Market Update
Market Edge

Market Update for the Week of January 29th, 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.

Mid – Week Market Alert for Friday, February 2nd 2024

Market Alert: Transfer a portion of your portfolio

The specter of a rate cut by the Federal Reserve in early spring is still being strongly considered by some however our analysis shows the first rate reduction occurring in possibly late spring (May) however probably in June. The data would seem to signal four rate reductions in 2024. The Federal Reserve broadcast a soft 0.2% increase in inflation in December but for the 12-months from January 2023 – December 2023 prices themselves rose 2.6%. Gross Domestic Product (GDP), reported on Thursday expanded at 3.3% annualized from data in the fourth quarter. This was a bit stronger than was expected.

American consumers are still anxious regarding the price of food. In exit polls conducted in New Hampshire this week, the number one concern of voters was food prices. As we’ve said previously, the coming election could likely come down to the state of the economy.

S&P 500 (stockcharts.com)

The strong data concerning the GDP helped the S&P 500 extend its record setting trading days to all-time highs. This week saw the S&P 500 close trading Friday at 4,890, up for the week 1.06%

Dow Jones Industrial Average (stockcharts.com)

The DJIA closed trading Friday at 38,109 posting a gain of just north of ½% at +0.65% for the week. Again, notice the Golden Cross that formed in mid-November and the results since. There is, however, a rare (very rare) exception to these market signals as you will see in a moment.

NASDAQ (stockcharts.com)

The Nasdaq saw an increase of 0.94% for the week, closing at 15,455.

Russell 2000 (stockcharts.com)

As you know, we use the Rydex Russell 2000 chart, given that Stockcharts (our go-to charting service) and the RUT (the ticker symbol for Small Caps) have been locked in a problem with the reporting agency. As evidenced by the Golden Cross – where the 50-day Moving Average crosses above the 200-day Moving Average (a Death Cross is the opposite and is an unwelcome sign to investors in that particular commodity, stock or index) shows a very positive uptrend, although down from it’s December highs. Being 10% of the stock market overall, the Small Caps were up 1.75% for the week, closing Friday at 1,978. The Small Cap market usually signals market direction one way or the other way. Although we are seeing a positive, albeit a small, uptrend we will watch this index in the coming weeks for its inevitable signal.

2-Year Treasury (stockcharts.com)

The Treasury yields are similar to a bouncing ball these past weeks. 4.40% on the 2-year Treasuries January 5th, 4.14% January 12th, 4.38% on January 18th and this week 4.35%. The current rate on the 5-year Treasury is 4.04% while the 10-year rate stands at 4.14%. Last week saw 4.05% and 4.12% respectively.


Volatility Index (VIX) (stockcharts.com)

The VIX closed a bit lower by week’s end at 13.26, last week’s number clocked in at 13.30. These numbers suggest little concern among investors where a number above 20 would show something like that. 30 and above would signal the beginnings of panic and fire alarms ringing at 40 and above. Obviously, we are nowhere near those numbers at this time.

30-Year Mortgage (stockcharts.com)

30-year mortgages closed nationally at 6.69% reflecting the slight uptrend in treasuries this week. The rates are a bit above one month ago (12/29/23 – 6.61%).

West Texas Intermediate Crude Oil (stockcharts.com)

In the chart above (Russell 2000) we mentioned that there are, every great once in a while, an exception to the rules concerning Golden Crosses and Death Crosses when they appear on a chart. Here we see this exception. Golden Crosses, where the 50-day Moving Average crosses above the 200-day Moving Average signaling a rise in the commodity, stock price or index. The Death Cross signals the opposite – The 50-day MA falls below the 200-day MA where an observer can expect lower numbers.

Last week we forecasted prices on a barrel of West Texas oil to hover between $75.00 and $77.00 however as the chart above announces the price of WTIC ended Friday at $78.01. Not only did the price increase but the chart, which is signaling a downtrend (as illustrated by the Death Cross on December 28th) in the MA has seen a price increase! For an analysis on this, please read our Commentary below. Our outlook for WTIC oil/barrel for the coming week are for prices between $79.00 and $83.50.

Commentary

On our Market Update for the Week of May 15th 2023 we wrote:

“…….In closing, it is becoming more and more likely (as well as has been apparent for quite some time) that the US will be experiencing a recession. Probably very soon. As corporate America begins to feel the total effect of higher borrowing, tighter budgets and hiring freezes as well, layoffs are more than possible. They are now probable. This scenario will result in consumers delaying major purchases and making do with what they currently have. Hopefully the time frame for such an event will be short-lived and relatively painless but we’ll see. What we do know however, is that over half of the consumers in the US are relying on credit as well as whatever savings they have left, to pay bills and make ends meet. This is obviously not a healthy sign………..”

Fortunately, it is becoming increasingly probable that whatever recession we will face will be mild. This type of ‘soft landing’ is rare. One only needs to harken back to what is now known as ‘The Great Recession’ of 2007 – 2009 when the housing market collapsed. Beginning in December 2007 this recession was triggered by the use of subprime mortgages. The country was as close to a depression not seen since the 1930s until the downturn ended in June 2009. In the last 25 years, the U.S. has only experienced two mild recessions – the early 2000s at the culmination of the dot-com bubble and the slow-down caused by COVID in February 2020 lasting until April 2020.

Some economists have put forth data that we entered a recession in late summer 2023 while other economists’ postulate that we never did. It likely is too early to tell. The technology sector has laid off workers with year-to-date numbers of 23,670. While the Nasdaq is at its highest since early 2022, the S&P 500 is trading at record highs. Combine the above number with 38,000 layoffs in March with the 90,000 that were cut loose in January of last year and it is obvious that the interest rate hikes of the last few years have had an effect on corporate America especially technology.

Layoffs have not been limited to the tech sector. Citigroup announced a 10% cut of its workforce, as has Levi Strauss. Paramount has also stated their intention to lay off a portion of their workforce however no numbers are available from the entertainment conglomerate to date.

Unless you have a heavy rock that you’ve been living under (or as a hermit in the Himalayas) you have been inundated with political rhetoric for months. Many months. It has always been my contention, based on my observing 9 separate Presidential Administrations, that the economy has been at the top, most times THE top, of issues that dictate a presidential election. Based on past history however, the year before a presidential election usually ends higher.

The election of 2024 is, in my opinion, unlike any national election in our lifetime. The current political situation causes me to reflect back to the election of 1860 – and with the violence which followed. We as a people are (to use a too-often used phrase) at a crossroads in our American way of life. It is critical, perhaps crucial, that we – each of us – remember that we are all Americans. Each and every one of us.

As I’ve stated in these pages previously, when we issue our market opinions we base them on an assortment of data with Geo-political (domestic and international) analysis among the most important. It would seem prudent to have someone, or some entity, available to help you sort through the noise and chatter. GaneWisdom/Market Edge was created for this purpose.

Although the markets continue to rise, I believe that there are some serious risks in the weeks ahead. Too much emphasis has been placed on the Feds lowering rates in March for one. As I’ve continued to believe, the first interest rate reduction won’t happen until late spring. Maybe a bit sooner. As you know, the Federal Reserve has maintained a goal of 2% inflation (in March 2022 it hit 9%) and the number for December’s inflation came in at 2.9% - the first time since early 2021 that the inflation number has crossed 3%. It is difficult to mount an argument against the government’s method of reducing inflation.

Core Inflation (Bloomberg)

We may get a bit of clarification this week at the FOMC (Federal Open Market Committee) meeting January 30th/31st at which time the market will move in one direction or another based on the perceived outlook. When Fed Chairman Jerome Powell holds his press conference Wednesday afternoon what he says – or doesn’t say – will be of critical importance. Again - stay vigilant as the market will react.

Globally, the Far East continues to be of international concern, but as I pointed out last week, China is in dire economic straits currently. Although Beijing continues to pound the table regarding Taiwan, at the moment they need to get their own monetary house in order. Despite China’s so-called policy of ‘One Nation’ as an excuse for taking over the small island nation, they, the CCP need only look back to their ‘welcoming’ of Hong Kong into their fold. Despite it’s promise (sorry to use that word regarding the CCP) to keep Hong Kong autonomous, allowing Hong Kong to continue its then-current economic path and lifestyle, the communist government bore down -brutally - on freedom of the press, freedom of speech and freedom to continue to exercise their economy unhindered from Beijing’s influence. The Taiwanese observed all of it. And KNOW what is in store for them should the CCP gain control of the country. Added into this is the semiconductor industry that we referred to last week.

The Middle East. Because of the continued attacks to shipping in the Red Sea and surrounding area, the price of oil – despite the U.S. primarily relying on oil produced in this country – is now spiking northward. You will notice on the chart for West Texas Intermediate Crude oil (above) that a Death Cross was formed the last week of December (12/28). Despite the propensity of a major downturn whenever that crossover appears, the price of WTIC rose. This is due to the unrest in the Middle East which again, is something we encouraged our readers to remain vigilant for. This past week, the U.S. and the U.K., along with other nations, launched massive attacks against targets in Yemen. As I’m writing this, it has been announced that three U.S. servicemen were killed in a Drone attack in Syria. It now is anybody’s guess where this latest retaliation leads to. Either way, at the least American consumer will notice a price increase at the gas pumps. Perhaps there is more than that to come based on the deaths of the military personnel.

Our positions, as you’ll note below, have been rising. Although the Big Capital stocks are moving up (Meta, Alphabet, Amazon, Microsoft, Nvidia to name a few) the stocks that are not performing as well are those known as ‘Mom-and-Pop’ stocks. These are the companies that many individual investors put money into. There has been a tremendous run-up on Wall Street since October. Just as everything cannot continue to go down, they also cannot continue to go up. As an investor its important to stay informed, stay current and stay ready to transfer positions if necessary – in other words the kind of guidance GaneWisdom/Market Edge offers.

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 38,109. The S&P 500 at 4,890. Any profit you made in the market runup of 2023 – the previous thirteen 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 18% + 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 Utilities11/3/231/22/24-3.5%
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 stocks11/9/231/18/2419.3%
A portfolio consisting primarily of Retailing stocks11/9/231/16/2413.8%
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 stocks11/16/231/16/243.5%
A portfolio consisting primarily of Electronic stocks1/23/24
A portfolio consisting primarily of Technology stocks1/22/24

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 Friday, February 2nd 2024

Market Alert: Transfer a portion of your portfolio into the following:

  1. A portfolio consisting primarily of Banking stocks
  2. A portfolio consisting of primarily Retail stocks

before the close of business on Friday, February 2nd, 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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