Market Update
Market Edge

Market Update for the Week of May 27th, 2024

Outside of the New York Stock Exchange – Autumn, 1927.

Federal Hall in the Distance

Although the market rebounded on Friday, Thursday’s losses were severe. This was due to the University of Michigan’s data on consumers’ inflation outlook which improved since the beginning of the month. Readers are familiar with our observation that ‘good news is (usually) bad news’ when it comes to the stock market. The Commerce Department issued a statement that saw where key manufactured capital goods (where raw materials are turned not finished products like tools, and machinery etc.) orders were up higher than expected in April. The reports were a bit better than many thought and although consumer sentiment (from UoM report above) was decent the information shows the overall economy rebounding.

There is amazing evidence that shows the economy is strong, yet we see the expectations of lower interest rates still remaining elusive and this dear Readers, is why we’re seeing these market gyrations. Retail spending in April came in weaker than many economists expected and although a bit of good news because retailers realize they can’t continue to raise prices, consumers by pulling back spending has an adverse effect on the overall economy. Crazy, isn’t it?

Let’s look back on the week……….

S&P 500 (stockcharts.com)

The S&P 500 ended trading on Friday at 5,304. For the week the index gained +0.03%

Dow Jones Industrial Average (stockcharts.com)

The Dow Jones snapped a five week winning streak by Friday, closing at 39,069, down -2.34% for the week.

NASDAQ (stockcharts.com)

When trading ended on Friday the Nasdaq stood at 16,920, up 1.41% for the week.

Russell 2000 (stockcharts.com)

The Russell 2000 closed at 2,069 of Friday gaining 1.04 % on the day after losing 1.06% on Thursday. As you observe by the chart above, we use the Rydex Russell 2000 chart in lieu of the actual Russell 2000 chart due to ongoing issues between Stock Charts and the reporting agency. A healthy sign, if you look at the above chart, shows the Rydex Russell 2000 hitting it’s 50-day Moving Average (MA) and bouncing back above it. Testing what’s called it support level, the Russell 2000 still has some power left toward an upward trend.

2 – Year Treasury (stockcharts.com)

The 2-year Treasury closed at 4.95% while the 5-year Treasury slid to 4.53% and the 10-year landed at 4.46% on Friday

Volatility Index (stockcharts.com)

Showing little concern from investors of a downward trend at the present time, The Volatility Index landed at 11.93 Friday.

30 – Year Mortgages (stockcharts.com)

Continuing their downward trend, the national rate on 30-year mortgages hit 6.94%, its lowest level since mid-April.

West Texas Intermediate Crude Oil (stockcharts.com)

As the summer blends begin to be refined, gas prices at the pump should begin to drop and the cost of a gallon of gas decrease somewhat. Look for these decreases by mid-June. In the meantime, West Texas Intermediate Crude oil, where our gas comes through in the U.S. dropped nearly a dollar from last week’s price of $78.74. Friday saw WTIC close at $77.7/barrel. The coming week should see prices between $75.40 and $78.51/barrel. Mid-April saw a barrel of WTIC topping $85.00+

Commentary

If you’ve ever wondered how the stock market could react negatively to good news, let me give you a ‘for instance’.

On Thursday the Dow had its worst day since March of 2023, falling over 600 points. The Bond market set the stage due to the ‘sometimes on - sometimes off’ interest rate declines. Simply, when interest rates go up, bond prices go down. When interest rates go down, bond prices go up. Remember however that bonds carry an interest rate. U.S. Treasury yields rose on Thursday due to positive economic news. A stronger economy should be good news for stocks due to the company’s strength but the whole market is obsessed with what the Federal Reserve is going to do. It’s been this way for nearly two years, but in truth, the markets have always watched the Fed moves. Time and again we mention the adverse effect good news has on the markets and this week was certainly no different.

Earnings season has largely wrapped up and 77.9% of the 480 companies that have already announced their earnings did better than many analysts’ expectations. This is above the stellar performance that occurred in 1994 when 67% of the companies averaged this kind of strength. The S&P 500 recorded 28 new 52-week highs and 6 new lows. The Nasdaq has recorded 68 new highs and 114 new lows. These are remarkable numbers! Regardless of the noise coming out of the campaign trail, the economy is doing awesome. What is not awesome is higher prices, yet since 2019 the buying power of the average American worker has outpaced inflation due to the increase in pay over that time. Still, when you go to the grocery store and see escalating prices month after month, there is no automatic calculator in most of our minds telling us we’re doing better! This is going to be a problem for the incumbent president if things don’t level off. Soon.

In reality, things are not as bad as they seem. Cut through the noise and we may see room for the Federal Reserve to cut rates, that the economy is going to be okay and things in our nation are not falling apart.

That’s it for this shortened holiday week.

Please take a moment to pray for those who sacrificed their lives ‘that this nation might live’ as Abraham Lincoln invoked at Gettysburg those many years ago…………

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 39,069. The S&P 500 at 5,304.

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. Since the beginning of May, the current market has offered significant trading opportunities which we’ve taken advantage of as well as throughout the past twenty-one 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.

The Stock Market will be Closed on Monday, May 27th, in observance of Memorial Day

Our current positions:

As of 5/24/24

We currently are/or were positioned in the following:       Entered
A portfolio consisting primarily of Consumer Products   5/3/24
A portfolio consisting primarily of Banking stocks      5/3/24
A portfolio consisting primarily of Small Cap (Russell 2000) stocks  5/7/24
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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