The Case for S&P 500 at 4,000 By Next Friday (or 3,400)

[] Market momentum turned green Friday, and the market is now starting to get some energy heading into earnings. But be cautious - there could be some BIG moves by this Friday. [View in browser]( [View in browser]( [] [Godesburg's Haven Investment Letter]( [] [Godesburg's Haven Investment Letter]( [] The Case For S&P 500 [Garrett Pic] Dear Investor, I’m happy it’s Monday. After a very long trading week, culminating in a bizarre squeeze on Friday, traders are taking long positions ahead of this week’s busy earnings schedule. About one-third of companies on the S&P 500 will report numbers this week. The core mega-cap stocks of Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL) will also report. These stocks combined comprise nearly 20% of the entire S&P 500’s weight. These are extremely crowded trades. And it’s possible that we will see even more funds and investment managers pick up shares. Earlier this year, I noted that Apple’s “passive investment” exposure had stretched to 300 exchange-traded funds. This number seemed extremely high at the time. Well, today, it’s 403. Funds continue to herd into these large positions - believing them to be a safety trade. It’s hard to argue against the logic. Most ETFs are trailing their benchmark in the S&P 500 - so they’ve stopped trying to beat the benchmark. Instead, they’re just “joining” the benchmark by replicating the S&P 500 and buying shares in the index’s top holdings. This is a smart strategy… until it’s not. The problem is that these funds have too much “passive investment” risk. If Apple has a horrible quarter, and the U.S. investment world starts to experience a liquidity crisis just like the events that just transpired in the European Union and the United Kingdom, things can get ugly for these mega-cap stocks very quickly. Imagine trying to empty out the contents of the Gulf of Mexico through a garden hose… as quickly as possible. This exposure is quite significant. If the S&P 500 were to fall to 3,200 - it would require a dramatic amount of selling from these ETFs, other pension funds, sovereign wealth funds, and even the Swiss National Bank. As I noted last week, the Swiss National Bank owns $20 billion in Apple, Microsoft, Amazon, and Alphabet stock. The case for 3,200 or lower starts and ends with significant selling of these stocks. While it’s possible… it would require more than a few bad earnings reports. It would require a steep increase in volatility… and perhaps a global contagion event that fuels capitulation. Revisiting the Business Models Another reason why these stocks may hold is leadership. With so many shareholders piled into these positions, the companies need to justify such investment. Two weeks ago, Amazon CEO Andy Jassy engaged in a massive pivot to turn the e-commerce giant into a fortress stock. Recently, a Powerpoint leaked to the media. It outlined a dramatic shift in Amazon’s corporate strategy. Jassy, who became CEO in 2021, started cutting costs, preserving cash, and aiming to reallocate capital expenditures toward boosting the stock value. Whether that’s introducing a dividend or buying back stock - these initiatives are designed to maintain investor capital. It’s been a busy year. Amazon eliminated its telehealth division, closed nearly all of its call centers, eradicated its delivery robots, announced a hiring freeze, and started shutting its retail stores. Amazon isn’t the only one looking to protect its investor concentration - especially as shares are off more than 30% for the year. These same initiatives are happening at Meta Platforms (META) and Alphabet. They come on the back of Apple’s decisions a few years ago to engage in the same activities. Apple has been aggressively returning cash to investors, and I’d anticipate a lot of stock buybacks this week among those big names. If these companies announce more buybacks and some semblance of positive results this week, this market could quickly squeeze to the 4,000 level. It will be very difficult to shake out big institutions, and many may choose to add to their positions depending on the corporate strategies moving forward. It’s going to be a very interesting week. Enjoy your weekend, [Garrett signature] Garrett {NAME} [] Market momentum is Green again. We’ve had two positive days in a row, which is traditionally bullish. However, this market is gearing up for a slate of earnings reports on the S&P 500’s top companies. It’s very unclear which way this market will go - but concerns about an economic slowdown will certainly be in focus when we get this round of earnings reports. [] [] [] The Case For S&P 500 [Garrett Pic] Dear Investor, I’m happy it’s Monday. After a very long trading week, culminating in a bizarre squeeze on Friday, traders are taking long positions ahead of this week’s busy earnings schedule. About one-third of companies on the S&P 500 will report numbers this week. The core mega-cap stocks of Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL) will also report. These stocks combined comprise nearly 20% of the entire S&P 500’s weight. These are extremely crowded trades. And it’s possible that we will see even more funds and investment managers pick up shares. Earlier this year, I noted that Apple’s “passive investment” exposure had stretched to 300 exchange-traded funds. This number seemed extremely high at the time. Well, today, it’s 403. Funds continue to herd into these large positions - believing them to be a safety trade. It’s hard to argue against the logic. Most ETFs are trailing their benchmark in the S&P 500 - so they’ve stopped trying to beat the benchmark. Instead, they’re just “joining” the benchmark by replicating the S&P 500 and buying shares in the index’s top holdings. This is a smart strategy… until it’s not. The problem is that these funds have too much “passive investment” risk. If Apple has a horrible quarter, and the U.S. investment world starts to experience a liquidity crisis just like the events that just transpired in the European Union and the United Kingdom, things can get ugly for these mega-cap stocks very quickly. Imagine trying to empty out the contents of the Gulf of Mexico through a garden hose… as quickly as possible. This exposure is quite significant. If the S&P 500 were to fall to 3,200 - it would require a dramatic amount of selling from these ETFs, other pension funds, sovereign wealth funds, and even the Swiss National Bank. As I noted last week, the Swiss National Bank owns $20 billion in Apple, Microsoft, Amazon, and Alphabet stock. The case for 3,200 or lower starts and ends with significant selling of these stocks. While it’s possible… it would require more than a few bad earnings reports. It would require a steep increase in volatility… and perhaps a global contagion event that fuels capitulation. Revisiting the Business Models Another reason why these stocks may hold is leadership. With so many shareholders piled into these positions, the companies need to justify such investment. Two weeks ago, Amazon CEO Andy Jassy engaged in a massive pivot to turn the e-commerce giant into a fortress stock. Recently, a Powerpoint leaked to the media. It outlined a dramatic shift in Amazon’s corporate strategy. Jassy, who became CEO in 2021, started cutting costs, preserving cash, and aiming to reallocate capital expenditures toward boosting the stock value. Whether that’s introducing a dividend or buying back stock - these initiatives are designed to maintain investor capital. It’s been a busy year. Amazon eliminated its telehealth division, closed nearly all of its call centers, eradicated its delivery robots, announced a hiring freeze, and started shutting its retail stores. Amazon isn’t the only one looking to protect its investor concentration - especially as shares are off more than 30% for the year. These same initiatives are happening at Meta Platforms (META) and Alphabet. They come on the back of Apple’s decisions a few years ago to engage in the same activities. Apple has been aggressively returning cash to investors, and I’d anticipate a lot of stock buybacks this week among those big names. If these companies announce more buybacks and some semblance of positive results this week, this market could quickly squeeze to the 4,000 level. It will be very difficult to shake out big institutions, and many may choose to add to their positions depending on the corporate strategies moving forward. It’s going to be a very interesting week. Enjoy your weekend, [Garrett signature] Garrett {NAME} [] Market momentum is Green again. We’ve had two positive days in a row, which is traditionally bullish. However, this market is gearing up for a slate of earnings reports on the S&P 500’s top companies. It’s very unclear which way this market will go - but concerns about an economic slowdown will certainly be in focus when we get this round of earnings reports. [] [] [] © 2022 Godesburg Financial Publishing, Inc. DISCLAIMER: COMMUNICATIONS FROM GODESBURG FINANCIAL PUBLISHING (GFP) ARE FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY – NOT INVESTMENT ADVICE: GFP and all the services it offers are for educational and informational purposes only and should NOT be understood to be securities-related offers or solicitations. None of GFP’s communications should be considered or used as personalized investment advice. GFP recommends that you speak with a licensed professional before making any investment decision. RESULTS PRESENTED ARE NOT NECCESSARILY TYPICAL OR VERIFIED: GFP communications may include information regarding the historical trading performance of gurus in their services (all verified by a third party), as well as testimonials of non-employees depicting profitable investments and trades that are believed to be true based on the representations of the persons providing the testimonial of their own free will. Please be aware that the claims regarding investing or trading results of non-employees are not tracked by GFP nor can they be verified. As always, past performance is not necessarily indicative of future results. Therefore, results presented in this email should NOT be considered TYPICAL. Actual results can and will vary based on everything from experience, ability, risk mitigation practices, and market volatility... to the amount of money exposed in the investment or trade. Investing and trading are speculative and carry serious risk. You may lose some, all - or possibly more - than your original investment or trade. GODESBURG FINANCIAL PUBLISHING IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER: GFP, including its owners and employees, are NOT registered as securities broker-dealers, brokers, or any sort of registered investment advisors with the U.S. Securities and Exchange Commission, any state securities regulatory authorities, or any self-regulatory organizations. GODESBURG FINANCIAL PUBLISHING EMPLOYEES MAY HOLD SECURITIES DISCUSSED: If a writer holds any securities in a communication, it will be disclosed along with the information on the potential investment or trade. HIR, its owners or employees, have not been - or ever will be - paid by the issuer of a security mentioned in our services or communications. GFP, its owners and employees are paid entirely or in part from commissions based on sales of their services to subscribers. For more information please visit [our disclaimer page here](. [] Sent to: {EMAIL} [UNSUBSCRIBE]( [] © 2022 Godesburg Financial Publishing, Inc. DISCLAIMER: COMMUNICATIONS FROM GODESBURG FINANCIAL PUBLISHING (GFP) ARE FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY – NOT INVESTMENT ADVICE: GFP and all the services it offers are for educational and informational purposes only and should NOT be understood to be securities-related offers or solicitations. None of GFP’s communications should be considered or used as personalized investment advice. GFP recommends that you speak with a licensed professional before making any investment decision. RESULTS PRESENTED ARE NOT NECCESSARILY TYPICAL OR VERIFIED: GFP communications may include information regarding the historical trading performance of gurus in their services (all verified by a third party), as well as testimonials of non-employees depicting profitable investments and trades that are believed to be true based on the representations of the persons providing the testimonial of their own free will. Please be aware that the claims regarding investing or trading results of non-employees are not tracked by GFP nor can they be verified. As always, past performance is not necessarily indicative of future results. Therefore, results presented in this email should NOT be considered TYPICAL. Actual results can and will vary based on everything from experience, ability, risk mitigation practices, and market volatility... to the amount of money exposed in the investment or trade. Investing and trading are speculative and carry serious risk. You may lose some, all - or possibly more - than your original investment or trade. GODESBURG FINANCIAL PUBLISHING IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER: GFP, including its owners and employees, are NOT registered as securities broker-dealers, brokers, or any sort of registered investment advisors with the U.S. Securities and Exchange Commission, any state securities regulatory authorities, or any self-regulatory organizations. GODESBURG FINANCIAL PUBLISHING EMPLOYEES MAY HOLD SECURITIES DISCUSSED: If a writer holds any securities in a communication, it will be disclosed along with the information on the potential investment or trade. HIR, its owners or employees, have not been - or ever will be - paid by the issuer of a security mentioned in our services or communications. GFP, its owners and employees are paid entirely or in part from commissions based on sales of their services to subscribers. For more information please visit [our disclaimer page here](. 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