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February 11, 2024
TECH-LED STOCK RALLY CONTINUES: I did not change the headline on this entry from last week, because it is still true. The S&P 500 hit another high, and it was led by the continuing performance of large tech companies. The S&P 500 has risen in fourteen of the past fifteen weeks. About two thirds of the S&P 500 companies have reported their fourth quarter of 2023 earnings, and investors like what they see. 75% of the companies have reported earnings above Wall Street consensus estimates. The five-year average is 77%. Companies are about 2.9% higher in earnings than a year ago. That is the second straight quarter of year-over-year earnings growth. Add the residual good feelings from last week's strong jobs report, and you have investors willing to buy more stocks, even at higher prices. The normal big tech names, Nvidia, Alphabet, Amazon, Microsoft, and Apple all had strong weeks.
LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.
MORE TECH LAYOFFS: While tech companies continue to lead the rise in the stock market, tech companies continue to lay off workers. Last week Snapchat got into the action, announcing a layoff of 10% of its workforce. Nearly 24,000 tech jobs were cut in January, and the cuts keep coming.
HAVE WE HIT BOTTOM?: According to the Mortgage Bankers Association, mortgage applications rose by 3.7% from the prior week. Believe it or not, the gain was driven by refinances. The number of mortgages for purchases of homes went down 1% and is 19% lower than a year ago. Purchase applications are up from the lows in October and November, but still close to the lows during the housing bust.
According to Blacknight, an organization that tracks real estate data, there are some other positive signs in the U.S. real estate market, including:
Affordability has improved as the share of income required to purchase a median home has fallen by about 5% from the October high.
The inventory of homes has increased for seven consecutive months.
With spring coming, this data is showing some hope that the slowdown in the real estate market, brought on by the quick rise in interest rates, may have hit bottom. We will see.
CHINA SLIPPING: I came across several articles in the past week that discussed China's slipping share of the world's economy. Below are two graphs, one by Bloomberg and the other by economist George Magnus, which both point to the same thing. The first graph shows China's GDP compared to the U.S. After relentlessly climbing for years, it slipped in the past couple of years. The second graph shows China's share of the world GDP. For almost 30 years, China's GDP as a share of the total world GDP grew. It fell in 2023 to just under 17%.
FOR ALL YOU HEDGE FUND INVESTORS: The Securities and Exchange Commission and the Commodity Futures Trading Commission have introduced new, stricter reporting requirements for U.S. hedge funds. These regulations will require confidential, detailed reporting of investment activities. The focus of these rules is on larger hedge funds. The hedge fund industry has been noisy in its disappointment with these new rules.
UNMARKED PICTURES: My wife was the fourth consecutive generation to live in the house where she grew up. My in-laws did not leave the house until about ten years ago. It was a very large, three-story house in Beaver, Pennsylvania. I took a week off to help them do the final move out. Unfortunately, they did not do nearly enough work before that week, and they were moving from that house to a two-bedroom apartment. Years later, little by little, we have gone through many of the boxes. When we come across old pictures, we have shown them to my mother-in-law, but, unfortunately, she can't identify many of the old pictures. Below are two examples. In the first one, we believe we have been able to identify the man in the top left as my wife's great grandfather. Who are the other twelve men and dog, and why are they all together? Is it a frat? The answers are lost to history. And we have no idea who the people are in the second picture.
NICE SOUTHPAW FORM!: I was able to attend festivities at the school of two of my grandchildren last week. Judah enjoyed throwing a sponge pie at the head of the school. I love the form.
Have a great week!
Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.
Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
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SOURCES:
HAVE WE HIT BOTTOM?: https://www.mba.org/news-and-research/newsroom AND https://www.blackknightinc.com/data-reports/february-2024-mortgage-monitor/
FOR ALL YOU HEDGE FUND INVESTORS: gritcap.io
CHINA SLIPPING: https://www.newsweek.com/china-economy-falling-against-us-dollar-2024-1863428 AND https://twitter.com/georgemagnus1/status/1748990168747344032
MORE TECH LAYOFFS: gritcap.io
(c) 2024 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved
*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.
Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.