Market Update
Market Edge

Market Update for the Week of April 1st, 2024

Our Commitment

When GaneWisdom/Market Edge went live in August 2022, the goal was to provide our subscribers top-tier market analysis and outlook to those with qualified accounts such as: IRAs, ROTH IRAs, 401Ks, and 403Bs. Our desire was to make this service affordable to anyone. Instead of paying thousands of dollars, or a percentage based on investment assets (which is how Guy managed his client’s money as a Registered Investment Advisor) GaneWisdom/Market Edge charges a very affordable $200 per year. Our subscribers now include those with non-qualified accounts as well as financial professionals.

Please watch for our Mid-week Market Alerts should there be any

Mid-Week Market Alert for Friday, March 5th, 2024

Market Alert: Transfer 100% of your portfolio into Cash (Money Market) of the following:

A portfolio consisting primarily of health care stocks before the close of business on Friday, March 5th, 2024

We are making this week’s report free

One of the most important common denominators that investors, economists, and market analysts have focused on for well over a year has been the trajectory of interest rates. The Federal Reserve began their most recent rate increase in March 2022. Interest rates have gone up 11 times since, with the latest being this past July, landing at their current level of 5.25-5.5%.

Although we’ve seen how the rates have affected the markets, these rates are far from those of 40+ years ago. Battling inflation is generally the reason for rate increases and in 1980 the inflation rate in the U.S. stood at 14.6%. Paul Volker, the Federal Reserve Chairman then, drew the ire of many in the financial field as the stock market remained in constant turmoil during those years. By the time he was done raising rates, the last increase occurring on December 5th, 1980, they stood at 19-20%.

However – as the rates began their downward descent it can be said, without hyperbole, that the market has never looked back.

Investors today were disappointed that the current Fed Chairman didn’t lower rates in March. Although we had been cautioning our readers against that expectation for nearly two months, we believed that a more likely rate drop would occur mid-year. Now we might have to revise that projection due to some unwelcome news on Friday. Despite the markets remaining closed in observance of Good Friday, the PCE – the Personal Consumption Expenditure price index, data was released. What it disclosed, an uptick to 2.5% for February, was a reading further away from the Federal Reserve’s stated goal of 2% annual inflation growth. The PCE is the Central Bank’s preferred inflation gauge and although Powell wasn’t overly fretting about it, saying the number was “pretty much in line with our expectations”, it has thrown a bit of concern toward the prospect of a mid-year rate decrease.  

Market breadth is the impetus for a continued upward market trend, and we are now in the midst of this as we’ve reported these last weeks (see Archives) and approximately 75% of stocks are trading above their 200-day Moving Average (MA) which is a healthy sign. For now, we see the major indexes continuing their march northward. HOWEVER – things will change. How soon no one knows but you can be assured that we will be here with our latest data, research, and analysis to help you navigate the rapids when they appear. Now, lets look at the week just passed……….

S&P 500 (stockcharts.com)

This week saw the S&P 500 gain 0.29% closing at 5,254 on Friday. The S&P 500 is trading strongly above it’s 200-day and 50-day Moving Average. This is a positive sign signaling a continued uptrend in the market. Looking at the chart above will confirm the strength the Large Cap stocks have experienced since November. There will come a time that this strength will decrease – another reason o continue to follow our posts, but for now (as they used to say in the space-race 60’s) all systems are go!

Dow Jones Industrial Average (stockcharts.com)

Friday the Dow Jones closed at 39,807, up for the week by 0.84%

NASDAQ (stockcharts.com)

The Nasdaq closed at 16,379 on Friday down slightly for the week at -0.30. The Nasdaq is trending above it’s 200 and 50-day Moving Average. This is a strong market signal.

Russell 2000 (stockcharts.com)

As our readers are aware, we consider Small Cap stocks to be a precursor to market direction. We refer to the Russell 2000 as ‘the canary in the coal mine’ due to the propensity of signaling market strength, or lack thereof, and this week the Russell 2000 outperformed their big brothers coming in up for the week 2.54%. This is a strong indicator of a continued run-up of the market as a whole. We use the Rydex Russell 2000 chart due to continuing issues between Stock Charts and the reporting agency.

2 – Year Treasury (stockcharts.com)

Rates on U.S. Treasuries fell once again this week. The 2-year Treasury currently yields 4.52%. The 5-year at 4.21% and the 10-year Treasury Bond at 4.20%.

The VIX ended the week at 13.01 – a confirmation of a strong market atmosphere. Any number lower than 20 signals little fear of a market upheaval. 20 and above shows investors beginning to be concerned about the direction of the market. 30 and above fear has set in and 40 and above a full-blown panic. Obviously, we are not near those levels.

30 – Year Mortgages (stockcharts.com)

The national rate on fixed 30-year mortgages is currently 6.79%, down a bit from last week.

West Texas Intermediate Crude Oil (stockcharts.com)

Friday saw the price of West Texas Intermediate Oil at $83.17/barrel. See the Commentary below for more on this subject. We project oil prices to continue to rise, this week between $83.00 - $86.00 per barrel.

Commentary

In 2023 the S&P 500 was a solid winner. It still is, however, what contributed to that rise were the so-called Magnificent Seven – Nvidia, Apple, Alphabet, Amazon, Meta, Microsoft and Tesla. These seven companies were the backbone of the dramatic rise in the markets last year. But – it is beginning to appear that their domination is losing steam. Tesla is down @30% so far this year. Apple down 10%. Nvidia though continues to tear the markets up with a gain of 80% year-to-date which has propelled the markets even when they were feeling sluggish. That these stocks have not quite lived up to last year’s performance (Nvidia notwithstanding) has been a good thing! Let me explain.

The broader market rose 1.6% in March, which also saw the S&P 500 post a 3.1% increase. The group above though fell by 1.6%. When you as an investor decide what equities are best in helping you to achieve your financial goals it is always heartening to know that it’s not just a select few stocks that are propping up the market and garnering all the headlines. As an investor you want to see a larger number of companies do well. This confirms that the gains which we’ve enjoyed these past months, are for real. And lasting - at least at the present time. When the broader market participates in a rally or a sustaining uptrend, it is a sign of market strength. The caveat though is “knowing when to hold em, and knowing when to fold em,” as the old Kenny Rogers song goes. This is where the guidance that we offer becomes consequential and far-reaching.

Over and over throughout these past 18 months I’ve talked about investing with knowledge and not emotions. When I actively managed money for my thousands of clients as a Registered Investment Advisor it was not unusual for a handful of those clients to call me now and then to question a repositioning I initiated of their portfolio. Though there were no commissions or charges in my doing so (I charged an annual 2% management fee – the only charge they were assessed) some of these folks had real difficulty in not becoming emotionally invested in their account. Of course I understood. After all it was their future that I was working with. But when anyone, especially an investor, becomes emotionally involved in the decision-making process it’s natural to rely on ‘feelings’. But feelings are to be avoided whenever possible when making investment decisions. I discuss this at length in my eBook ‘Managed Money: An Avenue to Wealth” but suffice to say that indeed the entire world of investing, according to Wall Street, comes down to two very unmelodious - but accurate - emotions: Fear and Greed.  

Think about the reasons you decided to invest. Whether for a retirement program, a future purchase, leaving money to heirs or even perhaps due to the low bank rates you have invested in your future. Why wouldn’t you want to protect as much of your principle, as well as your profit, as possible? When I’m asked what GaneWisdom/Market Edge offers that most other analysts do not, I always give the same answer: Peace of Mind.

The current economic conditions in the United States

When asked about the economy 52% of responders to a recent poll said they believed they were financially worse off than they were four years ago. 26% of respondents felt they ‘were about the same.’ 22% felt that they were in a better position now than four years ago. 40% of those asked felt that the economy is worse today compared to one year ago. In 2021 a loaf of bread averaged $1.83 while milk was $2.32. Butter - $3.64. A bag of groceries consisting of a 5-pound bag of flour, 4-pound bag of sugar, one gallon of whole milk and a dozen eggs came to $13.55. That same bag of groceries now costs $15.91.

As I’ve stated many times on these pages, when voters go to the polls on November 5th, it will be the economy that they will be most concerned with. That said, the enigma of a former president possibly being convicted of a crime, will in my opinion, play a large role in voters, especially independent voters, decisions. Other than food and energy, the Biden administration has been mostly successful in guiding the economy toward a soft landing and governing prices. Gas prices, however, have become a major issue once again.

The Oil Markets

Prices at the gas pumps have risen an average of 14%  since January. This fact has complicated efforts to slow inflation. This price increase seems to reflect the usual increase in the spring when travelers drive up demand. Add to this demand are the refineries which are switching to a blend of summer fuel that is more expensive. Since 2018, gas prices have risen at an average of nearly 50 cents between January and the end of March, however they are still higher by seven cents since this time last year. I expect to see the price of oil moderate a but in the coming weeks however by summer, when hurricane season begins, we will likely see disruptions due to weather-related effects at the refineries which are mostly located in the Gulf states. Together with the continued unrest in the Middle East, which has finally made its full presence known on American consumers now, we may see gas prices around $4.00/gallon by mid-summer. That said, look for price moderations by the middle to late September.

BTW – Have you ever considered why, whenever gas prices are displayed at the gas station and pump it is always with 9/10 tacked on? $2.95 9/10, $3.05 9/10 and so on. As always look to the Feds. The Revenue Tax Act of 1932 allowed the government to add a federal tax of $0.01 on every gallon of gas sold to help offset the national debt. Remember this was at the height of the Great Depression. A gallon of gas was in pennies back then (even when I was a kid, but I digress!) so a fraction of a cent was considered reasonable. Instead of rounding up, gas station owners instituted the percentage of a cent to keep the price down. Gas station owners, as most of us, feel that $3.05 9/10 is cheaper than $3.06 per gallon. Since profit margins for most gas station owners are around five cents a gallon, they do not want to lose business by rounding up. Or by giving up the 9/10! Now you know!!

Finally

As investors wait for definitive word on just when the Fed will lower rates, Federal Reserve Chairman Jerome Powell this week signaled his fear of cutting rates too early. “If we reduce rates too soon, there’s a chance that inflation would pop back and we’d have to come back in and that would be very disruptive (to the economy)”, he observed. Powell did acknowledge the risks of leaving the rates at their current levels as well which could have a detrimental effect on the country including causing the much-feared recession to actually happen. Several Fed officials are in agreement that cutting rates too soon would not be in the best interest of the economy. So, for now, we wait and see how the numbers and data are reported over the next 60 – 90 days.  

Please refer to our Update for January 1st, 2024, found below.

Have a blessed and prosperous week………

Guy W. Gane, Jr.

From Market Update for January 1st, 2024

“…….As you know, our investment philosophy follows the guidelines used by Guy Gane when he managed many millions of dollars for many thousands of clients. His results placed him among the premier Registered Investment Advisors in the United States for many years.

Periodically we are asked “How are subscribers to GaneWisdom/Market Edge able to enjoy profits without losing money?” The answer is – they don’t! No-one can accurately know when a market top happens, nor when a market bottom will occur. Our philosophy is to take small losses in order to avoid big losses.

Let’s analyze the stock market for the last two years – 2022 and 2023.

2023 has witnessed an extraordinary runup in the S&P 500 (+24%), the Dow Jones (+13%), the Russell 2000 (+17%) and the most impressive – the Nasdaq (+43%).

If you are participating in your company’s 401k or 403b, you most likely have no one giving you guidance as to what to buy, when to transfer or when to sell. Consequently, you probably just leave the money, and continue to deposit into whatever funds you originally started with. Most Financial professionals advise their clients to ‘Buy and Hold’ their investments because ‘the market always comes back, then goes up!’ Sounds logical as well as sounds good! It’s hard to argue that logic, especially this year when the market did indeed ‘Come back’. But is that the end of the story? Not by a country mile……

Had your portfolio been invested in tech stocks, the Nasdaq let’s say, and you just kept the money there because your advisor said that’s the ‘smart move’, 2022 saw your investment lose 33% of its value (the Nasdaq’s performance in 2022). Your $10,000 investment by December 2022 was now worth $6,700.00. But the market came back – up 43% as we’ve seen. Despite this – YOU STILL LOST MONEY!

Why? Let’s look……

$6,700  x 43% = $2,881

$6,700 + $2,881 = $9,581 !

In order to break even – JUST TO BREAK EVEN – the Nasdaq would have had to increase 49.3% !! You still lost money 2023!

As you can read in our Archive section, we have given sound financial guidance throughout the last 16 months which could have minimized these losses and maximized gains.

This dear reader, is the visual result of Buying and Holding……”

Upon Reflection

When we began publishing GaneWisdom/Market Watch on August 21st, 2022, the Dow on the previous business day (8/19/22) stood at 33,706. The S&P 500 ended trading on the same day at 4,228. As we wrote above, Friday’s close for the Dow Jones was 39,807. The S&P 500 at 5,254.

Having to give back profits, then having to make them back up instead of profiting by building on profits is not the way to win on Wall Street. This is the ‘Buy and Hold’ strategy. Realistically this is the ‘Buy and Hope’ theory.                                                                                                     

Our subscribers have averaged meaningful positive returns and by following our column exited the markets and re-entered them when appropriate – while the Buy and Hold crowd hung on with white knuckles hoping the market would come back and make up what they lost. The current market has offered significant trading opportunities which we’ve taken advantage of throughout the past nineteen months (please refer to the “Archive” Section of our site). We are listing our current positions below. Our market strategy has been taking advantage of upward trends, the advantage being not having to make up for the large losses that can (often) occur in the Buy and Hold strategy. When (not if) the market shifts again, we will issue our analysis, guidance and suggestions at that time.

Our Commitment

When GaneWisdom/Market Edge went live in August 2022, the goal was to provide our subscribers top-tier market analysis and outlook to those with qualified accounts such as: IRAs, ROTH IRAs, 401Ks, and 403Bs. Our desire was to make this service affordable to anyone. Instead of paying thousands of dollars, or a percentage based on investment assets (which is how Guy managed his client’s money as a Registered Investment Advisor) GaneWisdom/Market Edge charges a very affordable $200 per year. Our subscribers now include those with non-qualified accounts as well as financial professionals.                 

Our market analysis consists of market indicators, trends and strategies which allow our followers to avoid large losses usually associated with the traditional ‘Buy and Hold’ method. Our results speak for themselves and each of our Posts since our inauguration are available under the site’s heading: ‘Archive’.

In Conclusion

As a subscriber to GaneWisdom/Market Edge you are being given unequalled access to the latest and most comprehensive market analysis available. Please note the following and move accordingly. We strongly caution moving into an equity position in the middle of a market rally, as we are in right now. This could lead to severe losses – ‘Buying high, selling low’ – is not wise. This is especially true for this current rally – this past week notwithstanding -  where the S&P 500 has increased 21% + since late October. Please watch for our Mid-Week Market Alerts in the event of shifting market conditions.

Wishing, hoping, If only’s and what if’s are based on emotion and you know that we follow the numbers, the indexes, the trend, the fundamentals - not emotions.

Our current positions:

We currently are/or were positioned in the following:Entered
A portfolio consisting primarily of Consumer Products11/6/23
A portfolio consisting primarily of NASDAQ – dominated stocks11/9/23
A portfolio consisting primarily of S&P 500 (Large Cap) stocks11/9/23
A portfolio consisting primarily of Financial stocks    11/9/23
A portfolio consisting primarily of Telecom stocks          11/9/23
A portfolio consisting primarily of Small Cap stocks      11/14/23
A portfolio consisting primarily of Health care stocks        11/16/23
A portfolio consisting primarily of Technology stocks     1/22/24
A portfolio consisting primarily of electronic stocks     1/23/24
A portfolio consisting primarily of Banking stocks2/2/24
A portfolio consisting primarily of Retailing stocks2/2/24
A portfolio consisting primarily of Energy stocks  2/27/24

Your particular Mutual Funds and/or Variable Annuities may or may not offer all or any of the positions we recommend from time to time. You MUST do your homework. Doing so and finding the portfolio in accordance with the our analysis may position you to take advantage of what we believe to be the next market rally or opportunity.

* As is the case with any investment, use your discretion and judgement before purchasing and/or transferring. Diversification is always prudent; therefore, our suggestion is using a portion of your portfolio and not the total in any one fund or subaccount. A portion should remain in Cash (Money Markets)

Please watch for our Mid-week Market Alerts should there be any


Mid-Week Market Alert for Friday, March 5th, 2024

Market Alert: Transfer 100% of your portfolio into Cash (Money Market) of the following:

  1. A portfolio consisting primarily of health care stocks

before the close of business on Friday, March 5th, 2024

As is the case with any investment, use your discretion and judgement before purchasing and/or transferring. Diversification is always prudent; therefore, our suggestion is using a modest portion of your portfolio and not the total.

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