[Market Outlook] The Market Party Continues!

Is It A Good Time To Put More $ In The Market? [Company Logo] The Market Party Continues! Is It A Good Time To Put More $ In The Market? By Donn Goodman February 04, 2024 [image] Welcome readers. We hope you had a profitable and productive last week of January and first few days of February. The End of the Month Period. The end of the month is a uniquely favorable period for investing. A number of factors contribute to this, including 401k contributions getting invested, companies typically buying back their stock towards the latter part of the month, pension funds rebalancing their asset allocations, and some individuals having auto investment plans. Combine end of month favorability and the continuation of a bull market that blasted off at the beginning of November when the Federal Reserve broadcasted upcoming rate cuts, and it is no surprise that the market remains in party mode. It is also earnings season (more on this shortly). Couple the favorable positive seasonality with blowout earnings from several of the largest tech companies, and you have the recipe for the party to extend further. But will it continue? We will explore a few charts and commentary about the upcoming (election) year and what the current earnings season and market pricing may hold going forward. Therefore, it is no surprise that the end of January and the beginning of February have, so far, been positive. Did you know that MarketGauge utilizes a strategy that invests only 32% of the time in the markets and takes advantage of calendar and seasonally positive periods? This strategy has a back-tested and partially real-time track record with over 8.5% a year return for 6 years with minimal drawdowns. We also recently received a positive signal from one of our other investment strategies, Profit Navigator, and entered the market with a partial position. The unlevered strategy has back-tested at over 17% a year with drawdowns of less than 40% of the S&P 500. The levered strategy interestingly enough has back-tested at over 32% per year with drawdowns slightly less than just investing in the S&P 500. If you would like more information on these strategies or how we can put them to work for you, please contact [Rob@marketgauge.com]() or set up a free strategy call at [www.marketgauge.com/call](=). Two important economic inputs this past week. On Wednesday, the Federal Reserve Chairman, Jerome Powell, told the markets that there would be no change to interest rates, which fell in line with economists’ and market watchers’ predictions. He also stated that it was unlikely that the Fed would lower rates in March. That took some investors by surprise and resulted in an immediate sell-off which reversed course by day’s end and had little negative influence the remainder of the week. The Federal Reserve continues to aim for the proverbial 2% inflation rate. As we showed in last week’s Market Outlook ([if you have not had a chance to review it, click here](=)), inflation has come down at a rapid rate. One of the reasons for inflation falling so fast is that the supply chain has been “fixed” and commodity prices have plunged. A good illustration of this is the following chart: [image] Global commodity prices rose marginally for the first time in 9 months at the start of 2024 but reported supply shortages remain below long-run averages. We think the Fed was acutely aware of this back in the fall when they announced several interest rate cuts in 2024. [image] The Fed’s Pause As we stated above, the Fed’s pause was not a surprise. December payrolls added 216,000, and the CPI, which measures inflation, came in at an annualized rate of 3.4%, well above the 2% target rate. Then, on Friday, the jobs report was SHOCKING with an announcement that came in at 8:30 a.m. (before the market opened) with 353,000 new jobs added in January. This was over 2x the expectations given that ADP announced their household report of only 107,000 new jobs earlier in the week. The unemployment rate declined to 3.7% from an expected rate of 3.8%. Interest rates, which had been slowly coming down, reversed course and ended the day over 4% for the 10-year Treasury. Who to believe? We are not sure that the Bureau of Labor Statistics report of 353,000 could be accurate given that the ADP report was actually obtaining accurate information from households. Many believe the ADP report more accurately reflects the job market. Also, the 353k number could include people who are working multiple jobs and being counted several times. The positive number that was released on Friday (and may have been the silver lining) was the Employment Cost Index, which only increased to 0.9% and shows that labor costs are slowing dramatically. This number suggests that employers are feeling less pressure to raise pay to attract and retain workers as wage growth slowed in the 4th quarter of 2023. These numbers show a possible reacceleration of the economy. Conclusion on interest rates: Last year, in this column, we commented frequently that we believed interest rates would stay higher for longer. Now we continue to believe that the economy is not showing nearly enough signs of weakness to warrant the Fed to lower interest rates until later in the year. We also remain concerned that inflation may reaccelerate, especially given the turbulence in the Middle East and the effect it could have on the price of oil. The market has adjusted its expectations to only a 20% chance that we could see a March rate cut. While June remains at a 60% chance, we wouldn’t be surprised, given the strength in the economy, if that rate cut is also pushed off a few months. However, another point of view worth considering is that the Fed may wish to help the current administration get reelected (or feel the pressure to do so). There may be a high probability that they are going to cut rates mid-year to create easier financial conditions going into the election. The Market Party lives on. Use the links below to continue reading about: - The odds of the market continuing higher after a streak of 13 of 14 weeks closing higher - Data showing how buying new highs works better than any other day - What happens after the first rate cut - 20 measures of market valuation - Several January based indicators - A current condition that has occurred 9 times since 1952 and has a 100% track record in predicting the S&P 500 will end 2024 higher than today’s prices with an average annual gain of 15%. - The MarketGauge BigView Bullets - Keith’s weekly BigView video analysis - And more! - [Click here to continue as a free member]() [Click here to continue as a PREMIUM member](=) Best wishes for your trading, Donn Goodman CMO Market Gauge Asset Management [image] Every week we review the big picture of the market's technical condition as seen through the lens of our Big View data charts. The bullets provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral. The the video analysis dives deeper. Get started here and continue with the links below. Risk-On - Once again, 3 of the 4 [key US indices](=) hit new all-time highs this week and closed up about 1.3% for the week. (+) - While Energy (XLE) was the leading sector last week, it was the poorest-performing sector this week. On the other hand, the leading sector for the week was [Consumer Discretionary (XLY)]() +3.3%, a positive indication for the market. (+) - Excluding China (FXI) which was down heavily on the week, other [Asian countries surged]() including India (IFN) and South Korea (EWY). (+) - Despite the selloff on Friday, the [Long Bond (TLT)]() was up significantly on the week. (+) - [Growth stocks (VUG)]() continue to outperform Value (VTV) by a wide margin, and the ratio between the two shows that Growth is outperforming Value by its highest percentage in several years. (+) There's more... Use the links below to continue reading about: - The odds of the market continuing higher after a streak of 13 of 14 weeks closing higher - Data showing how buying new highs works better than any other day - What happens after the first rate cut - 20 measures of market valuation - Several January based indicators - A current condition that has occurred 9 times since 1952 and has a 100% track record in predicting the S&P 500 will end 2024 higher than today’s prices with an average annual gain of 15%. - The MarketGauge BigView Bullets - Keith’s weekly BigView video analysis - And more! - [Click here to continue to the FREE analysis and video.]([Click here to continue to the PREMIUM analysis and video](). Best wishes for your trading, Keith Schneider CEO MarketGauge P.S. When you’re ready, here are 4 free ways we can help you reach your trading goals… - [Book a call with our Chief Strategy Consultant](=), Rob Quinn. He can quickly guide you to the resources that you'd like best. - To discuss having assets managed by MarketGauge strategies, contact Ben Scheibe, at MarketGauge Asset Management at Benny@mgamllc.com - Get the foundational building blocks of many of our strategies from Mish's book, [Plant Your Money Tree: A Guide to Building Your Wealth](, and accompanying bonus training. - [Review quick descriptions]( of our indicators, strategies, services and trading systems here. [image] Get more - follow us here... Twitter [@marketgauge]() and [@marketminute]( and [Facebook]( To stop receiving this go [here.]( Got Questions?Office hours 9-5 ET (New York time) Email: info@marketgauge.com Live Chat: Go to bottom right corner of our [home page.](=) Call: 888-241-3060 or 973-729-0485 There is substantial risk of loss associated with trading any securities including and not limited to stocks, ETFs, futures, and options. Only risk capital should be used to trade. 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