Market Update
Market Edge

Market Update for the Week of June 3rd, 2024

We are making this week free

The Personal Consumption Expenditures Index, which does not include food or energy prices (considered very volatile) was issued this past week. The PCE is the Federal Reserve’s favored gauge on inflation, and the report showed no changes with the annual increase which turned out to be in line with the Fed’s expectations. The rate came in at 2.8% over 2023 in April. What excited the deep thinkers at the Federal Reserve was the month-over-month increase in April flashed a bit of progress when the reading clocked in at 0.2% which was a tenth of a percent lower that the level for March and was the slowest increase in the PCE so far in 2024.

The markets have been thrashing about since the beginning of April yet despite the ‘maybe-they-will, maybe-they-won’t’ bet on rate reductions, May proved to be an upbeat month for the equity markets. Lets take a look………………….

S&P 500 (stockcharts.com)

The S&P 500 ended the week on a positive note, gaining 42 points on Friday, closing at 5,277, however for the week the index lost 0.5%. For the month the S&P 500 gained 4.8%

Dow Jones Industrial Average (stockcharts.com)

The Dow ended trading Friday at 38,686, down 0.9% by week’s end. The DJIA gained 574 points on Friday and for the month was up 2.4%

NASDAQ (stockcharts.com)

The Nasdaq saw it close Friday at 16,735, down 2 points. For the week it lost 1.1% breaking its five-week win streak. The tech index gained a healthy 6.9% for the month however.

Russell 2000 (stockcharts.com)

As Stock Charts and the reporting agency continue their feud, we use the Rydex Russell 2000 chart as seen above which closely follows the Small Cap index. For the week the Russell 2000 stood at 2,070 and for the month the index clocked in at a positive 4+% .

2 – Year Treasury (stockcharts.com)

The 2-year Treasuries are at 4.88% while the 5-year Treasuries at 4.51% and the 10-year 4.50%

Volatility Index (stockcharts.com)

Although elevated a bit over last week’s closing of 11.93, the VIX continues to flash little concern by investors over the current market. The VIX closed at 13.47 on Thursday with the drop in the equity markets, by close of business on Friday it had come back down 10.71%.

As a subscriber, you know that a reading of 20 or above shows growing concern by investors over the state of the market. 30 and above begins to illustrate fear setting in and 40 and above have investors throwing in the towel and heading out the door – quickly. The current numbers are showing investor confidence in the markets.

30 – Year Mortgages (stockcharts.com)

This week’s national average of a 30-year mortgage came in at 7.03%, a bit higher than last week (6.94%).

When the Federal Reserve began their rate hikes in 2022, the rate of a 30-year mortgage was @ 4% according to Freddie Mac. Although the Fed doesn’t direct current mortgage rates the lenders such as banks and mortgage companies do. The last time we saw rates at these levels was in 2001. It took nearly 20 years before we saw rates decrease to annual percentage rates under 3% by 2020. Chances are pretty good that we won’t see rates that low anytime soon. But before we throw our hands up in complete frustration, please bear in mind that the 50-year average for a 30-year fixed-rate mortgage is well over 7%.

West Texas Intermediate Crude Oil (stockcharts.com)

The national average price of a gallon of regular gas is currently $3.55. The price of a barrel of West Texas Intermediate Crude Oil stood at $76.99 at the close of trading Friday. Consumers should begin to see the prices reflect summer blends which traditionally are lower and usually begin to be seen around Memorial Day. For the week, we estimate WTIC to hover between $75.50 and $79.00/barrel.

Headquarters of the Federal Reserve

Established December 23rd, 1913

Located in Washington D.C.

Commentary

If we were to judge the markets by the performance of the indexes this past week, we’d likely think the market had a bad May. Actually, it’s the final few days of the month that don’t look so good. However, Thursday, when the Dow fell 330 points (the S&P 500 down 31 points) it came roaring back gaining 574 points on Friday. The S&P 500 gained 42 points by the close of business Friday. The Russell 2000, that I refer to as ‘the Canary in the coal mine’ saw a 13-point increase, up over ½%.

The S&P 500 in May showed the strongest performance since 2020, which could very well give momentum during the summer for an upward trend in the market. The Dow Jones registered its biggest daily percentage gain since November 2023. Nearly all of the major S&P 500 sectors, of which there are eleven, ended higher Friday. The energy sector rose 2.5% while the Nasdaq closed down 2 points.

With so much uncertainty going into June, there is always a possibility that a downtrend could begin to form. Based on what our analysis is showing currently, this downtrend is unlikely. However, the good news – at least for our subscribers – is that we will react in accordance with that analysis and our strategies. Unlike most stockbrokers telling their clients to ‘just hang on’ we will issue updates and alerts. Instead of watching a down market give back all the profits previously made, we’ll cut our losses by taking small losses to prevent big losses. A market like this can be VERY dicey if one is not aware of its machinations.

The next Federal Reserve meeting on June 12th will remain a major focus for investors. The Fed President in New York, John Williams said on Thursday that its his feeling that he doesn’t’ see a stoppage of the downward trend of inflation and expects that the Federal Reserve is still looking for rate reductions before the end of the year. Futures traders are giving even odds the Fed will cut rates in September with another in November.

While the economy grew, it did so more slowly during the first quarter, up 1.3% and the Gross Domestic Product (GDP) increased at the smallest it has in nearly two years. With a 1.3% GDP we just might see the Fed be open to rate reductions. This is good news for shareholders as was evidenced in Friday’s gains.

Earlier this week the bond markets played Hobb with the equity markets. As they did in October, the bond market has raised yields over these past weeks (see our Archive) and the ‘soft’ demand in a few of the Treasury auctions recently has been a worry that the bond selloff may not be over. I’m seeing one of those moments when the bond market may have the final say on the direction of the market, at least in the short term.

As I pointed out a few months ago here, at the end of the day, when voters have their hand on the lever at the polling booth, the deciding factor will most likely be the economy. Polls are showing that voters are reluctant to give President Biden credit for what is legitimately a rising standard of living. Personally, I believe that Biden’s age is a large factor. Again, it’s my belief that this race would not be close if a younger person – man or woman – was running on the Democratic ticket. That Donald Trump was convicted on all 34 counts against him in the Hush-Money trial, will further obscure the race. You’ve likely seen the disparity in the poll numbers where most Republicans think Trump is getting the short end of the stick and where Democrats feel he should be getting the whole stick. That said, it will (again in my opinion) be the independent voters who decide this election. How they will respond to a candidate who’s been convicted of a crime is not clear. At this point anyway.

A presidential election year usually sees a rise in the market in the months leading up to the election so the coming months should be interesting to watch.

Lastly, the average volume of stocks trading in the market Friday nearly doubled the average. Since the S&P 500, the DJIA and the Russell 2000 posted solid gains Friday we should expect to see the upward trend in the market continue into next week.

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 38,686 The S&P 500 at 5,277.

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 specific trading options which we’ve taken advantage of throughout the past twenty-two 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 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 – this past week notwithstanding -  where the S&P 500 has increased 21% + 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:

As of 5/31/24

We currently are/or were positioned in the following:EnteredExitProfit/Loss
A portfolio consisting primarily of Consumer Products  5/3/245/31/24+0.2%
A portfolio consisting primarily of Banking stocks     5/3/245/31/24+0.1%
A portfolio consisting primarily of Small Cap (Russell 2000) stocks5/7/24
A portfolio consisting primarily of Nasdaq traded stocks   5/8/24
A portfolio consisting primarily of Large Cap (S&P 500) stocks        5/8/24

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 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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