Market Update
Market Edge

Market Update for the Week of January 22nd, 2024

We are issuing a Market Alert for Monday, January 22nd, 2024:

BUY – A portfolio consisting primarily of Technology stocks.
SELL – A portfolio consisting primarily of Utility stocks.
Before the end of trading on 1/22/24

Mid-Week Market Alert for Tuesday, January 23rd, 2024

Diversification is always prudent; therefore, our suggestion is using a modest portion of your portfolio and not the total.

We are making this week available for free

Although Wall Street began the first week of the new year on the downside, this week saw that ground not only break loose but set a new all-time record high for the S&P 500. Much of the positive news originated from what are known as ‘Chip’ stocks – Texas Instruments and Super Micro Computer among them. Travelers Insurance, in another sector, rose nearly 6% due to higher than anticipated earnings.

The Consumer Sentiment Index (CSI), conducted by the University of Michigan reported at 78.8 which was significantly higher than the 70.0 economists expected. This index is now at its highest level since July 2021. The cumulative two-month gain equals 29%, which is the largest-consecutive increase since 1991. The CSI also showed that inflation concerns are easing as well.

A survey conducted for December by the New York Federal Reserve showed that the perceptions of American households’ current financial situations have improved while there were fewer respondents feeling they were worse off than a year ago.

This Week

The new high in the S&P 500 will likely bring out investors who became (or were already) skittish with the year-end run-up in the market and then the downturn during this years first week. Make no mistake – there WILL BE a pullback, at this point it is not looking imminent, but we do believe sometime within this quarter. Just as things cannot always continue to go down, they cannot always continue to go up either. Rest assured there will be some profit taking. This is where a service such as that offered at GaneWisdom/Market Edge becomes advantageous. Despite this current run-up, you will notice that we are transferring out of some sectors based on our analysis.

S&P 500 (stockcharts.com)

Friday saw the S&P 500 hit an all-time record, closing at 4,839, up 1.17% for the week. This index lost nearly 25% of its value between its previous high on January 3rd, 2022 and October 2022 however Fridays performance confirms that the S&P 500 has been in a Bull market since October 2022.

Dow Jones Industrial Average (stockcharts.com)

The DJIA closed the week at 37,863, up 0.72% by weeks end.

NASDAQ (stockcharts.com)

Closing at 15,310, the NASDAQ had another good week up 2.26%. Tech stocks led the charge this week which propelled the broader markets into record territory.

Rydex Russell 2000 (stockcharts.com)

The Russell 2000 Index closed at 1,944 Friday, for the week down 0.34%. Although the Russell 2000 has lagged year to date. We watch this index as you know as a bell-weather for the broader markets. In order to gauge the Russell 2000 we use the Rydex Russell 2000 Fund above, due to issues between Stock Charts and the reporting agency.

2-Year Treasury Bond (stockcharts.com)

Friday saw the 2-year Treasuries at 4.39%, the 5-year 4.05% and 10-year at 4.12%.

Volatility Index (stockcharts.com)

The VIX closed Friday at 13.30. Anything less than 20 shows little concern among investors. 20 and above is where we’d see investors showing some emotion. 30 and above fear, and 40 and above would see investors heading for the nearest exit. We do not forecast that at this time.

30-Year Mortgage (stockcharts.com)

Continuing its downward slide since October, the 30-year fixed rates nationally stand at 6.60%.

West Texas Intermediate Crude Oil (stockcharts.com)

West Texas crude closed at $73.25/barrel on Friday. We expect to see this week’s prices hover between $75.00 - $77.00.

Commentary

Technical analysis, which is what GaneWisdom/Market Edge uses when giving market guidance, allows us to examine and review the data presented by the various reporting agencies as well as to our keeping abreast of various available statistics and Geo-political events.

As I’ve written over these past weeks, the world situation is becoming more ‘aggressive’ for lack of a better word, than at any time since the Cold War. Wars (currently 30 world-wide), and rumors of war, have now become so commonplace that the public at large is becoming not only complacent regarding such, but inured to the inevitability. This is not only shocking, but unnerving. The present uncertainty does, it would seem, call for a guiding voice in positioning our money and investments – which is why GaneWisdom/Market Edge has now become a reliable and preferred resource for so many. Our past guidance through our Market Updates and Mid-Week Market Alerts have proven this value.

Despite the unrest in the middle East, the American public has not felt (yet) the repercussions of rising energy prices. Oil prices in the United States, which is largely determined by West Texas Intermediate Crude Oil has remained relatively stable with prices hovering between $67.00 and $79.00 for weeks. Comparing those prices to Brent Crude Oil (the international standard price), which has been averaging @ $80.00 (Friday’s close at $78.69), the price of oil in the U.S. has been moderately reasonable.

In the 1980’s two major crude oil benchmarks were created – the West Texas Intermediate Crude (which we follow weekly) and the European North Sea Brent. The prices are determined during trading in the London and New York Stock Exchange (ICE and NYMEX).

On to China……….

China is becoming more aggressive by the month. This past week saw Taiwan elect a new president, William Lai. China sent its congratulations by violating Taiwanese airspace and continued its bellicosity - as well as threats - toward any nation sending President Lai its best wishes.

China seems to believe that it can impose it’s will on any nation it chooses (and after Hollywood and the NBA buckled to the CCP’s will, who can blame them? but I digress) by threatening retaliation. As you may know President Xi recently fired more than several of his top military leaders, ostensibly over ‘corruption’ (a favorite excuse in the dictatorial world to get rid of someone) but from intelligence coming out of China, more likely because his military leaders and advisors are more than reluctant to go to war with the United States and the West.

What is puzzling, and then again perhaps not, is the timing of this saber-rattling, especially as the economic meltdown that China is currently experiencing continues and in fact worsens. It would be easy, if not natural, to take some degree of satisfaction (even perhaps peace of mind) with this knowledge, however in a country run by an authoritarian, the best way to get the minds of the folks at home off of their day-to-day troubles is paint them as ‘victims’ of others, a ‘them against us’ mentality that seems to easily sway the masses.

I write this because in the coming year, I unfortunately fear that some sort of ‘incident’ will transpire. Given the current vituperation (political and otherwise) going on here in the U.S., the world’s bad actors may, and likely will, take advantage of what we as an American people, are doing to one another which is causing us to look inward more and more each day. It is now becoming progressively crucial that you have someone, or a resource such as what GaneWisdom/Market Edge offers, to rely on to advise and offer guidance on your investments.

Getting back to China, lets look at what is going on…………

China/Hong Kong Stock market (Bloomberg.com)

As you can see from the above chart, the Chinese stock market, listed on the Hong Kong exchange has been having a rough go since its peak in 2021. The world’s second largest economy (behind the U.S.) experienced another dismal week as well as languishing at the bottom of global equity index rankings since the beginning of the new year. Mutual Fund closures in China stands at a five-year high. The Hang Seng China Enterprises Index (HSCEI) is down 11% year to date! Most international money managers are exiting China as if the house is burning down.

Since the peak in 2021, Chinese and Hong Kong stocks have seen $6.3 trillion dollars disappear. There were signs this Thursday that the Chinese government threw substantial money into their market, seemingly to no avail. The HSCEI lost over 6% just this week alone.

Foreign Positions in China (Bloomberg)

Unfortunately, when a government, or high-level government official is known to lie, the loss of confidence becomes severe. This truism is now plaguing China. Despite Beijing’s reassurance to investors, not many people are drinking the Cool Aid. Chinese Premier Li Qiang, who spoke at the World Economic Forum this week tried to assuage investors, telling them that China was able to hit its 5% growth rate target in 2023 without government stimulus. Not many bought that.

Xin-Yao Ng, one of the investment directors for Asian equities at the firm abrdn, observed, “The (Chinese) government seems very sanguine about the economy. The market might not even trust the 5% growth figure, it certainly has a much more negative view on the economy and definitely believes Beijing needs a big fiscal response.”

Taiwan produces over 60% of the world’s semiconductors while more than 90% of those are considered advanced. This is one of the most crucial reasons that the world’s powers are prepared – however costly it may end up becoming – to defend this island nation. Having control over this industry is also considered one of the primary reasons China wants to take over Taiwan. I think it goes without saying the true catastrophy that would befall humanity if China were to overtake this industry.

The Chinese economy is, in our opinion, in dire straits. Will this cause the dragon to lash out in hopes of diverting its citizens’ attention or will austerity cause it to redirect resources to stabilize the economy? The coming year will allow all of us to know. Meanwhile it is vital that you become, and remain, vigilant – your livelihood, money and investments will rely on your staying informed.

We are still of the opinion that the Federal Reserve will delay any rate reduction until mid-year. Wall Street is beginning to agree with us. It is now beginning to factor that realization into its psyche as well. Inflation as it is becoming more under control, may be the cause of a ‘soft-landing’ recession hoped for by Washington. We see the economy playing a central role, if not the focus of, this year’s presidential election. The views on the economy are diverse when viewing the data based on political parties (based on a survey conducted by the University of Michigan) – Democrats scoring their current economic conditions at 106.5, Republicans gave it a score of 61.9 however Independents -of whom will ultimately decide on who will become, or remain, president came in at 77.2 Most people are not looking for a change when they are financially stable.

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 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 1/2 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 37,863. The S&P 500 at 4,839. Any profit you made in the market runup of 2023 – the previous twelve 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’ 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 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.

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 (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 currently are/or were positioned in the following:EnteredExitProfit/Loss
A portfolio consisting primarily of Utilities11/3/231/22/24
A portfolio consisting primarily of Construction Material and Products11/3/231/16/24+4.1%
A portfolio consisting primarily of Consumer Products11/6/23
A portfolio consisting primarily of NASDAQ – dominated stocks11/9/23
A portfolio consisting primarily of Leisure stocks11/9/231/16/24+7.5%
A portfolio consisting primarily of S&P 500 (Large Cap) stocks11/9/23
A portfolio consisting primarily of Financial stocks11/9/23
A portfolio consisting primarily of Banking stocks11/9/231/18/24+19.3%
A portfolio consisting primarily of Retailing stocks11/9/231/16/24+13.8%
A portfolio consisting primarily of Telecom stocks11/9/23
A portfolio consisting primarily of Small Cap stocks11/14/23
A portfolio consisting primarily of Biotech stocks11/16/23
A portfolio consisting primarily of Health care stocks11/16/23
A portfolio consisting primarily of Transportation stocks11/16/231/16/24+3.5%

We are issuing a Market Alert for Monday, January 22nd, 2024:

BUY – A portfolio consisting primarily of Technology stocks.

SELL – A portfolio consisting primarily of Utility stocks.

Before the end of trading on 1/22/24

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.

* 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 Tuesday, January 23rd, 2024

If you have the following available in your retirement plan or current portfolio of funds, money should be transferred into them by the close of business on 1/23/24

To view the rest of this article, sign in to Market Edge.

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.

More Market Watch Articles

See Past Market Edge Updates