liners and headline-grabbing quotes.
But the most important line is one many investors tend to overlook.
Sure, I’ll be paying close attention to this metric a week from now, because, as I indicated earlier, the last time we’ve seen it at these levels was right before the 2022 stock market crash.
But what I’m talking about are loan loss reserves.
It’s not something you see many financial experts discuss regularly… but that “loan loss reserves” figure is money that JPMorgan sets aside to cover loans that are either delinquent – in default – or need to be renegotiated.
JPMorgan set loan loss reserve levels considering past loan performance, current economic conditions, and expected future economic conditions or future losses. The loan loss reserves are recognized as an expense on the company’s financials, which means they can directly impact the company’s profitability and its stock price.
But loan loss reserves paint a picture of the overall health of consumers and businesses. Higher loan losses mean companies’ consumers might be struggling to pay off their debts.
Loan loss reserves at all major banks rapidly rose in 2020 due to the economic uncertainty the pandemic ushered in. However, thanks to government stimulus and low interest rates, banks didn’t realize much stress during this time.
But that’s not the case right now.
We have seen over the past year that loan loss reserves are steadily rising again. We’re at levels not seen since 2022… right before the stock market took a major nosedive.
The fact that banks are setting aside more money for loan losses with delinquency and charge off data means things are really not looking good.
Consumers are delinquent on their credit cards at a rate not seen in more than a decade. Commercial real estate loans are in a similar predicament. Unlike the federal government, businesses and consumers can’t just print dollars to pay our bills.
The impact of sustained inflation and higher interest rates is taking its toll on the economy. And the financial markets, which are near all-time highs, largely haven’t priced a lot of this news in.
Next Friday could be the first indication that markets begin to pay attention to this all-important data. We’ll certainly be here to cover it for you here on The Bleeding Edge. I hope you have a fun and safe weekend. We’ll see you again next week.