One of the most important things we can do as investors is take a step back and ask ourselves one question. What type of market are we in? It is hard to look at what's happening across global markets and be anything but bullish right now. Not only is this the strongest seasonal period for stocks, but just as with last month, more individual investors are bearish than bullish even while indices around the world are breaking out to new 52-week highs. Additionally, consumer sentiment remains incredibly pessimistic, creating an even more favorable environment for equity investors given the strength of the underlying uptrend.
Some other key items we have been tracking include semiconductors and credit spreads. Semiconductors, which include NVDA and AMD, have slowed down recently after being one of the hottest sectors all year. When looking at their relationship with the S&P, they are right at a pivotal price point which could signify this is a major top. However, since the underlying trend remains so strong, we believe this trading pattern will resolve to the upside instead, much like many other growth stocks with similar trading patterns have all year long. This belief is also supported by credit spreads, which remain as tight as they have been all year long even with the recent rally in the dollar. This would be consistent with the current rally continuing into the end of the year.
It is important to note that it isn't just a few stocks holding the market up. Not only has there been consistent sector rotation, but most sectors have hit new 52-week highs on an equally weighted basis. This means that even without the largest companies in the world (AAPL, NVDA, TSLA, etc), those sectors have seen participation from a majority of their other components across all market caps. All of these factors make it very difficult to be bearish equities here and we will be searching for new opportunities as we close out 2024.
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. The content is developed from sources believed to be providing accurate information.
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