Market Update
Market Edge

Market Update for the Week of December 11th, 2023

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.

Please watch for our Mid-Week Market Alerts in the event of shifting market conditions.

“It’s a sure thing…….” How many times have you heard that in your life? Depending on your line of work (or associations!) probably at least a few. Lately we’ve been hearing that the next sure thing would be that the Federal Reserve would not only stop raising interest rates but would lower them in the spring. No doubt, that could indeed happen but this past week, as investors regained their sobriety from November’s glorious market run-up, there was a growing realization that those lower rates were not ‘a sure thing’. At least not immediately.

You’ll recall the many times we’ve written that good news can sometimes be bad, and bad news can sometimes be good? This was again the case this past week. The Labor Department issued their monthly report which showed nonfarm payrolls had increased by 199,000 jobs in November. The expectation was that only 180,000 would have found work. The unemployment rate dropped to 3.7% and average earnings rose 0.4% on a monthly basis compared with economists’ forecasts of ‘only’ 0.3%. This should be good news, right? Nope! More jobs means higher spending from workers. Until inflation reaches the Fed’s magic number of 2% inflation, any type of news like the above will not bring smiles to the Federal Reserve board.

Investors are assessing that the strong jobs report underscores market optimism that the proverbial ‘soft landing’ recession might be possible. Investors have already priced in the likelihood that the Fed is done raising rates. The current labor market data suggests that lower inflation without a hard recession is possible. However, until we see a continuance of lower Treasury yields, we will continue to rely on past history.

S&P 500 (stockcharts.com)

This week saw the S&P 500 close at 4,604, up 0.21% for the week.

Dow Jones Industrial Average (stockcharts.com)

This week saw the S&P 500 close at 4,604, up 0.21% for the week.

Dow Jones Industrial Average (stockcharts.com)

The Dow closed Friday at 36,247, up modestly at 0.01%

NASDAQ Composite (stockcharts.com)

Friday the NASDAQ closed at 14,403, up 0.69% for the week. As illustrated above, the Nasdaq has performed magnificently since the end of October.

Rydex Russell 2000 (stockcharts.com)

Using the Rydex Russell 2000 chart (which closely resembles the Russell 2000 chart) we would see the Russell 200 closing Friday at 1,880, up nearly one point, at + 0.98%

2-Year Treasury Bonds (stockcharts.com)

2-year Treasury Bonds closed at 4.71% while the 5-year Treasury closed the week at 4.38% and the 10-year Treasury closing at 4.50%. What is happening now behind the scenes is a bit worrying. As the government needs to continue borrowing money to cover the budget deficit, buyers of government debt - buying T-Bonds and Bills – are becoming scarce. It seems that as one concern is easing – the Inverted Yield Curve – another seems to be arising. We’ll have more to say as more information becomes available.

Volatility Index (VIX) (stockcharts.com)

The Volatility Index closed the week at a recent low of 12.35. As you know, any number of 20 and above signals a concern on investors’ part. 30 and above is increasing anxiety by them and 40 and above is a signal of an all-out panic. We are now among the lowest VIX of the year – a comforting sign.

30-Year Mortgage (stockcharts.com)

30-year Mortgages ended the week at a national level of 7.03%. This is quite a drop since the end of October. You’ll recall that rates hit 8% + during that month. The projection is beginning to appear that there may be more buyers than sellers next year. In 2024, the country could see a renewal of the ‘Bidding Wars’ of a few years ago. Stay tuned.

West Texas Intermediate Crude Oil (stockcharts.com)

West Texas Intermediate Crude Oil ended the week at $71.23 per barrel. The good news for consumers is the continuing lower price at the gas pumps. As we’ve been forecasting for some time, oil prices continue to remain low (comparatively speaking) and have been dropping. This despite the unrest in the Middle East. This week we are seeing the price of a barrel of oil dropping still more, down to an average between $68.00 and $73.00.

Commentary

It is little wonder why investors can watch their hair turn grey much earlier in life than what’s considered normal! The good news of course is that more Americans are working and less Americans are filing for unemployment benefits. Yet, as we know, the Fed looks at these figures as inflationary! And their way of combating inflation is to raise rates or keep them at the current level.

My home is about 15 miles from the University of Michigan in Ann Arbor. That prestigious institution offers their respected research on the country’s Consumer Sentiment on a monthly basis. This week, research showed that this sentiment rose to 69.4 in December, up from 61.3 in November. This was due to the growing anticipation that inflation now seems to be under control. The market was expecting a 62.0 rise, and this is the highest level since August.

One of the concerns I looked at this past year, and wrote about, was the effect that the continued rise in rates from the Fed would cause the nations industries to take a hit and this has happened. Factory orders dropped by 3.6% (month-over-month) in October which followed a downwardly revised 2.3% increase in September. This was not what the market expected. Wall Street anticipated a decrease of 2.8%. This is the largest decrease since the spring of 2020 as COVID was beginning to ramp up in the U.S. The markets, as you read above, were nothing if not lethargic this week.

There had been an announcement from nationwide employers that plans were afoot to cut over 45,000 jobs in November, which would been 24% increase over October. The sectors most affected were in the financial, technology, transportation and healthcare. This (weirdly) may be good news for the stock market in the near term. We’ll analyze the numbers coming out this week.

I continue to maintain that the big news concerning the presidential elections next year will be the economy. Personalities aside, most Americans are more concerned with their, and their families, day-to-day welfare and if the reining party and/or incumbent is delivering that peace of mind, there is little likelihood that they will change the leadership that is delivering that to them. November 2024 is now 10 ½ months away and world, as well as domestic, events can rearrange the landscape certainly but that’s the view from here.

Guy W. Gane, Jr.

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 36,247. The S&P 500 at 4,604. Any profit you made in the market runup of 2023 – the past six weeks notwithstanding - has perhaps been negligible due to ‘giving back’ profits, then having to make them back up instead of profiting by building on profits that were saved from market downturns. So much for the ‘Buy and Hold’ theory. Our subscribers have averaged 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. The current market has offered trading opportunities which we’ve taken advantage of, and we are listing them below. Our market strategy has been taking advantage of this upward trend, the advantage being not having to make up for the large losses of several months ago. When (not if) the market shifts, 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. 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.

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