January 30, 2024
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
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THE GAME SHOW EDITION!
Tuesday February 6, 2024 5 PM Eastern Time US
Join us for "Market Mania," a game show created by ETFYourself.com Founder Rob Isbitts. This is a Jeopardy-like game where the questions/answers all relate to investment market history. Market Mania aims to educate and entertain at the same time.
We're looking for up to 6 contestants to answer questions live, so if you would like to be "on the virtual stage" with us, let us know! Rob will briefly explain the answers after contestants respond, so this will be a great way to learn together for an hour.
We hope you'll join us for Market Mania!
To attend as an audience member, sign up HERE
To volunteer to be a contestant, email us at info@sungardeninvestment.com
I’ve been a guest on 2 podcasts recently, and one more is coming out later this week, so you’ll get plenty of my current “takes” from those discussions.
THIS LINK will take you to my latest conversation with Seeking Alpha’s podcast queen, Rena Sherbill. We talk markets, dividend investing and how my stock selection process and ETF selection process go together. Have a listen!
ETFYourself.com is the newest sponsor of the Money Life Show with Chuck Jaffe!
Chuck and go back a ways, and his show is one of my favorites…even when I’m not the guest. THIS LINK takes you to a short interview where we announce the sponsorship. Later this week they will broadcast a full-length interview covering my market views and some ETFs of interest. You will also find Rob’s segment in our Learning Center.
Chuck is like the James Brown of the investment education industry (“the hardest working man in show business”) and we are excited to be more connected with his audience of self-directed investors.
Investing to win
I can’t put it more simply than that. The thing is, every investor defines “winning” differently. So here are a few visuals to help you understand what I’m watching closely, and how I aim for it to inform my near-term and long-term investment decision-making.
First, there has been so much chatter about whether the market is “narrow” or “broadening out.” I heard a well-known market commentator on radio today, and they said something like this: “more than 140 of the S&P 500 stocks were up last year, so the recent gains are not just about 7 stocks.” Hmm, that’s quite a headline, but it is fairly meaningless. Here’s why.
The chart below shows that since July of 2021, SPY (S&P 500, the traditional way, orange line) was up 19%. That’s close to an average return for 2 1/2 years. But if we simply remove the tech sector (purple line) the return was well short of that. And, if the 500 stocks are equally-weighted instead of a small number of giants driving the return, it also gets us to about a 10% total return over 2 1/2 years.
Now, if we simply reverse the weightings, so the FAANG stocks are the lowest-weighted and the smaller S&P 500 member stocks are the highest-weighted, we get just over no return for 2 1/2 years. Finally, if we expand out to the 1,000 biggest stocks but treat them equally, the return is about zero since July of 2021.
Now, let’s just focus on the market runup since the start of October, 2022, about the past 16 months. FNGS, which is the 7 biggies and 3 similar stocks, has just about doubled. And as we go through the same process as above, we see that SPY managed to gain 40%, but the other versions of the “stock market” trailed badly.
Let’s put this all together: the rally HAS BEEN a narrow one. 140 stocks out of the S&P 500 may have gone up in 2023, but most of them contributed virtually nothing to the 23% gain in SPY last year. It was indeed a FAANG-driven year, and this year has started out similarly.
HOWEVER, there is a potential change afoot. In my continuous chart reading, the market is telling me that the story might be changing. The Dow is breaking out, and when I look inside those 30 stocks as well as the 100 largest US stocks that I track closely, it is looking more like we might be transitioning to a true “stock-pickers market.” I’ll need to see more evidence, and get through earnings season (as well as the reaction to the Fed’s announcement tomorrow).
The bond market appears to be heading nowhere, very indecisive, so that’s not an immediate source of “alpha” to me. But within that vast group of thousands of stocks, some micro areas are starting to look interesting, which is a prerequisite to making a move to buy something. The Dow is at all-time highs; so is the S&P 500. It took a long time to get there, and QQQ is waffling a bit near its all-time high level.
My ideal scenario, if it occurs, would be where the quality stocks that have been severe laggards since the start of 2023 finally get some momentum behind them. A continued strong DIA (Dow 30) would be the kind of evidence I seek.
Meanwhile, risk management is always #1 here, so I am not abandoning the fortress of T-bills and some modest hedges that allow me to participate in the current equity market rally, without taking on a lot of downside potential.
It is the heart of earnings season, so this is one of those “no sudden moves” periods I talk about. But I did make a change to the 7-ETF model portfolio, selling 1 ETF and using that money to buy a new position.
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)
Coming this Thursday: a simpler, more actionable premium depth chart!
Yeah, yeah I know, we just simplified the format, dividing the 100 ETFs I follow regularly into 5 “tiers” based on relative attractiveness. But we can’t help ourselves here: we want to make ETFYourself.com as efficient a tool for self-directed investors as we possibly can.
So, rather than try to “shoehorn” depth chart tiers on all 100 ETFs every week, I’m going to provide the following, updated every Thursday:
The “Tactical 10”: 10 ETFs for fresh money, shorter-term time frame
The “Long-term 10” 10 ETFs for long-term aggressive appreciation potential
The difference between these 2 lists and the model portfolios I run are as follows:
The portfolios are constructed in a way I think pieces together the best combination of ETFs at any moment in time, in line with my investment approach
The depth charts are a list of ETFs to be viewed individually, not as a “portfolio”
Subscriber feedback drives ALL of this, so keep the suggestions and ideas coming!