Market Update
Market Edge

Market Update for the Week of July 1st, 2024

We are making this week’s report free

The stock market will be closed Thursday in observance of Independence Day – July 4th

The Star-Spangled Banner

Ft. McHenry, Baltimore Maryland

There were hardly any ripples in the water this week down at the Federal Reserve’s monthly get together. The Fed decided Wednesday that keeping interest rates steady at 5.25% - 5.5% was their best course of action.

It wasn’t that long ago (including here on these pages) that many in the investment world expected the Fed to begin lowering rates in the month of June. Now, after readjusting our outlook, we’re of the belief that one rate cut should happen before year’s end. Be careful in your discernments as you will hear the back-office Gurus at the big brokerage houses touting two rate cuts as if that is a given. Trust us – it’s not. Awesome if it happens but don’t count on it.

If you’ve ever thought about the correlation between interest rates and inflation, here is the thumbnail: The Federal reserve believes that high borrowing rates slow spending which in turn, keeps inflation down. So far that seems to be working, certainly too slow however, the retail businesses have the option of raising prices to us (the consumer) and if you’ve shopped for anything from cars, streaming services, rents, groceries and most anything you know that these folks have no leash on them. In other words – they’re not helping.

Unlike his European (and Canadian) counterparts who last week lowered their rates despite their inflation rates remaining above their targets, Fed Chairman Jerome Powell signaled ‘steady as she goes’. “We’re looking for something that gives us confidence that inflation is moving sustainably down”, Observed Powell.

Although interest rates remain high the economy is strong. Unemployment is low at 4%, however it’s the every-day stuff that has most Americans worried. Mortgage rates hover around 7% (this week’s rate came in Friday at 6.86%), auto loans are north of 6% and credit card rates are 20%+.

Although the economy is strong, President Joe Biden is not being credited with that. For many months consumers have allowed Biden’s age issues to override their own economic observations and after Thursday’s debate those concerns - now major concerns – are more than justified. Without confidence in leadership (think the captain of a ship) panic begins to settle in. We as a country have much to be concerned about. Let’s view last week’s activity……………

S&P 500 (stockcharts.com)

The S&P 500 closed out the last trading day of June at 5,460. For the past month the S&P 500 has seen growth of 3.67% and in the last year + 24.20%. Year to date the S&P 500 is up 14.1%.

Dow Jones Industrial Average (stockcharts.com)

The Dow ended trading at 39,118 points, for the past month + 1.76% and since one year ago +14.64%

NASDAQ (stockcharts.com)

The Nasdaq ended trading Friday at 30.47%, up 4.80% in the last month and + 30.47 in the past year.

Russell 2000 (stockcharts.com)

The Small Cap market continues to gyrate, this week hitting 2.047points up from last week’s close at 2,022. The one month return for the Russell 2000 is + 0.56% and the past year + 8.83%

2 – Year Treasury (stockcharts.com)

As the chart above indicates, the 2-year Treasury Bond rate ended at 4.75% on Friday. The 5-year Treasuries at 4.38% and 10-year at 4.40%

Volatility Index (stockcharts.com)

Indicating little investor concern currently, the Volatility Index closed at 12.44. A reading of 20 and above indicates growing concern of a market downturn. 30 and above growing anxiousness and a reading of 40 and above a full-out panic. This is where investors running screaming ‘Fire!’ as they head to the exit.

30 – Year Mortgages (stockcharts.com)

The US saw the sales of new single-family house down 11.3% month-over-month. High home prices coupled with high mortgage rates have continued to bring down buyers’ dreams of affording a new home. As the chart indicates, the national average of 30-year fixed mortgages stood Friday at 6.86%

West Texas Intermediate Crude Oil (stockcharts.com)

A barrel of West Texas Intermediate Crude Oil ended trading Friday at $81.54/barrel. The anticipated drop in gas prices which traditionally is seen after Memorial Day has yet to materialize. Next week looks to bring the price of WTIC up a bit to fall between $81.00 - $83.00/barrel.

Commentary

A few weeks ago, on June 17th, I wrote:

“…..If you were to look at overall participation in the current rally, you would notice that only a few stocks are involved in it. These few stocks have been pushing the markets forward, however what you’d also discover is that market breadth (how many stocks are actually participating in the market or sector) is weak. This is NOT a good sign that the current rally is going to continue either. If you were to look further, 34.5% of the S&P 500’s market cap gain this year has come through one stock – Nvidia. Nvidia’ shares have gone through the roof by an increase of 166% since January 1st. It is up over 200% from this time last year!

Although Nvidia has propelled the market, along with Apple and Microsoft, relying on these behemoths to propel the market up will be dangerous if/when they go the other way. Put another way – the top 10 companies that are in the S&P 500 presently are more overvalued than were the top 10 companies during the Dot-Com days of the mid-1990’s! That’s scary!....”

Nvidia, the AI chipmaker, lost nearly 13% of its value earlier in the week. This equates to nearly a half trillion dollars in market cap! Although the company made back some of its losses, this is a significant amount and illustrates my concerns that the current stock market, and the rally these last months, are overly relying on a few highly-publicized stocks (Apple and Microsoft, for example). Nvidia’s dilemma concerns the fact that their chips are outpacing supply and given that even if sales double from 2023’s $61 billion, will that demand continue?

It is safe to say that AI is not going to go out of style and there is every reason to expect that this technology will increase exponentially over the coming decade, however that the current US markets are relying on a handful of companies to propel its growth is, as with my opinion above, scary. I could not overstate the value, the absolute necessity, of receiving financial guidance from either a broker or the analysis and guidance we offer here on GaneWisdom/Market Edge. Its great to make money in an up market but oh so painful to watch those profits evaporate when the markets turn. And then eating away at principle. And eventually the markets will turn. Just be prepared. Again, this is the service we offer.

On Friday, the Personal Consumption Expenditure (PCE) readings for the month of May were released and it showed the lowest reading in three years. The PCE is the gauge favored by the Federal Reserve as it measures inflation so an investor would be correct to believe that things are on the right track. Ironically the markets reached new records on Friday after the PCE announcement before giving up by day’s end. The DJIA closed the day at 39,118, down 45 points, the S&P 500 down 22 points at 5,460, the Nasdaq closing at 17,732, down 126 points. Seems like the party favors remained on the floor by mid-afternoon Friday. The only bright spot, small that it was Friday, saw the Russell 2000 inch up 9 points to close the day out at 2,047.

The US Elections

Nearly 48 million Americans watched the debate on Thursday. Although history indicates that the incumbent usually holds an advantage in an election, what we saw Thursday has many very concerned.

The stock market didn’t take off after Donald Trump appeared to best President Biden however there is a slight breeze coming from offshore that, at least according to the market now, a Trump victory may be in the offing.

There is incredible pressure from inside the Democratic party for Joe Biden to step aside, but as of this writing, Biden is not giving any indication of doing so. Incredibly he was congratulating himself in front of a North Carolina audience Friday on his fine performance! His halting, sleep-walking answers and dazed look sent shivers down many a back and tears down many a cheek – mine included. Trump, who certainly was more composed than is his habit in a debate, continued his lean into falsehoods about the economy, the January 6th attack on the Capital, after-birth murders on infants and other issues. We are a nation of 333 million people – these two candidates are the best we as a country, have?

When voters enter the booth, the economy usually (almost always) has been foremost on their minds. The path of inflation, interest rates, housing affordability, grocery prices, gas prices and the direction of the Federal Reserve being able to guide the economy to a ‘soft’ landing seemed to be foremost on voter’s minds just a few months ago. This year, however, may be the year of the ‘lessor of two evils’. Heaven help us.”

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 39,118. The S&P 500 at 5,460.

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 twenty-three 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 6/28/24)

We currently are/or were positioned in the following:EnteredExitProfit/Loss
A portfolio consisting primarily of Nasdaq traded stocks5/8/24open+8.9%
A portfolio consisting primarily of Large Cap (S&P 500) stocks5/8/24open+7.8%

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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