The S&P 500 was down for the 3rd straight week. Weekly market recap, trading week 16/2024
Summary of the trading week in several posts with the most interactions on X
In this series, I’ve been bringing out financial posts with the largest number of interactions from my feed on the X platform over the most recent week. I am aware that not everybody uses X regularly so I thought it could provide some value to your analysis, and investment process.
Weekly performance. In the below attachment, you can see last week’s performance of the major US indexes, the VIX volatility index, gold, and Bitcoin. April has not been a great month for main stock indices so far. The S&P 500 has seen 3 consecutive weeks of losses with Nasdaq being down in 6 out of 7 last weeks as tech stocks have been hammered. On the other hand, commodities are on fire. Furthermore, gold has continued its outperformance. Interestingly, though, Bank stocks have also outperformed. In effect of all these developments, the stock market sentiment is near extreme fear. Counterintuitively it could be a good entry point. Commons sense tells, however, that it is still better to be careful with buying as the sentiment can fall even further (see the second attachment below). Finally, on the longer timeframe, it looks like net US liquidity additions have stalled in recent weeks (third post) which could have accelerated stocks' downward moves.
In terms of the key events in the week ahead, there is the first reading of US Q1 2024 GDP data on Thursday.
In addition, there is March PCE Inflation data due Friday. The core PCE is expected to slow in March from 2.8% year-over-year in February to 2.7%. Headline PCE is estimated to rise to 2.6% from 2.5% in February. 3-month annualized rate is forecasted to jump to 4.0% from 3.5%.
Additionally, ~40% of S&P 500 companies are scheduled to report their quarterly earnings including Tesla, Microsoft, Google, and Meta. In other words, huge week for stocks ahead.
Some Dot-com bubble similarities.
1) T-bills are paying 4x more than the S&P 500 companies in dividends. We have to keep in mind that many companies prefer to buy back their shares instead which is a more tax-efficient form of returning capital to investors.
2) The S&P 500 earnings yield (reciprocal of the P/E ratio) is lower than the 10-year US Treasury yield for the first time in 20 years. It appears that there’s finally a safer alternative to stocks if held to maturity.
3) The US Technology sector accounts now for ~30% of the S&P 500, the largest share since the Dot-com bubble. Does that mean US tech stocks are in a bubble? Find out in the below article:
US debt concerns. Almost $9 trillion of US government debt will mature over the next year, the most ever. Right now, the Fed has been shrinking its balance sheet, reducing the US debt exposure. On the other hand, foreigners have been net buyers of US bonds for the last couple of years. History suggests that once there are some cracks in the largest bond market in the world then the Fed will step in to the rescue. To find out more about the US national debt future path, read the full story attached below:
How do investment professionals position themselves in this challenging market? 224 global portfolio managers* with $638 billion assets under management recently moved out of Bonds, Cash, Staples Stocks, and Emerging Market stocks and increased their exposure to Materials, Commodities, and Energy. This, in turn, suggests that they hedge against re-accelerating inflation.
*The Bank of America monthly survey (April 5-11)
Another very useful piece to check if you would like to hedge against inflation:
Some Bitcoin data in the end. The estimated global Bitcoin adoption is ~3% or 269 million users and has been rising as fiat currencies trust deteriorates. Meanwhile, Bitcoin is up by ~54% year to date and almost 130% in the last six months.
If you find it informative and helpful you may consider starting a premium subscription for under $0.50 a day or buying me a coffee, and following me on Twitter:
Why subscribe?
https://globalmarketsinvestor.substack.com/about
Paid subscription will certainly help you avoid this kind of underperformance:
Did you know that the average investor has had consistently lower returns than the S&P 500 in the past?
The 20-year annualized return over 2002-2021 of an average investor was just 3.6%, almost six percentage points lower than the S&P 500 return of 9.5%.
If the average investor invested $10,000 and did not contribute any additional capital over those 20 years it would have $20,285.94. At the same time, a portfolio that invested only in the S&P 500 would have $61,416.12, or 3x more when excluding fees and taxes.