Market Update
Market Edge

Market Update for the Week of March 4th, 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.

We are making this week’s report free of charge

Wall Street in the 1860s

Once again, this week saw technology stocks power the stock market forward. Nvidia led the charge once more, followed by Dell Technologies, up 32% due to their solid sales. It is becoming common that when any bearish sentiment makes an appearance buyers jump in to quickly reverse a downward market trend. Nearly all the companies that make up the S&P 500 have already reported their fourth-quarter earnings and they look unbelievable, with growth up nearly 8%. Most economists expected a rise of 1.2 %.

The concern over when the Fed may begin cutting rates has, with no doubt whatsoever, caused many traders to wring their hands in angst. I suppose they should read our Market Updates more carefully! There were too many signs which the Federal Reserve broadcast these past months that signaled that rate reductions were not happening in this first quarter. When it started to become more obvious by the end of 2023 that maybe rates really weren’t coming down in March, the first week of the year saw a loss on Wall Street. Since then, however it’s been all systems go. The frenzy concerning artificial-intelligence took many traders and forecasters by surprise it appears. The current uptrend has blown by their expectations for 2024.

Given this, lets examine this week’s market results:

S&P 500 (stockcharts.com)

This week saw the S&P 500 top 5,100. An amazing feat. Closing at 5,137, the S&P 500 gained 0.95% for the week. This week also saw the FIFTEENTH RECORD this year. Despite some weak economic data (factory activity was down) as well as the realization that the Fed will not be cutting rates this month has not seemed to dampen investor enthusiasm. February saw the S&P 500 up over 5%, which extended its fourth consecutive months of gains.

Although the S&P 500 as we know it began in 1957, Poor’s Publishing and the Standard Statistics Company created what was known as the ‘Composite Index’ in 1941. The Composite Index since 1950 (and then the creation of the S&P 500) has shown that whenever this gauge finished higher in the first two months of the year, the full year returns for the index have average 19.8 % for the entire year! Despite the fact that the month of March usually is kind to the market (historically up 1.1%) during election years the returns for March average 0.4% with mid-month being very weak.

Dow Jones Industrial Average (stockcharts.com)

The Dow lost steam this week, down 0.11% closing at 39,087.

NASDAQ (stockcharts.com)

The Nasdaq saw its average break through the 16,000-barrier, closing Friday at 16,274, up a healthy 1.74% for the week.

Russell 2000

Last week we wrote:

Although we saw a significant show of strength from the Small Cap market the previous two weeks (up a combined +3.54%) when this week’s numbers came in, the Russell 2000 was down 0.79%, closing trading Friday at 2,016……..I always refer to the Small Caps as the canary in the coal mine due to its propensity to signal the market over upcoming weeks but as long as we see the index continue trading above the 50 and 200 MA, we’ll continue to feel a bit of comfort.…….”

We continue to adhere to the logic that as Small Caps go, the broader markets usually follow. This week’s record-setting closes in the S&P 500 and Nasdaq adds to this narrative. The Russell 2000 closed Friday at 2,076, up a strong 2.96% for the week.

As we previously reported, we use the Rydex Russell 2000 chart due to issues between the reporting agencies and Stock Charts.

2-Year Treasury (stockcharts.com)

The 2-year Treasury yields were down significantly this week. Last week saw a sharp uptick in rates, however by week’s end the 2-year Treasuries were at 4.53%. The 5-year rate closed Friday at 4.16% and the 10-year rate at 4.18%

Volatility Index (stockcharts.com)

The VIX continues to show little investor fear. This week the Volatility Index closed at 13.11 as the market continues to post new records. A reading of 20 and above shows investor concern. 30 and above fear and 40 and above panic. Obviously we are not in that territory at the present time.

30-Year Mortgage (stockscharts.com)

Continually inching upwards, the national rate of a 30-year mortgage clocked in at 6.94% this week. A year ago, the rate stood at 6.5%. As the chart above illustrates, the 30-year rate began to decline in November. However, with the Treasury rates escalating over the past weeks the mortgage rates reflected the same. We may see a slight reduction in the next week or two due to the 10-year Treasury’s lower yield this week. There was hope that when the Federal Reserve would lower rates in March, which we now know is not happening, mortgage rates would also begin sliding downward.

Despite the rise in Treasury rates in the last few weeks, sales of new single-family homes increased by 1.5% in January due to the perception from both builders and buyers that rates were going to head lower.

West Texas Intermediate Crude Oil (stockcharts,com)

The price of oil has, as of a few weeks ago, begun to show the effects of the ongoing turmoil in the Middle East and in the Red Sea as well. Although we saw the Death Cross (as seen above during the last month of December) appear the conventional thought of a downward turn in oil prices didn’t occur. This week saw WTIC close at $79.97, a bit more than our forecast of last week.

Looking forward to the upcoming week, WTIC should see prices between $81.00 - $83.50 per barrel.

Commentary

The Hallowed Halls of Congress

If this upward market trend is to continue throughout 2024, it is my belief it will mainly be due to the technology sector. Specifically AI. As I wrote last week, it would be healthy to see some profit-taking. If not now, soon. As noted above, the Nasdaq broke 16,000 this week and although it would, as I wrote, be healthy to see a bit of a pullback, we will continue to follow the trends and signals the market and economy is offering.

The Small Cap markets are generally a harbinger of the broader markets, and this index shows resiliency as well as strength. With a nearly 3% gain this week, we’re seeing Small Caps at their highest level since January 2022.

As I’ve written here previously, I analyze the market from the standpoint of a ‘Technical Analyst’. The technical indicators I use as well as those who register as Fundamental Analysts are both supporting this continuation of the market rally. Market Breadth, as I explained at length last week, is showing formidable underlying strength as most stocks are contributing to the current advance. This is a positive sign mid-term.

Also, last week I pointed out the thought: “When everybody is buying, sell. When everybody is selling, buy.” I wrote that if you are alone in your investing journey, with no financial advisor to turn to, taking this somewhat vanilla approach is not a bad choice. There is, actually, a name for this type of investing: Contrarian.

As an investment style, contrarians purposefully go against the prevailing market trends as that listed above. This thinking comes from believing that ‘herd mentality’ generates market moves and is usually accompanied by the fact that the stock market is motivated by fear and greed. One only has to realize that the most famous contrarian has indeed done very well – Warren Buffett.

As you’ve read over these many months, GaneWisdom/Market Edge, although not completely contrarian in nature, has many of the features of a contrarian. Going against the prevailing ‘expertise’ broadcasts by the back-office gurus and mavens at the major brokerage firms (which in many ways are motivated by sales for the firm) is not only contrarian but also sensible – as the guidance on these pages has evidenced. Being in the business 34 years allows me that leeway – in my opinion anyway!

Across the Sea…….

Investing money is more than just picking out a stock or a fund with a nice sounding name. If you’re looking to make a profit anyway. There is much that goes into deciding what security, index or commodity is best not only at that time but going forward. Unless you are a day trader (where a quick move in or out of a stock can be done) a thorough calculation should be done based on expertise, current events globally and domestically, pending legislation that could affect that particular market sector, public perception of that company or commodity, dividends and price to earnings ratios just to name a few. There are two areas that are taking up a lot of the current available oxygen – global conflicts and the U.S. presidential election.

Taiwan/China. Israel/Hamas. Russia/Ukraine. Russia/NATO. Houthi/Cargo Ships. Iran (through it’s proxies/U.S. And these are (sadly) just the tip of the iceberg. The cargo ships in the Red Sea handle around 12% of global trade. The Houthi militants which act on the orders of Iran, has as I’m sure you know, been attacking these ships. The U.S. and Great Britain, among other allied nations have been conducting airstrikes against the installations from which the Houthis continue to launch these attacks. As the U.S. strives to control inflation here at home, these types of attacks could adversely affect the supply chains bringing a pandemic-style disruption to global trade as well as shortages here in the U.S. Because of this turmoil, freight rates have increased by 200%. At this point we in the U.S. are managing with minimal impact but should this continue for any length of time, things will change and not for the better.

The U.S. has sent four naval battle groups across the globe. Two are currently in the Pacific. One in the Atlantic and the other off the Red Sea. Other than the USS Eisenhower’s U.S. Carrier Strike Group (CSG) stationed in the Red Sea, which are in active operations, the others are not engaged presently. Having up to the minute information on U.S. force deployment gives a bit of an advance, an ‘edge’ possibly, on potential problems that will lead to market upheavals. GaneWisdom/Market Edge also considers these deployments.

The Election of 2024

From as far back as I remember I have loved the subject of history. Specifically American history. The period of the Civil War was all-consuming when I was growing up and it fascinates me still. Although I was mesmerized by the events and conditions of that far away time and spent countless hours as a kid thinking what life would have been like then, never in my unbridled imagination could I have believed those conditions could ever occur again. Now, I realize I was wrong.

The presidential election of 2024 will not only have major implications on the stock market, but the magnitude of the results of it on the United States – and the world - are, at this time, unfathomable. Not since the election of 1860 has our country been as divided, contentious, and vicious toward each other as we find ourselves in today. The similarities are chilling. The Consumer Confidence Index has actually come down due to the uncertainty surrounding the elections and its effect on the markets. Its time for each of us to realize that we are ALL Americans and that nothing – no foreign nation, no calamity or no one person can divide us or should ever be allowed to do so.

As I’ve written in these past Updates, when it comes down to deciding whether to reelect or to elect, the economy has overridden the emotional decisions always present in an election. There is no doubt that this election, as in 1860 will likely be different than any other. BUT I do believe that the economy will prevail over passion as it has for the past 96 years. Let me state my case:

Herbert Hoover, elected in 1928, was driven from office due to the Great Depression.

Gerald Ford was defeated by Jimmy Carter in 1976 due to inflation and a depressed economy.

Jimmy Carter was defeated in 1980 due to his inability to revive the economy as well as his inability to overcome inflation.

George H.W. Bush was defeated by Bill Clinton in 1992 due to a sagging economy. Who can forget the phrase, first used in that year’s election – “It’s the economy, stupid!”

Donald Trump was defeated by Joe Biden in 2020 when the U.S. faced the worst economic crises since the Great Depression after Covid reached American shores.

It is interesting to note that each of these presidents only served one term, each not being reelected to a second term as well as the only presidents serving only one term since 1928.

Since World War 2, any time the S&P 500 fell in the three months leading up to the November election, the incumbent or party of the outgoing president went on to lose the election 88% of the time. Conversely when the S&P 500 rises for the three months prior, the incumbent and or party has won 82% of the time.

This scenario played out again prior to the 2020 election when the S&P 500 fell 0.04% between July 31st 2020 and October 31st, 2020. We’ll see if this scenario holds true once again, however the stock market generally acts as a pseudo-proxy when it comes to the wider economy.

Although obviously too early to accurately predict, based on the current economic conditions, outlook and market behavior, the numbers point to Biden’s reelection and a blue wave. Stay tuned!

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 39,087. The S&P 500 at 5,137.

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 past nineteen 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:

We currently are/or were positioned in the following:Entered
A portfolio consisting primarily of Consumer Products11/6/23
A portfolio consisting primarily of NASDAQ – dominated stocks11/9/23
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 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 Technology stocks1/22/24
A portfolio consisting primarily of electronic stocks1/23/24
A portfolio consisting primarily of Banking stocks2/2/24
A portfolio consisting primarily of Retailing 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 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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