January 9, 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
#Stag-Nation
I doubt that will ever be “trending” on X, formerly known as Twitter, but as I look across markets on the 6th trading day of 2024, some form of that word comes to mind. What do I mean?
Ask yourself: what’s happening with the US economy?
Employment is OK, provided you believe the numbers are inclusive, not tilted to ignore certain factors that we’ll look back on later and say “we shouldn’t have ignored that.” Every month, this month’s job figures look good, and every month, previous month’s reports are revised downward.
Economic growth is meh. Inflation is lower than it was but looks more and more like it will be stubbornly, well, stagnant, in the 3-4% area. That’s much better than 9% at the peak last year, but way higher than most consumers are used to.
Some only know near-zero rates and inflation. And if you think the pandemic changed behavior, wait until they see sustained inflation! For example, even 3.7% inflation over 5 years means the fancy burger you used to pay $10 for is now worth $12. It won’t likely go back down to $10. And for those who expect big-time GDP growth in the coming years, that’s a one-way ticket to even higher inflation and rates. This might be OK for savers and the wealthy. But for the other 80-90% of folks, not so much.
The debt, oh lordy the debt! $34 trillion and counting for the US alone. And Europe and Asia are, generally speaking, in worse shape economically, overall. When will that finally matter? When the market decides it will.
The markets are pretty stagnant too, adding to the #Stag-Nation theme. Sure, the stock market “feels” good after a solid end of 2023, but the average stock spent 10 months of the year breaking even, only to join the rally at the end. And that’s after the 2022 debacle. Since way back on 6/1/2021, more than 31 months ago, the total gain of SPY including dividends is 18%. That’s not bad, but it is deceiving, since it is essentially trading where it did at the start of 2022.
SPY masks the following: RSP and EQAL, the ETFs that track the 500 and 1,000 biggest US stocks, but weights them equally so that they represent the “average stock’s performance” are up 8% and 0% the past 31 months.
Meanwhile, the 10-year US Treasury bond yield appears to be transitioning from a potential reversal from 5% in October to way down toward 1-2% where it sat for most of a decade, to hinting at something else. Despite endless proclamations by my investment strategist peers (who are compensated much more when stocks go up and rates go down) that rates were a 1-way trip to the good old days, the actual market is showing a technical picture that should give us pause.
A trading range is starting to develop between 5% and 3.8%, the recent low area. Like an approaching hurricane, this is something to monitor, not overreact to. But the best thing about charting to me is across markets, using ETFs, we can see the market’s ever-developing story. And proceed one step at a time.
Do not for one minute take me for a perma-bear or even a bear at all. All I really care about as an investor is this: do the ETFs I buy go up during the time I hold them, or do they at least not sink my portfolio.
In other words, the markets and the ETFs are just the tools, like bat, ball, glove and cleats to a baseball player. Success comes from how you use those tools to create a process, goals and guardrails, which become your desired path. Everyone is different in terms of time frame, risk aversion, what a “big loss” means to them, etc.
That’s why we’re here. ETFYourself.com does not tell anyone what to do. We simply tell you what I/we see, and what I/we are doing with our own accumulated wealth. Sure, my first rule is Avoid Big Loss (ABL) and so you won’t catch me shooting for the moon, and certainly not promising the moon.
But at a time when investing and markets are as ubiquitous, quirky, popular (uh-oh, not a great sign historically) as any time in human history, amid the snake oil peddlers and “I’m always right/you’re always wrong” crowd that surrounds us in the investment reserach/publishing industry, we hope we can do our part: to educate, to make you think, to question traditional/oversimplifed investing tenets, and to create a community of serial investment learners. So far, so good. Thank you!
The plan:
Our ROAR Score stays at 35, where it moved up to five weeks ago from 25. Our 2-ETF model portfolio remains allocated 35% in SPY (S&P 500) and 65% in BIL (1-3 month T-bills).
As noted last week, the ROAR Score is “broadcast” here every Tuesday night, but I can and will change it any time between Tuesday newsletters, and send an interim alert. We’ve done that once so far in our first 3 months. Let’s see what the CPI and PPI reports bring this week. Again, the numbers don’t matter. The path of market prices does. As one of my favorite (now departed) strategists Steve Leuthold said, “predictions are for show, but our asset allocation decisions are for dough.”
ETFYourself.com is new, but the investment process behind it has evolved over the past 3 decades. You bring the desire, we'll provide the tools!
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)
