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Weekly Economic and Stock Market Commentary – January 2, 2024

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As for the stock market specifically:

We had the famed Santa Claus rally in the shortened holiday week. Despite losses on Friday, it was a great year to own roughly 5 – 10 stocks which accounted for a huge percentage of market gains in 2023. While I have not seen it in print, I did see a “television business channel” say that without those “magnificent” stocks in the S&P 500…. The S&P would have only advanced by 9%. Thus you can plainly see just how much those fabulous and “magnificent” stocks carried the water for the 2023 gains. If you have not heard of the so-called “Magnificent 7”, just let me know.

Let’s get to the common question for the benefit of new readers.

The question is some form of “What do you think will happen this year in the market?”

The answer has not changed since I joined the industry 31+ years ago.

I don’t know.

While not necessarily a fulfilling answer, it is an intellectually honest answer.

Given such large gains in the mega-cap stocks last year, it would not come as a surprise that they drift down to one degree or another. The reason(s):

— We are now in 2024, any sales then, would not be reported on the 2023 tax returns, but rather on the 2024 tax year. Giving investors 12 months to deal with whatever may come their way. Perhaps even some losses to offset those gains.

— Another possibility is that IF indeed interest rates have peaked, and the Federal Reserve does indeed cut interest rates as expected, then I would not be surprised to see life pumped back into the dividend oriented stocks.

— An additional beneficiary of expected lower interest rates could be the small and mid sized stocks where borrowed money means a great deal. As such, they could benefit handsomely by any reductions in borrowing costs.

The bullish percent indicators increased once again, and we still have good field position. WEALTH ACCUMLATION strategies are in force.

Remember, Xs means OFFENSE or wealth accumulation, while Os means DEFENSE or wealth preservation.

Below is where our indicators stand as of December 31, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

I’ve said enough above. Let’s leave it here for the week, and hope the first week of January goes our way. Be prepared for the “as the first week of January goes, so goes January”. Then of course the famous: “as goes January, goes the year”. So let’s cross our fingers.

Happy New Year

Phil