THE APPLE OF OUR EYES

DJIA: 52 -wk: +17.06% YTD: +3.71% Wkly: -011%

S&P 500: 52-wk: +26.98% YTD: +7.70% Wkly: +0.95%

NASDAQ: 52 wk: +39.23% YTD: +8.42% Wkly: +1.74%

APPLE: 52 -wk: +18.98% YTD: -6.68% Wkly: -1.57%

STRONG STUFF: The S&P 500 enjoyed a road rally on Friday, hitting a new record. The index has advanced in 16 of the past 18 weeks for the first time in more than half a century.

LEAPING TO A RECORD: The Nasdaq Composite closed at an all-time high on Thursday for the first time since November 2021. The tech-heavy index is up around 8% since the start of the year.

A RECENT SURVEY FROM INVESTORS INTELLIGENCE: Shows the number of bulls outnumbered their bearish counterparts by the widest margin since late 2021. This level of bullishness is nearly as good as it gets, and suggests that parts of the market “look a little euphoric,” says Julia Hermann, global market strategist at New York Life Investments.

THE S&P 500 JUST FINISHED THE FIRST TWO MONTHS OF 2024:

Up 6.87%, its best start to a year since 2019. And the Nasdaq Composite, for its part, closed the month at its first record high since November 2021. Valuations, at 20.6 times 12-month forward earnings, are also high relative to history.

Torsten Slak, chief economist at Apollo Global Management, notes that the median price/earnings ratio of the S&P 500’s 10 biggest stocks is higher than in 2020, 2010. And even the dot-com bubble peak in 2000, when it was about 25 times.

TWO RISKS LOOM LARGE THOUGH: The Fed has been reluctant to cut interest rates. Conditions haven’t been looser than now in at least the past seven years, according to Evercore ISI strategist Julian Emanuel. That means they’re likely to tighten from here, and when financial conditions tighten, the S&P 500 usually drops.

APPLE: Emanuel further states that despite the stock market’s gains this year, Apple has dropped 9.3% from its record high and now trades below $180.00, a level that had been an important support for the stock.

With iPhone sales growth almost non-existent in the fourth quarter, the stock could head even lower. And if it breaks below $170.00 it could drop still more – and drag the S&P 500 down with it, ending the “fear of missing out” once and for all, Emanuel says.

That’s not the kind of market worth chasing. Rather than being afraid of missing out, investors should fear the very real possibility of a decline.

A Frothy Market Misses Vital Bubble Ingredients

Measures of investor sentiment are positive, but nothing like past bubbles.

After a Historic Rally: We are two months into 2024 and the year has already started with a bang. Despite the big rally from the October lows late in 2023, the bullish momentum in the stock market continues to drive stocks higher.

The rally has been fueled by two factors.

First, due to lower inflation rates, we have optimism that the Federal Reserve will start cutting interest rates multiple times starting this summer. And second, we are seeing euphoria surrounding the artificial intelligence space.

This combination has helped the S&P run +25% and the Nasdaq surge +28% since the October lows.

THIS WEEK’S INTERESTING SECTOR PIECE IS ON TECH & AI: Dell stock hits all-time high after earnings.

Why it’s good for Nvidia and AMD. Nvidia stock is on the rise. Why AMD is climbing even faster.

Friday’s job report could be a factor going forward.

― Richie Naso

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