Market Update
Market Edge

Market Update for the Week of April 29th, 2024

This Weeks Market Update is Free of Charge

New York Stock Exchange Trading Floor – 1964

After the past few weeks, the markets had moved a bit higher by the closing bell on Friday. Thanks to strong earnings reports from Microsoft and Google on Thursday, the S&P 500 saw its largest gain since early in November after pulling 5% off the table since January 1st. The S&P 500 however still is in positive territory even with that reversal, up about 7% year to date and +24% since the rally began in late October.

This week will see earnings reports from Amazon (Tuesday) and Apple (Thursday) and others. Wednesday the Federal Reserve will issue its monetary policy statement and although Wall Street has more-or-less accepted few if any rate reductions this year, this report will give more clarity to their direction which could influence the markets by late afternoon on Wednesday if they signal possible reductions by year end.

S&P 500 (stockcharts.com)

The S&P 500 closed at 5,099 Friday, up 2.67% for the week. The S&P 500 trades at 20 times forward earnings estimates, well above its historic average of 15.7, according to LSEG Datastream.

Dow Jones Industrial Average (stockcharts.com)

Friday the DJIA closed at 38,239

NASDAQ (stockcharts.com)

The Nasdaq ended trading Friday at 15,927

Russell 2000 (stockcharts.com)

Although we use the Rydex Russell 2000 as a chart due to issues between Stock Charts and the reporting agency, the Russell 2000 closed at 2,002

2 – Year Treasury (stockcharts.com)

Reflecting the confusion on Wall Street as well as the concerns over inflation, Treasury Bonds are trending steadily upwards. The 2-year Treasury closed Friday at 5%. The 5-year at 4.69% and the 10-year at 4.66%.

Volatility Index (stockcharts.com)

This week saw a pullback to the VIX which closed Friday at 15.03. A number of 20 and above would show investors checking the exit signs. 30 and above heading toward them and a reading of 40 and above would see a stampede out of the market. We are not seeing anything so dire at present.

30 – Year Mortgages (stockcharts.com)

Reflecting the upward trend of Treasuries, the fixed 30-year mortgages nationally stand at 7.17%

West Texas Intermediate Crude Oil (stockcharts.com)

Closing the week at $83.85/barrel, the U.S. is now under the constraints of world events, specifically the Middle East. Look for West Texas Crude to hover between $83.50 and $85.00/barrel this week.

Commentary

The major indexes this week offered a bit stronger of a pulse than we’ve seen over the past few weeks. Earnings from companies like Alphabet (which paid out its first dividend ever this week) and Microsoft, which beat earnings estimates, helped propel the market to a positive closing on Friday and consequently the week. Of the 11 major S&P 500 sectors, six finished higher, led by gains in communication services, consumer discretionary, materials and technology. The S&P 500 and Nasdaq posted their largest weekly percentage gains since early in November.

It is becoming increasingly obvious to me that investors have become more demanding and less forgiving when earnings are not as robust as they believe they should be.  What is considered a ‘good’ Price to Earnings ratio (P/E) – 12% - 15% doesn’t seem to satisfy many people. For example, the S&P 500 is trading at 20 times its forward earnings estimates which is considerably above its historic average of 15.7% and yet investors are exhibiting caution. Tesla for instance was up 12% earlier in the week however its stock is down over 30% since January 1st.

Treasury yields, as noted above, continue to climb and besides having a negative effect on the stock market, the housing markets continue their torturous journey reflected in reduced home buyers and housing starts.

As I have written repeatedly here, the November election may very well come down to the economy as has generally been the catalyst for change when the economic conditions falter. BUT – we are also living in an historic period of time as we witness a former president sitting in court as the target of a criminal complaint. At this moment in time anything is possible in November.

The Trump team has been floating the scenario of overtaking the Federal Reserve in as much that the Fed will no longer be independent should Trump be elected. To be at the whim of any type of special interest group or person would, in what many learned observers observe, a disaster waiting to happen. Plainly put, the economic future of the United States must be left to what is sound judgement and independent thinking from the top economic minds in the country and NOT for political purposes.

Last week I wrote, in very simple terms, what constitutes an inflationary situation – supply and demand. This is a condition where spending money creates demand. Friday the Bureau of Economic Analysis reported data indicating that people spending money outpaced the income these same people produced. Unemployment is under 4% (I always refer to the good news is bad news and vice versa) which allows more Americans to spend money however personal savings has nosedived to 3.2% which is the lowest level since October 2022.

The Federal Reserve’s key measure for determining inflation pressures comes from the Personal Consumption Expenditures Price Index (PCE). This index illustrates that in March inflation is continuing its stubborn trend. The department also reported that inflation (on an annualized basis) ran at 3.7% for the first quarter. These trends do not make a case for lowering interest rates any time soon. There are now estimates that IF a rate reduction happens at all prior to the election, they could occur in September. Additionally, Gross Domestic Production (GDP) numbers were disappointing as well. The data held that there was slower than expected growth and higher than expected inflation. There are beginning to appear many traders, investors and economists who are speaking one of the most dreaded words in economics: Stagflation.

According to Investopedia, Stagflation is defined as “an economic cycle characterized by slow growth and a high unemployment rate accompanied by inflation. Economic policymakers find this combination particularly difficult to handle, as attempting to correct one of the factors can exacerbate another. Once thought by economists to be impossible, stagflation has occurred repeatedly in the developed world since the 1970s oil crisis.”

In my eBook (available on Amazon) “Managed Money: An Avenue to Wealth” I discuss Stagflation in more detail but in order to begin a recovery it would usually call for interest rate hikes. This is a worst-of-all scenarios and you can be assured that its something we will continue to monitor but I’m fairy certain you will hear this term more frequently soon.

In closing, this week should indicate what direction the near-term markets are headed. All four of the major indexes we follow above are trading below their 50-day Moving Averages (MA). We should begin to see a trend this week and will report it as soon as it becomes apparent.

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 38,239. The S&P 500 at 5,099.

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 any type of market rally. This could lead to severe losses – ‘Buying high, selling low’ – is not wise.  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 are currently 100% in Cash (Money Markets)

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

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