foxex: SurveyMonkey goes Bananas in IPO

Insight after the bell

By Caleb Silver, Editor in Chief

Four for Wednesday:

SurveyMonkey climbs 44% on IPO
Why this Bull Market is getting Weary
Fed Raises Rates and Stocks Sink
Facebook shares in a Death Cross

SurveyMonkey goes Bananas in IPO

Sorry folks - irresistible pun. There was a lot of enthusiasm for the online survey company's public offering with shares climbing 44 percent on its debut. SurveyMonkey, which trades under the ticker SVMK, follows EventBrite's IPO last week. It also popped out of the gate up 70 percent on opening day, but failed to hold those gains. SurveyMonkey has history, though. Like us, it's been around since 1999, managing to survive the dot-com meltdown and the financial crisis. It's got a real business which generated $218m in sales last year, but still lost $24m.

Why it's Important: There is always a lot of enthusiasm for IPOs. And why not? CEOs stand to make a lot of money as their shares become liquid, the banks and venture firms cash in, and friends and family who were given access to pre-IPO shares become millionaires (on paper) for a few days. The truth is, very few companies are able to hold the share gains they see on the first few days of trading. The real test comes 6 months after the IPO when those executives, investment banks and friends and family get to sell those shares after the lock-up expires. Many do, and that's when you see what the public markets think about your company's prospects.

What's next? Many of us thought this would be the year Uber would go public. But there haven't been any signs of that lately from CEO Dara Khosrowshahi who took the wheel a little over a year ago. He's had his work cut out for him restoring the culture and public image of the rideshare giant. But 2018 has not been a banner year for IPOs despite the high profile debuts of companies like Spotify, Dropbox and Sonos. According to Renaissance Capital, there have been 184 IPOs to date in 2018, up 36 percent from last year at this time, but lower than average since 2009. With concerns about excessive valuation for US stocks, the rest of the year might be quiet.

How does Survey Monkey Make Money?

Watch how the IPO process works at the NYSE with Kenny Polcari

How to get in on an IPO

#2 The Raging Bull is ready for a rest

The second-longest Bull Market in history (By some measures… we know there is lots of debate about this) is, well, aging. Bank of America Merrill Lynch is out with a research report stating that, "... The 20-year long risky stock premium has finally been wiped out...Investors should pay for safety and be compensated for risk…" They warn investors to expect significantly lower returns going forward on the order of about 2.2 percent on average through 2025. Yikes!

Why it Matters: Don't get us started… 529 Plans, 401ks, mutual funds, our retirement, inheritances and gifts to our loved ones, endowments, pensions, the global world order… You get the point. But, before we freak out about this prospect, we should examine why BofA makes this case. Here are the five market trends behind their thesis:

Rising volatility as the yield curve flattens causing more frequent and bigger pullbacks
Investors will favor cash-rich quality stocks
Value stocks will be up and center after 2018 as growth stocks take the backseat
Active fund managers get their groove back
Small cap stocks will hit the skids

What's Next? If you believe this thesis, and BofA is not the only research firm espousing it, take a good look at your asset allocation and check yourself before you wreck yourself, as Ice Cube would say. If you've been riding the wave through this extended bull market, it's a good time to consider a healthy rebalancing and risk assessment check.

P.S. It's not just research firms sounding this drumbeat. Earnings forecasts for the S&P 500 companies have been getting reined in. According to FactSet, the percentage of companies issuing negative EPS guidance is at its highest level since Q1 2016.

Rebalance Your Portfolio to Stay on Track

Earnings Guidance: Can It Predict the Future?

Digging Deeper Into Bull And Bear Markets

#3 The Fed does what we thought it would

No surprises from Jay Powell and the FOMC. They hiked the federal funds rate 0.25 percent to a target range of 2-2.25 percent, just as they telegraphed they would. The FOMC also forecasts at least one more hike before the end of the year and potentially three in 2019. They are taking away the punch bowl at the bull market party, but finally

Why it Matters: The federal funds rate is one of the key underlying rates that everything from mortgages to credit cards to car loans are based on. If you are financing anything with an adjustable mortgage or payment through a bank or credit union, you are feeling these rate hikes. Higher interest rates also make the cost of borrowing more expensive which may cool off hiring, big research and development projects and debt purchases.

What's Next: Powell and the Fed may as well have flown a banner behind an airplane letting people know about their plans to keep raising rates through 2019. Markets seem to have priced this in and taken it in stride, to say the least. But higher rates along with rising oil prices and an extended rally for US equities are three of the key factors that Bears and many market strategists point to as the perfect storm to end this Bull Market.

What should you do?

If you have adjustable rates on your home or auto loans, consider locking them in to fixed loans. Read More
If your portfolio is heavy growth stocks, consider rebalancing. Read More
If you want to learn more about how interest rates impact stock prices, take a class with us.

Fed Raises Interest Rates, Flags End of 'Accommodative' Policy

How Do Interest Rates Affect the Stock Market?

The Impact of a Fed Interest Rate Hike

Chart of the day: Death cross for Facebook. Tough times ahead?

Facebook's been in the news for all the wrong reasons lately and that continues. The company's shares entered into the much dreaded Death Cross pattern last week. As somber as it sounds, it literally means that the short-term moving average in the share price falls below a longer-term moving average. New to trading jargon? Here's the difference between the two.

The reason why this chart pattern is dreaded is that it is usually a bearish indicator that signals a downward movement for the stock price. (Death Cross has been one of the top searched terms on our site the past week, too. Funny how that works.)

But when has anything stopped Facebook from bucking the trend? The company's shares hit a Death Cross in April this year too but ended up higher instead. Here's what a Death Cross looks like.