Almost everyone has an opinion, right? And I believe those who may claim to have no opinion are often just reluctant to share it. Since I am so long in the business of investing, I receive questions about my opinion of the near future market results.
My opinion is worth about what you would pay for it–that is, almost nothing! Even though I pay attention to the US and other stock markets, it is a proverbial joke that Mr. Market will do whatever it takes to confound the greatest percentage of investors. Therefore, I try not to consider what I think should happen, but to concentrate upon what we see is happening. This relates primarily to price and value trends.
With almost six months in 2024’s history, consider what trends are in place now. Being an ice cream nut, I have 31 market indicators I examine to help me determine current trends. These range from the usual market measures such as the S&P 500, Dow Jones Industrials 30, and Nasdaq 100 indexes to commodity prices to mathematically produced oscillators and summations. (The latter remind me I do not have a great talent for theoretical math and I will not bore you about them.)
Up through Tuesday morning, the 25th, the three major indexes are higher by 14.3, 4.2, and 16.2 percentages year to date. Note the large difference between the S&P 500 and the Dow Jones Industrials. The market weighted 500 is still being inflated by the optimism for the top seven technology companies. They are currently valued at almost $16.5 Trillion dollars of a total valuation of $45.7 Trillion, or 36 percent. (Cumulative value from https://www.slickcharts.com/sp500/marketcap)
The highest performance to date is that of NVIDIA, the darling of the AI futurists, up 147 percent. The laggard this year is Tesla, down 25 percent. As to the rest, almost 200 stocks have negative results. Almost 100 are lower by more than 10 percent. Almost any diversified portfolio will therefore not be higher now by 14 percent or more.
For example, the Dow index (cited above) has 20 positives and 10 negatives. Walmart leads the group at +28 percent, but Intel has suffered worst at -38.9 percent.
This phenomenon of radically different results across the stock markets is known as a lack of breadth. When most stocks are having mediocre or poor results, that breadth indicator is a red flag. It shows weakness that concerns technical analysts.
Will we soon learn that the market is actually on thin ice and prices will fall dramatically? Since predictions are difficult, especially about the future as the late, great Yogi Berra put it, I choose to rely upon probabilities. Almost every year, in good markets and bad, we see a drop in prices during the third quarter so I at least expect a drop. In 2023, it was 9.8 percent, down 16.7 percent in 2022, down less than 6 percent in 2021, and so on.
Many televised experts will say it depends upon what and when the Federal Reserve decides about interest rate cuts or hikes. Current odds are being given according to the CME Group of 66 percent probability of a cut by September 18.
The overall economic production trend is flat. We probably will not experience a major recession, but it looks and feels like the period of stagflation which occurred during the Carter administration in the late 1970’s. In any event, I put much more faith in US people and businesses than I do the federal government. Remember that there are always rewarding places to put your money to work. We just have to observe and find them.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)
(All references and statistics other than those cited above are from TC2000, Worden Bros., Inc., 2024)