December 12, 2023
December 12, 2023
The latest research, market indicators and trade summaries from Sungarden Investment Publishing
ROAR Score
(Return Opportunity and Risk)
If my choices are stocks and cash, what % would I have in the stock market right now?
Market in a Minute
So, since tomorrow (Wednesday) is the last Fed rate decision of the year, and that is followed by Chairman Jerome Powell’s press conference (2:30pm ET), maybe I should just write “wait until tomorrow.” Since apparently those types of events, as well as the monthly jobs report and CPI (released this morning) seem to be all that markets care about sometimes.
I continue to believe that there are 3 very viable historic stock market scenarios for the first 3-6 months of 2024. None of these will play out exactly as they did in the past, but like they say, history rhymes, so the key is to be aware of what is possible. Three different years in the stock market stand out to me as potential rhymes for what 2024 could resemble
2000: QQQ rises sharper and faster than anyone can imagine, and that is the final “blowoff top” of this post-pandemic era. In 2000, it was 9 weeks of bliss, followed by 3 years of losses.
2008: 2023’s regional bank crisis was swept aside like Bear Stearns’ failure was in 2007. But that only led to a worse situation in 2008, involving banking, consumer and real estate woes. Sound familiar? A potential 2024 scenario.
2010: Remember investing in 2010? Few do. It is not as memorable as the 2 periods cited above. But 2010 followed the vicious 37% S&P 500 decline of 2008 and the 26% rebound in 2009. The S&P 500 gained 15% in 2010, but it was a back and forth year, with that entire return coming in the final 4 months. If the market “feels” like anything after this year, that would be it.
Just because we are in a holiday mood here, I’ll follow up on the above by doing what we investment strategists typically come to regret. Here is my handicapping of 2024, choosing from those 3 historical predecessors and a fourth, “something else.”
OK, here goes: handicapping the stock market in 2024:
Year 2000-like: 35%
Year 2008-like: 25%
Year 2010-like: 20%
Something else: 20%
Because investing today is not about placing your chips on one part of the roulette board and waiting a year for the darn wheel to stop spinning. It is a constant re-calibration based on a continuous flow of new information, chart patterns, etc.
That’s why our ROAR Score is so valuable. That’s what it tracks, week by week. And this week, it gets a lift, as explained below. This is not quite “liftoff” for the stock market, and there are industries, sectors and themes that look much better than others. But assuming that investors don’t go into panic mode when Powell speaks Wednesday afternoon, and nothing else “out of left field” comes at us, there is room for a whiff of that year 2000 scenario noted above.
Even when the threats to stock and bond markets are high (and they are), it makes sense to allow for the possibility that it will be all “puppies and candy-canes” for a while. Who are we to tell the market what story it should tell? Right now, that story is edging up toward being more bullish for a bit.
The plan:
Our ROAR Score has been raised to 35 from 25, after 5 straight weeks at that lower level. Our 2-ETF model portfolio is 35% in SPY (S&P 500) and 65% in BIL (1-3 month T-bills). This super-simple balanced risk portfolio, using only 2 ETFs, is now up 6.2% this year. Since its 1/1/22 inception, its “worst-case” drawdown is less than 8% from peak to trough, versus more than 17% for a 60/40 portfolio and more than 22% for the S&P 500.
There were also changes to the 4-ETF and 7-ETF model portfolios, reflecting the increased ROAR Score. Premium subscribers can read about that below.
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S&P X-Ray
The S&P X-Ray tracks our latest projected trading ranges
for the S&P 500
(Updated weekly on Tuesday, as of Monday’s market close)
