2024 Financial Markets Update 3/1/2024
The powerful rally in stock prices that started last November,
continues into 2024. Seems that the stubborn inflation and tight money (interest
rates) are not hampering the optimism on Wall Street.
Just one day into March’s market action, stocks gained about 1% Friday (on the
S&P 500 and Nasdaq indexes) closing at all-time highs. The Dow sits just
44 points from its all-time high achieved in late February. Our favored commodity – Gold, added $40 an ounce
Friday, good enough for a 2% gain on the day, registering a new ALL-time high
near $2,080. So it’s darn hard to find a displeased investor now-a-days.
Adding January and February together, stocks are ahead +7% on the S&P 500 index, quite a run.
Similar to the last half of 2023, the main drivers of higher stock prices remain the large technology stocks: Apple, Google, Microsoft, Amazon, Nvidea, Meta (formerly Facebook), and Tesla. Their moniker is “The Magnificent 7”*. They are widely owned by money managers and no doubt you own them too if you have a retirement plan or 401(k) plan or own a large stock mutual fund. It’s virtually impossible to NOT own these stocks unless you intentionally want to.
Back in the 1970’s the name “Nifty 50” was given to a list (of 50), stocks that were very important and also exhibited fast growing sales and earnings. If you managed money** or your own portfolio back then, you no doubt owned shares of IBM, Proctor & Gamble, Coca-Cola, Avon Products (remember Avon-calling), General Electric, Xerox, Sears Roebuck & Co., and Eastman Kodak. Some of these you no doubt recognize as they are still operating today. Some merged or went out of business. The oil embargo induced high inflation and recession of 1973-1975 sent stock prices down about 35% combined in 1973-74. The Nifty 50 fell 50% !
I see investing this way as a self-fulfilling advantage or a
curse. As these companies do well and their prices rise, they represent more of
the index that they’re in. Then they ‘crowd out’ other market sectors that you
under-own. It becomes top-heavy – good or bad – with your performance and your
dollars invested. Here’s the sector breakdown today for the S&P 500 Index.
I realize that most of us recognize the value and safety of NOT putting all your money into the stock market. But the money in stocks should be diversified also. Would you invest over 40% of your stock market money in just 2 areas of our economy, Technology and Financial Services? You can't escape this technology bias with the Dow Industrials (30 stocks) either; it's also about 40% technology; think names like IBM, Intel, and Cisco Systems; also Amazon, Apple and Microsoft.
In my mind, a more prudent idea is to own some other sectors too; health-care and energy for instance. You’ll most likely experience a smoother ride with your stock market holdings than just blindly owning the S&P 500 Index or a look-a-like. Beware: often your retirement plan will offer a mutual fund(s) named something like “Large Cap Growth Fund” or “Capital Appreciation Fund”. Look on-line to see what they own. Use Yahoo Finance to find out also. https://finance.yahoo.com, input your fund symbol, then select ‘holdings’ from the tabs, then ‘Sector Weightings’. If no luck, call your retirement plan, or the investment company who offers the fund choices.
Let's see if the early March gains can continue with stocks and Gold. Bonds are sitting this rally out; as market-based interest rates are backing up again after the steep fall in the fourth quarter. Shorter term Treasury Bills are paying 5.1% to 5.2% a year for 3 and 6 month maturities; a safe place for your cash. Read my prior post on the 2023 recap which explains the markets in more detail.
Keep safe out there!
~Barry
* Apple, Google and Tesla are down in price thru 2/29/24, but the Magnificent 7 are up +14% collectively year-to-date.
** My father started managing pension fund money on 3/31/73, right near the start of the bear market. He did quite well avoiding most of the losses.
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