Time for a breaK? What I am doing before elections.
October 27th, 2024 - Update
MACRO
Let’s start with the macroeconomic outlook.
The latest GDN Nowcast for Q3 2024 from the New York Federal Reserve is 2.91%, down from 3.1% a couple of weeks ago. It amazes me how quickly these models change, especially considering that Q3 is already behind us.
The Nowcast for Q4 is at 2.41% and is trending slightly downward.
Is this bad? Not really. If the economy continues to slow down gradually (pun intended), it would be beneficial for stocks because interest rates will decrease step by step. This means there is no emergency or significant fear of the economy collapsing. This scenario is well illustrated by the chart below:
Slow Rate-Cut Cycles: On average, these cycles see the S&P 500 climb.
Fast Rate-Cut Cycles: These cycles see the S&P 500 decline, reflecting market fears for about 8 to 12 months after the first rate cut.
EARNINGS SEASON
The S&P 500's third-quarter earnings season reveals a selective landscape where Financials, Health Care, Consumer Staples, and Information Technology excel by exceeding revenue and EPS expectations and raising their future outlooks. Information Technology is the standout sector with the best upward revisions, positioning it as a key driver for continued growth.
Conversely, energy and Industrial companies face challenges with declining revenues and lowered earnings forecasts, reflecting broader economic and market headwinds. While the market shows resilience in its strongest sectors, the underperformance in Energy and Industrials suggests a need for a more cautious and selective investment approach moving forward.
INDEX
The NASDAQ closed the week slightly positive with all key moving averages pointing upwards.
MY TAKE
The NASDAQ is testing all-time highs again, marking the seventh consecutive week of gains for the index.
Under-the-Hood, breadth has been deteriorating, meaning the number of stocks improving is declining. This is a sign of caution.
Corrections are normal and expected in all bull markets, so I would not be surprised to see some extra volatility as we approach the elections.
Valuations are not extended, yet the market is not cheap either.
The market is being led by technology once again, and with all the advancements in artificial intelligence and robotics, this trend is to be expected. I view corrections as buying opportunities to invest in the leading companies driving this technology revolution.
If the economy does not show very bad results, the Federal Reserve's easing cycle should continue at a slow pace, which is ideal.
However, if very bad economic data emerges, I’ll need to reconsider my positive outlook for stocks.
PORTFOLIOS
This week I’ll stay quiet. No buys for me. I updated my Stop Loss levels. Let’s see how it goes.
UNDERPRICED GROWTH PORTFOLIO
Last week, my HEAR 0.00%↑ order was not triggered. APP, SOFI, and HIMS are leading the pack. I will be adding on weakness if I have the chance.
10X LARGE-MID CAP MOMENTUM PORFOLIO
Here is RKLB 0.00%↑ that is leading greatly. This portfolio has been a great success so far and stays above 70% annualized after more than 18 months from inception. All positions in the green right now. Stop Loss levels updated.
10X SMALL CAP MOMENTUM
My only position CMPO 0.00%↑ keeps delivering. I updated my Stop Loss. Let’s see if CMPO wants to keep grinding higher.
That’s all for the week!
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Important: This is not investment advice. Consult a licensed financial advisor before making any investment decision.