How Low Can Stocks Go?

Plus: Which funds got hammered by Meta and Amazon; are mutual fund investors bailing? [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_smartinvestor&utm_content=39797&elqTrackId=7107ba0c8ef246e39c6a68d95deebcc6&elq=c0c75c9000eb4707a8b6d6f499cbb4fc&elqaid=39797&elqat=1&elqCampaignId=18830) [Smart Investor] Smart Investor [Tom Lauricella, chief markets editor]( Twitter: [@LauricellaTom]( [Tom Lauricella] In this week’s newsletter: - [Why the bottom may not be in for stocks.]( - [How bad would a recession be?]( - [What investors are – and aren’t- doing with their money.]( The stock market did a pretty impressive job of defying earnings-news gravity this past week, especially considering the sobering outlook from Amazon. To some degree, it’s not that surprising. As we’ve noted, bear markets are typically filled with rallies and head fakes that can make it seem like the coast is clear. Usually, it’s only hindsight that shows us when a bounce has turned into a bottom. One sign of a bottom that pundits love to talk about is “capitulation.” They’ll say we can’t have a true bear market low until investors have really given up hope. There’s lots to debate about that assertion, but one thing we can do is look at the data to see whether investors and fund managers have been heading for the hills. Katherine Lynch digs into Morningstar’s database and [reports on what the facts show](. A common theme across earnings reports are the signs of an economic slowdown. The markets seemed to take heart in a stronger-than-expected GDP report this past week (although that would also mean more Fed tightening, go figure) but the real question is how bad will any recession be. Morningstar’s U.S. economist Preston Caldwell offers his latest [read on the odds of a recession here]( and more importantly, his thoughts on how deep a recession we might be in for. Speaking of earnings, we had a couple doozies of earnings reports this week from Big Tech. Just when some investors thought things couldn't look any worse for Facebook’s parent company, Meta Platforms, they did. Meta reported dismal numbers and the stock collapsed nearly 25%. Then Amazon, which soared through the pandemic recession, warned about an impending soft holiday season and dropped more than 10%. Why should you care? If you own a mutual fund, they most likely own these stocks. We took a look at which funds got hit by [Meta’s plunge here]( and [Amazon’s drop, here](. When all is said and done, the big question that remains is how much more of a decline in the stock market might still lay ahead. Unfortunately, by some historic measures, the answer is quite a bit. Sandy Ward walks us through why the most widely followed measure of [stock market valuations is still flashing a warning sign](. [Why Stock Multiples Say the Market Could Continue to Drop]( [Why Stock Multiples Say the Market Could Continue to Drop]( History suggests the stock market’s current bottom would be `the most expensive bear-market low.’ Sandy Ward [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] Markets and the Economy [What Could Midterm Elections Mean for the Stock Market?]( [What Could Midterm Elections Mean for the Stock Market?]( Pay closer attention to economic and geopolitical catalysts than elections. David Sekera [Investors Show Few Signs of Throwing in the Towel on Stocks]( [Investors Show Few Signs of Throwing in the Towel on Stocks]( Stock fund managers have raised cash as investors put money to work, but investors are still choosing U.S. equity funds. Katherine Lynch [When Inflation Surfaced, TIPS Flopped]( [When Inflation Surfaced, TIPS Flopped]( This year’s surprise loser. John Rekenthaler [A Harder Landing for the U.S. Economy Now Looks More Likely]( [A Harder Landing for the U.S. Economy Now Looks More Likely]( Recession in 2023 now looks like a coin-flip probability as the Fed’s war against inflation continues to escalate. Preston Caldwell [Bond Ladder ETFs Can Help Investors Climb Higher]( [Bond Ladder ETFs Can Help Investors Climb Higher]( Putting money in ETFs with staggered maturities can preserve and even grow wealth in a rising interest-rate environment. Saraja Samant [How to Find Impact Investments for Your Portfolio]( [How to Find Impact Investments for Your Portfolio]( These options are on the rise as individuals “want to connect to their investments more,” Morningstar analyst says. Leslie Norton [Amazon's Stock Drop Trips Up Some Well-Known Funds]( [Amazon's Stock Drop Trips Up Some Well-Known Funds]( With Amazon stock down 10% Friday and 40% in 2022, some T. Rowe funds, Polen Growth take it on the chin. Chart of the Week [Which Funds Took a Big Hit From Meta's Stock Collapse?]( [Which Funds Took a Big Hit From Meta's Stock Collapse?]( Fidelity funds, Oakmark Select are among those dented by the woes of Facebook's parent company. [Read More]( Share: [facebook]( [twitter]( [linkedin]( Earnings [AT&T Posts Another Solid Quarter of Earnings as Revenue Per Customer Climbed]( Maintaining $25 fair value estimate; stock significantly undervalued. Michael Hodel [Apple Reports Strong Earnings, but Stock Still Overvalued]( Demand for products likely to slow on currency headwinds, high inflation. Abhijay Gupta [Cutting Amazon Stock’s Fair Value Estimate to $150 From $192 on Disappointing Q3 Earnings]( Guidance weak and AWS performance a concern. Dan Romanoff [Snap Earnings Disappoint for Third Consecutive Quarter]( Fair value estimate on Snap’s stock maintained at $27; company missed on top- and bottom-line growth. Ali Mogharabi [Ford’s Q3 Earnings Has Good and Bad News, but Is More Positive Than Negative]( Company is resuming limited share buybacks; stock’s fair value estimate unchanged. David Whiston [Kinder Morgan Earnings: Solid Q3 Results Led by Natural Gas Business]( Fair value estimate on Kinder Morgan’s stock is maintained; firm did well managing costs despite inflationary environment. Stephen Ellis [Mastercard’s Earnings Show Strong Growth on Bounce Back From Pandemic]( Stock viewed as modestly undervalued with a fair value estimate of $369. Brett Horn [Alphabet’s Q3 Earnings Disappoint as Macroeconomic Uncertainty Hits Ad Revenue]( Trimming fair value estimate on Alphabet’s stock to $160 from $169; shares undervalued. Ali Mogharabi [ServiceNow’s Stock Sees Fair Value Estimate Cut Despite Good Quarterly Earnings]( Price lowered to $640 from $675 as currency headwinds lead to results, guidance below our expectations. Dan Romanoff [Slashing Meta’s Stock Fair Value Estimate to $260 From $346]( Earnings for Q3 mixed, but strategy for metaverse a concern. Ali Mogharabi [Texas Instruments Q4 Forecast Suggests Demand in Most End Markets Has Peaked]( Stock’s fair value estimate lowered to $158 from $166 despite solid earnings for Q3. Brian Colello [Microsoft’s Stock Fair Value Estimate Cut on Lower Forecasts for Revenue Growth, Operating Margins]( Earnings results show macro pressures continue to weigh on performance. Dan Romanoff [Coca-Cola Earnings Show a Solid Q3 on Strong Pricing Despite Headwinds]( With Coke’s stock near fair value, investors should refrain from building a position. Dan Su [General Motors Responds to the Market’s Recession Fears With Great Third-Quarter Earnings Results]( Shares rose after the company posted $4.6 billion in automotive free cash flow and maintained their 2022 guidance. David Whiston Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2022 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602