What to Watch Next If the S&P 500 Hits 5,000
February 8, 2024
US equity futures are pointing to a lower open even as the S&P 500 closes in on a new record at 5,000. That level could be a magnet for stocks especially with investor sentiment returning to “Extreme Greed” this week. Fueling that move is the combination of improving economic data and better-than-expected quarterly results so far in the current earnings season that is helping expand positive stock performance beyond Big Tech. That is building investor confidence for 2024 profit growth and earnings despite the growing likelihood that Fed rate cuts may get pushed back to 2H 2024.
We suspect there is at least some FOMO at work as well as latecomers to the S&P 500’s 21% move since late October attempt to join in. Both FOMO and rising investor confidence could be tested next week when the market receives the next batch of GDP inputs and January inflation data.
Fed speakers today include Atlanta Fed President Tom Barkin, who is also expected to speak before the Economic Club of New York.
When she appears before the Senate Banking Committee today, Treasury Secretary Janet Yellen, per her prepared remarks, will share an upbeat assessment of the economy as she goes on to highlight the Financial Stability Oversight Council’s 2023 annual report.
Under Armour (UAA) lifted its annual profit and margin forecasts, helped by easing input and freight costs even as demand for its products slowed.
Tapestry (TPR), the Coach and Kate Spade handbags maker raised its full-year profit forecast, betting on a demand recovery in China for its handbags and leather goods.
For more, be sure to read our Daily Markets column published each day by Nasdaq.
Model Musings
Cloud Computing
“Cloud is flexible. Because of this core reality, a second truism also comes to light i.e. there is no R in cloud, except there is. Because the cloud computing model of Software-as-a-Service (SaaS) based applications and data services is so inherently movable, malleable and manageable, we are offered an array of re-this and re-that options that give us the chance to reap the maximum business benefit possible (and environmental benefit too, we hope) from the use of cloud computing deployments. But how many of these R-factor processes are there, how important are they and what do we need to know about them?” Read more here
Guilty Pleasures
“The chocolate industry is running more bitter than sweet as cocoa supplies tighten and prices soar, affecting both manufacturers of chocolate confectioneries and consumer pocketbooks. Cocoa prices have jumped nearly 15% since the start of November and are approximately 65% higher than they were a year ago, according to a new research brief recently released by CoBank’s Knowledge Exchange. New York cocoa bean futures prices have consistently broached 46-year highs since September, and London ICE cocoa futures reached record highs in multiple consecutive sessions. These price surges in cocoa have trickled down to the retail level. Data from the US Department of Agriculture indicates the price of sweets overall is rising almost three times faster than the rate of broader inflation.” Read more here
Luxury Buying Boom
“Coty beat Wall Street estimates for second-quarter revenue on Wednesday, powered by higher pricing and strong demand for its high-end Burberry and Gucci fragrances and fresh launches of cosmetics in the US during the holiday season. The company’s newer products such as Burberry Goddess and CoverGirl Clean Fresh Yummy Gloss helped pull in customers in the US compared to bigger rival Estée Lauder, which flagged feeble demand in the country and is doubling down on new launches and reinventing existing products.” Read more here
The strategies behind our Thematic Models:
Aging of the Population - Capturing the demographic wave of the aging population and the changing demands it brings with it.
Artificial Intelligence – Software, chips, and related companies that facilitate the collection and analysis of large data sets and autonomous generation of solutions given non-machine language prompts.
CHIPs Act – Capturing the reshoring of the US semiconductor industry and the $52.7 billion poised to be spent on semiconductor manufacturing.
Cloud Computing – Companies that provide hardware and services that enhance the cloud computing experience for users, such as co-location, security, and edge computing.
Consumer Inflation Fighters - Companies poised to benefit as consumers stretch the disposable spending dollars they do have.
Core Holdings – Companies that reflect economic activity and are large enough to not get pushed around by day-to-day market trends. Low-beta, large-cap names able to better withstand economic turmoil.
Digital Infrastructure & Connectivity -The buildout and upgrading of our Networks, Data Storage Facilities, and Equipment.
Data Privacy & Digital Identity - Companies providing the tools and services that verify authorized users and safeguard personal data privacy.
EV Transition - Capturing the transition to EVs and related infrastructure from combustion engine vehicles.
Guilty Pleasure – Companies that produce/provide food and drink products that consumers tend to enjoy regardless of the economic environment and potential long-term health hazards associated with excessive consumption.
Homebuilding & Materials – Ranging from homebuilders to key building product companies that serve the housing market, this model looks to capture the rising demand for housing, one that should benefit as the Fed returns monetary policy to more normalized levels.
Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Luxury Buying Boom - Tapping into aspirational buying and affluent buyers amid rising global wealth.Market Hedge Model – This basket of daily reset swap-based broad market inverse ETFs protects in the face of market pullbacks, overbought market technicals, and other drivers of market volatility.
Nuclear Energy & Uranium – Companies that either build and maintain nuclear power plants or are involved in the production of uranium.
Precision Ag & Agri Science – Companies that look to address shrinking arable land by helping maximize crop yields utilizing technology, science, or both.
Rebuilding America - Turning the focused spending on rebuilding US infrastructure into revenue and profits.
Safety & Security – Targeted exposure to companies that provide goods and services primarily to the Defense and security sectors of the economy.
Space Economy – Companies that focus on the launch and operation of satellite networks.
The strategies behind our Dividend Income Models:
Monthly Dividend Model – Pretty much what the name says – this model invests in companies that pay monthly dividends to shareholders.
ETF Dividend Model – High-yielding ETFs that provide a range of exposures from domestic equities, international equities, emerging market equities, MLPS, and REITs.
ETF Enhanced Dividend Model – A group of high-yielding ETFs that utilize options to enhance yield through collecting option income.