Stock Market Outlook: April 2024

T.S. Eliot famously wrote that “April is the cruelest month.” Those words might seem a little heavy to many readers this April. But if you procrastinated badly enough on your taxes, you’re probably feeling some of those feelings, too.

But not all is gloomy this April. Cryptocurrency traders are making fortunes gambling on meme coins. An upcoming economic data release could shed light on the health of the U.S. economy — and U.S. stock market valuations. And a plethora of huge companies are due to report earnings per share (EPS).

In this issue

• Meme cryptocurrencies: investments or lottery tickets?

• The Buffett indicator, or why you should be paying attention to GDP

• A massive month for mega-cap earnings

Meme coin mayhem

It seems fitting that one of the biggest stories in the trading world on this April Fools’ Day is the meteoric rise of silly little cryptocurrencies with names like “bonk” and “dogwifhat.” Sometimes, these are known as meme coins. Other times, they go by another appropriate name you may have seen: one that starts with “sh” and rhymes with “Bitcoin.”

What are meme coins?

Meme coins are minor cryptocurrencies that represent internet memes. One of the most famous meme coins is Dogecoin (DOGE), a cryptocurrency based on the “doge” internet meme (a photo of a smirking Shiba Inu puppy that went viral in the 2010s).

All meme coins are altcoins — that is, non-Bitcoin cryptocurrencies. But not all altcoins are meme coins. Some altcoins, such as Ethereum, are projects with sincere financial and technological applications. Meme coins, on the other hand, tend to be pure jokes.

But the money they can raise is no farce. Dogecoin, for example, has a market capitalization of more than $20 billion at the time of writing. That’s greater than the market cap of some tech stocks, such as Snap Inc. (SNAP).

7 largest meme coins by market cap as of March 27, 2024

Source: CoinGecko.com. Data is current as of 6:30 p.m. ET March 27, 2024, and intended for informational purposes only.

But it’s important to note that past performance does not predict future performance — there’s really no way to predict whether you’ll earn these lofty returns by investing in meme coins.

“Unless you have a good grasp on the supply and demand dynamics, I think it's just gambling,” Vijay Marolia, chief investment officer of Orlando-based asset management firm Regal Point Capital, said in an email interview.

Ramy Bekhiet, a senior advisor to energy-industry blockchain startup PDX Coin, agreed in a separate email interview. “It is pure gambling and speculation,” he said.

Should you gamble on meme coins?

Experts — even those in the crypto industry — agree that the meme coin market is basically a casino.

It may not be a realistic way to build wealth in the long term. But if you enjoy this kind of gambling, can do it responsibly, and have some “play money” that you’re willing to lose, you might find it fun to speculate on meme coins. If you’re just getting started, check out our roundup of some of the best crypto exchanges and apps.

And although meme coin investing is mostly a game of luck, experts say there are ways to do it somewhat strategically.

“The key is to have a thesis,” Marolia said, referring to an important piece of information about a particular coin that the market seems to be overlooking.

Bekhiet said that some people monitor internet sentiment around meme coins in order to develop a thesis about whether they’re due to rise or fall.

“I do see people make money from tracking the X [formerly known as Twitter] account of the project or Telegram chat, amount of presale holders and stakers, etc.,” he said.

But it bears repeating that both Bekhiet and Marolia referred to meme-coin investing as gambling. If you’re looking to learn about a more legitimate investment strategy, check out the next section.

Term of the month: The Buffett indicator

This April is a month of many important data releases, one of which is the Bureau of Economic Analysis' first estimate of U.S. gross domestic product (GDP) in the first quarter of 2024.

That BEA estimate is due on April 25 and will be revised over the next couple of months. For the most part, it’s of interest to economists and institutional investors, and not closely watched by retail investors.

But perhaps retail investors should pay attention because GDP is one component of a potentially powerful stock market valuation metric: the Buffett indicator.

What is the Buffett indicator?

The Buffett indicator is the ratio between a country’s total stock market capitalization — that is, the value of all stocks listed on all exchanges in that country — and the size of its economy, as measured by GDP.

The legendary value investor Warren Buffett uses the indicator to gauge the priciness of a country’s stocks, by comparing the value of its stock market to the value of the actual economy underlying that stock market. In that respect, the Buffett indicator is kind of like a price-to-earnings (PE) ratio, but for countries.

Buffett developed the indicator in the aftermath of the 1990s dot-com bubble. This was a period when tech stocks, driven by early-internet-era hype, took on inflated valuations relative to actual economic activity before crashing back down to earth in the early 2000s. At that time, in a quote now widely referenced, he said that the ratio was “probably the best single measure of where valuations stand at any given moment.”

In a U.S. context, the Buffett indicator is often calculated by dividing the Wilshire 5000 index (a big-tent stock market index that contains almost every stock listed on a U.S. exchange) by the GDP numbers provided by the BEA^[0]

Is the Buffett indicator high or low right now?

At the time of writing, the Buffett indicator reads about 187% for the U.S. — meaning that the stock market cap of the U.S. (as measured by the Wilshire 5000 index) is slightly less than twice its GDP (as measured by the BEA)^[0]

That’s pretty high, historically speaking. The long-term average value of the Buffett indicator is a bit less than 100%. So the current reading, in the absence of any other context, implies that U.S. stocks are overvalued.

But Jared Dillian, editor of the Jared Dillian Money and Daily Dirtnap investment newsletters, says that investors should be wary of using the Buffett indicator as a market-timing signal of when to get in or out of the stock market.

“I think it’s kind of useless for timing,” Dillian says.

How should investors use the Buffett indicator?

Dillian says the Buffett indicator can be useful as a way to find undervalued stocks in overlooked foreign markets.

“It does give you an overall sense of valuation on a country-by-country basis,” he says.

International investing may entail more risk than domestic investing and may not be right for everyone. But with so many foreign-stock exchange-traded funds (ETFs) and index funds available to U.S. investors, getting international exposure has never been easier.

» MORE: Best online brokers for ETF investing

Dates that could move markets this month

Economic events

• April 5, Bureau of Labor Statistics (BLS) monthly employment report. A report showing hiring levels and various measures of the unemployment rate.

• April 10, BLS monthly consumer price index (CPI) report. A key inflation gauge. The employment and CPI reports could give investors hints about what the Federal Reserve will do with interest rates in future meetings; unexpectedly high unemployment or low inflation could indicate that a rate cut is on the way.

• April 15, taxes are due.

• April 20 or 21, Bitcoin blockchain reward halving. The reward for mining Bitcoin by validating a block of transactions will decrease from 6.25 BTC per block to 3.125 BTC per block. This "halving" event will restrict the supply of Bitcoin, and previous halvings have been associated with cryptocurrency bull markets. The exact date is unknown, as it depends on the usage of the Bitcoin network.

• April 25, BEA first estimate of U.S. GDP in Q1 2024. A measurement of whether the economy grew or contracted over the quarter. It will be revised over the next two months.

• April 26, Michigan Consumer Survey preliminary data for April. The University of Michigan will release its final data for last month’s survey on April 12, and its preliminary data for this month’s survey on April 26. The survey has become a closely watched indicator of ordinary Americans’ perceptions of the economy, which have been improving recently after a long period of negativity.

• April 30, Federal Reserve meeting begins. The Federal Reserve will start its next meeting on April 30 to determine the new level of the federal funds rate, which will be announced on May 1.

Earnings

Below is a table of blue-chip stocks that are reporting earnings per share in April, with the dates and analyst estimates for their upcoming earnings reports.

We’ve filtered the list for companies with a market capitalization of at least $100 billion — high-volume stocks whose earnings reports are often major trading events for options traders and day traders.

No data above? Log in or register for a NerdWallet account to see the full earnings calendar.

» MORE: Best online brokers for options trading