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.
Please watch for our Mid-week Market Alerts should there be any.
Please see our Special Alert below for important analysis
When the closing bell of 2023 sounded this past Friday, the Nasdaq had climbed 43% - it’s best performance since shortly after the turn of the 21st century. This impressive outcome was led by Meta, Facebook’s parent company and the chipmaker Nvidia. AI took the market by storm and the tech heavy Nasdaq is where these companies generally trade. Adding to the euphoria was the thought that the Federal Reserve has finally halted their rate increases and are now signaling that rates may begin coming down in 2024. Although many investors were hopeful that these rate decreases would begin in March, our view is that June 2024 will be the likely month for these reductions to start.
The S&P 500 could be considered ‘overbought’ as it is very near its previous all-time high. We will continue to monitor this index next week. We could see a pullback due to profit taking in the short term, but we could also see a new high attained soon as well. Although this may sound a bit like hedging ourselves, this is only the way we see the current markets – a possible trend continuing or ending.
The Small Cap market, as indexed through the Russell 2000 has achieved what’s known as a breakout and although the average was down for the week (down 0.34%) there are strong indications that we could continue to see an upward trend.
The market finished lower on the year’s final trading day however all the major indexes still saw their ninth straight week of gains take place.
S&P 500 (stockcharts.com)
Closing the year at 4,769, many thought that the S&P 500 might reach – and perhaps surpass - it’s all-time high of 4,796 (January 3rd, 2022). Regardless, the S&P 500’s performance for 2023 was outstanding, increasing 24.7% for the year.
Dow Jones Industrial Average (stockcharts.com)
The DJIA ended trading on Friday at 37,689, up 0.81% for the week. For the year, the Dow gained 13.70%
On Friday the NASDAQ closed at 15,011, up 0.12% for the week. The Nasdaq had a fantastic year, up 43%
Rydex Russell 2000 (stockcharts.com)
For quite a while, the reporting agency for the Russell 2000 index has not posted with Stock Charts, which we use, therefore, we use the Rydex Russell 2000 chart which follows the same trajectory.
Small Caps this week closed at 2.027, down fractionally for the week -0.34%. As we continually monitor the indexes, we will wait to see if a change in the trend of the Russell 2000 takes place. As we have written, the Small Cap market is akin to the ‘Canary in the Coal Mine’ as it can usually signal early which way the major indexes are headed.
2-Year Treasury Bond (stockcharts.com)
The 2-year U.S. Treasury Bonds are currently yielding 4.23%. The 5-year Treasuries are currently at 3.85% and the 10-year’s 3.88%. The yields have dropped from 4.71% on the 2-year Treasury Bonds posted on December 8th, as well as the 5-year: 4.38% and 10-year at 4.50%. This is a clear indication that the Fed is preparing to cut rates in 2024.
Volatility Index (VIX) (stockcharts.com)
As the chart above illustrates, the VIX has once again stabilized below 13.00. Last week saw the VIX close at 13.03 and at the final bell on Friday it closed down to 12.45. As you know any number above 2o is a show of concern by investors. 30 and above is a signal that investors are getting very nervous and 40 and above will see a mass exodus out of the market. We are not seeing anything of the sort at this time.
30-Year Mortgage (stockcharts.com)
The 30-year Mortgage rates will reflect what the U.S. Treasury Bonds are yielding. As we’ve seen, those rates have come down over the last weeks therefore we are seeing mortgage rates follow suit. At the beginning of December the 30-year rate stood at 7.03% and as you notice above the rate now stands at 6.61%.
West Texas Intermediate Crude Oil (stockcharts.com)
West Texas Intermediate Crude Oil closed at $71.65/barrel Friday.
The chart above is very interesting. On it, you’ll see the 50-day moving average of West Texas Intermediate Crude Oil surpassing the 200-day MA mid-August. Notice the price of a barrel of oil afterwards? The price went up by the last week of September ($95.03). This event on the chart is called a ‘Golden Cross’. A Golden Cross sends an investor’s heart aflutter due to the signal it gives that the price of that commodity, security or index is going to increase. This, as you can see, is exactly what happened.
Now look ahead to this past week. What you’re seeing is known as a ‘Death Cross’. This occurs when the 50-day MA falls below the 200-day MA. This is NOT a signal that an investor is hoping to see if they hold that particular commodity, security or index. The reason? Death Crosses signal a downward trend. We should see the price of WTIC head south, perhaps significantly in the coming weeks. This will be very (happily) noted at the pumps.
Look for prices with WTIC between $67.00 and $71.00 this week.
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 keept 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.
2023 was a year fraught with problems and potentials – both good and bad.
The political atmosphere in our country is nothing if not toxic. Can anyone say it will get better in 2024? Although my 30 plus year career was in finances, I was/am also a ‘history guy’. Although world history was a subject I knew quite a bit about (which assisted with my market recommendations due to that background knowledge) it was American history that most interested me. What I am about to write will be scary to some, if not most of you, but because of the major affect it will have on the stock market, it is an observation that needs to be told. The situation that we now find ourselves in is very similar – eerily similar - to the year 1860.
Without delving into a history lesson, the year 1860 was a pivotal election year. North and South were sniping at one another for over a decade. Slavery, and the spread of slavery to the new territories was the catalyst that would pit section against section, family against family and literally brother against brother. Political talk was forbidden at the table due to the emotions that would arise from the conversation (which turned into heated arguments) and threats of violence and secession were everywhere. Once Abraham Lincoln was elected both North and South went into their respective corners and came out fighting. And fighting is what they did for 4 years. At a cost of 2 ½ % (or 750,000 lives) of the then population of the United States (two and a half percent of the U.S. today would equate to 8,250,000 lives).
Regardless of who wins the presidential election of 2024, there will be many unhappy citizens. It is imperative that you keep abreast of national, as well as international events, in order to decide upon right action regarding your investments. Sticking our head in the sand thinking that no matter what, we’ll be fine, is no longer an option, and certainly not a luxury.
Let’s move on globally.
Taiwan and the People’s Republic of China are, by all accounts, on a course that could be, likely would be, a disaster for the world’s economy. There could be a shooting war between the U.S. But allow me to give some insight that is generally not brought up in the media………….
Should a war take place between the United States and China, the economies of both countries would be adversely affected HOWEVER, China’s economy would implode. Given the fact that China has steadily accumulated U.S. Treasury securities over the past 30 years – about 13%, or $971.8 Billion – a war would be a calamity for them. Remember also that the Chinese economy has been in a free fall for nearly 18 months mainly due to the real estate bubble within the country. Regardless of what you may have read, COVID began China’s descent.
The reason that China has invested in Treasuries was in order to keep export prices as low as possible, which in turn generates jobs in China. Although there has been speculation that China could begin selling these holdings in order to hurt the U.S. this would not be in China’s interests to do. Keep in mind that they own about 1% of available land in the U.S. (much of it agricultural) and the approximately 17% of sales to foreign nations were made by China in 2017, the latest year available from Statista (9/27/23). A precursor to war would be to see the Chinese begin to sell vast quantities of Treasury securities. We here at GaneWisdom/Market Edge would know within an hour or two, depending on the news source much sooner, and would alert you as well.
Although there is a lot of saber-rattling from Russia, any war on a nuclear level will be catastrophic. But then again each side knows that – as do any foreign entities. What is this commentary really all about then?
We need to, no - we MUST - come together as a nation. It is in each of our, each and every one of our, interests to do so. Despite our differences (and there are many) we are all still Americans. Each of us love our country therefore we must find a way to put our differences aside and continue to ask God to bless our nation as He has for nearly 250 years.
As I think you have seen, we look for much more than what the stock market does on a particular trading day. We look at the entire picture and you can confidently be assured that this will continue.
I want to wish each of you the very Happiest of a New Year and I pray that our Heavenly Father continues to bless you and your family through the coming months…….
Guy W. Gane, Jr.
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 37,689. The S&P 500 at 4,769. Any profit you made in the market runup of 2023 – the past nine weeks notwithstanding - has perhaps not been as great as it would have otherwise. Please see above. 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’ theory. 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 year (please refer to the “Archive” Section of our site). We are listing our current positions 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 once more, we will issue our analysis, guidance and suggestions at that time.
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’.
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 (as of this writing) where the S&P 500 has increased 15% + 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 are positioned in the following:
A portfolio consisting primarily of Utilities
A portfolio consisting primarily of Construction Material and Products
A portfolio consisting primarily of Consumer Products
A portfolio consisting primarily of NASDAQ – dominated stocks
A portfolio consisting primarily of Leisure stocks
A portfolio consisting primarily of S&P 500 (Large Cap) stocks
A portfolio consisting primarily of Financial stocks
A portfolio consisting primarily of Banking stocks
A portfolio consisting primarily of Retailing stocks
A portfolio consisting primarily of Telecom stocks
A portfolio consisting primarily of Small Cap stocks
A portfolio consisting primarily of Biotech stocks
A portfolio consisting primarily of Health care stocks
A portfolio consisting primarily of Transportation stocks
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.
* 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.