MARKET UPDATE JANUARY 2024

SUMMARY:

• The stock market as measured by the S&P 500 just reached a new all-time high.  Technically this means that the bear market for the S&P 500 is over.  The Nasdaq is still 3% below its all-time high and the Russell 2000 (small cap stocks) is still 20% below its all-time high. 

• This does not mean that we are out of danger. Markets will likely remain volatile until there is clear evidence that inflation is under control and that a recession will be avoided.

• The trend has been positive for the market since the end of October 2023.

The markets are off to a good start in 2024, continuing the positive trend that began in October of last year.

When we step back and look at the entire bear market that began at the beginning of 2022, we see a two-year period of high volatility.  Notice all the ups and downs during these two years.

The good news is that the drawdown (from peak to low point) of this bear market was lower than most other bear markets with the S&P down 25% at its low point in October of 2022.  The bad news was that there were many mini rebounds that reversed themselves over the two years.  This is a sign of volatility and instability, and this bear market was more volatile than most other bear markets. 

The reality is that no one knows if the worst is over or not.  No one is ready to declare victory over inflation just yet.  And even though the economy keeps humming along, a recession is still a possibility.

Many market watchers are concerned about a slowdown among the “Magnificent 7” stocks that have been responsible for most of the gains in the market for the last year.  Because of the massive size of these companies (Alphabet, Amazon, Apple, Nvidia, Meta, Microsoft and Tesla), any negative moves for these stocks could drag the overall market down. 

Today is no different than any other time in the market.  There are many things to be concerned about and there are many things to be optimistic about.  It is anyone’s guess as to how all the forces will play out in the short-term, but you can be confident that in the long-term the value of indices like the S&P 500 and the Nasdaq will be much higher. 

The S&P 500 is at what we call “fair market” value which means that it is not overvalued or undervalued now. This is a good thing.  Our indicators suggest that the Nasdaq is only slightly overvalued at present.  This simply means that the market does not need to correct in either direction from its current level based on value.  Yet, we know that markets are not rational in the short term and other factors can cause big moves in either direction.

Because of the uncertainty, it is important to follow a disciplined approach to investing.  It is critical to have an investing strategy that wins no matter which way the market moves.  No one can predict which way things will move in the short term.  But we all know that in the long term, the direction of the stock market will be higher.  Stay disciplined, my friends.

Happy Investing,

Phil

---

Disclaimers *The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.

Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.