You want to know that the companies you're investing in are ready–come what may. As investors, you want to hear the bad news. That's usually a good thing, as prudence can often pay off. Whether or not we're in a recession or heading into one, a lot of public companies are acknowledging the downturn and preparing for it by curbing their spending, watching their head counts, and battening the hatches. That's the highest number in more than a decade, and we have to go all the way back to the Great Financial Crisis to find more mentions of the 'r' word in earnings calls. In this most recent earnings season, according to FactSet, 240 companies–nearly half of the S&P 500–have mentioned the word ' recession' in their reports and earnings calls. Well, our number one thing to watch this week is the tone we're hearing from public companies. When companies are overly pessimistic and they are public about it, they are probably acting out all their bad news, hoping that investors will appreciate the transparency and decide they can live with the bad news and recommit to owning shares in that company. This theory also kind of works inside companies as well. Too much optimism is usually a sign that the market is overbought and it may be time to back away. Just how bearish is individual retail investor sentiment right now? Well, according to the American Association of Individual Investors (AAII), which runs a sentiment survey every week, the 40-week average for sentiment readings has never been as low as it is right now. If everyone's negative or pessimistic, that usually leads to a tipping point where sellers get exhausted, all the bad news gets priced into the market, and the bold buyers start buying. They say that super-negative investor sentiment is a contrarian sign. Let's get to our big three things this week.
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