• Stocks moved higher this past week with the Dow Jones Industrial Average as well as S&P 500 closing at record highs.  While the Dow has set record highs multiple times over the past month, the one set by the S&P is the first since the early trading days of 2022.  Despite the fact that the S&P 500 has risen more than 34% off its October 2022 low, the average bull market historically tacks on more than 100% and lasts more than four years.  Although we believe this bull will be weak by historical standards, investors should not ignore the fact that record closes generally beget more record closes.
    Regardless, we will once again note that given the intensity and magnitude of the rally in both stocks and bonds during the fourth quarter, a sideways to slightly move lower in equities as well as a retracement of part of the move lower in interest rates would be welcome as at least to us, it would imply a bit of rationality was making its way back into the market.
  • The more things change the more they stay the same as according to Bespoke, “through eleven trading days in 2024, the S&P 500 outperformed the small-cap Russell 2000 by 4.98 percentage points (-0.64% vs -5.62%) in what was the widest margin of underperformance in the index’s history since 1979.”  As we noted within last week’s Snapshot, “although not short-term traders, we do believe that it will be hard to unseat the sectors that exceled during 2023, namely, Technology, Communication Services and Consumer Discretionary and this past week, at least temporarily, confirmed that view.”
  • Despite the Dow Jones Industrial Average and S&P 500 closing at record highs declining stocks substantially outpaced those that advanced this past week and have done so thus far in 2024.  This narrow leadership may continue as despite being overbought, technology related (see Artificial Intelligence [AI]) companies will most likely continue to attract investment dollars.
  • According to Reuters, “France registered 678,000 births last year, representing a decrease of 7% from 2022 and down 20% since peaking in 2020.”  In a separate report Reuters noted that “China’s population fell for the second consecutive year in 2023, as a record low birth rate and a wave of COVID-19 deaths when strict lockdowns ended accelerated a downturn that will have profound long-term effects on the economy’s growth potential.”  We draw the attention of our readers to this data as countries in Western Europe as well as China have been undergoing fundamental shifts in the demographics of their population, both of which could ultimately benefit the U.S. Economy.
  • After a furious rally off the October 2022 lows, interest rates have been trading within a range indicating to us that, at least for now, perhaps the easy money has already been made in the bond market.  Those looking to get in on the long end of the yield curve should wait for more data to see if inflation is indeed cooling to the extent to warrant such an investment.
  • According to the Federal Home Loan Mortgage Corporation (FreddieMac), “mortgage rates decreased this week, reaching their lowest level since May 2023.  This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability.  However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale.”  As noted last week, those ages 45-plus are quite familiar with these rates and we believe that younger potential homebuyers will be as well, as they will most likely remain range bound.
  • Retail Sales continued to hum along, rising 0.6% during December and by 4.5% over the past twelve months throwing cold water at least temporarily on the notion of six rate cuts.  That said, stocks may not need rate cuts to grind higher as earnings thus far remain adequate to support prices.
  • Corporate news –For the first time, Apple (AAPL) surpassed South Korean handset manufacturer, Samsung, shipping 234.6 million units as compared to 226.6 million.  Earnings from Taiwan Semiconductor (TSM) provided a tailwind to semiconductor stocks as both revenue and earnings surpassed estimates.  The company also provided a rosy outlook.
  • Upcoming Economic Reports scheduled to be released this week include the following, on Monday, the Index of Leading Economic Indicators (LEI) for December from the Conference Board; on Tuesday, December M2 Money Supply from the Federal Reserve Board; on Thursday, the Weekly Report of Initial Claims for Unemployment Insurance, December Orders for Durable Goods, the Initial Look at Fourth Quarter Gross Domestic Product (GDP) and December Sales of New Homes; and on Friday, December Personal Income and Spending along with December Home Sales.
  • The current earnings cycle is in full swing.  Several companies of note are reporting this week, to include – Johnson & Johnson (JNJ), Procter & Gamble (PG), Netflix (NFLX), Verizon (VZ), Texas Instruments (TXN), General Electric (GE), IBM (IBM), ServiceNow (NOW), Abbott Labs (ABT), Tesla (TSLA), Visa (V), Intel (INTC), NextEra Energy (NEE) Comcast (CMCSA), Union Pacific (UNP), T-Mobile (TMUS), Caterpillar (CAT), American Express (AXP)

This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.

Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”

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