Welcome readers. We hope you had a profitable and productive last week of January and first few days of February.
The End of the Month Period.
The end of the month is a uniquely favorable period for investing. A number of factors contribute to this, including 401k contributions getting invested, companies typically buying back their stock towards the latter part of the month, pension funds rebalancing their asset allocations, and some individuals having auto investment plans.
Combine end of month favorability and the continuation of a bull market that blasted off at the beginning of November when the Federal Reserve broadcasted upcoming rate cuts, and it is no surprise that the market remains in party mode.
It is also earnings season (more on this shortly). Couple the favorable positive seasonality with blowout earnings from several of the largest tech companies, and you have the recipe for the party to extend further. But will it continue? We will explore a few charts and commentary about the upcoming (election) year and what the current earnings season and market pricing may hold going forward.
Therefore, it is no surprise that the end of January and the beginning of February have, so far, been positive.
Did you know that MarketGauge utilizes a strategy that invests only 32% of the time in the markets and takes advantage of calendar and seasonally positive periods? This strategy has a back-tested and partially real-time track record with over 8.5% a year return for 6 years with minimal drawdowns.
We also recently received a positive signal from one of our other investment strategies, Profit Navigator, and entered the market with a partial position. The unlevered strategy has back-tested at over 17% a year with drawdowns of less than 40% of the S&P 500. The levered strategy interestingly enough has back-tested at over 32% per year with drawdowns slightly less than just investing in the S&P 500.
If you would like more information on these strategies or how we can put them to work for you, please contact [email protected] or set up a free strategy call at www.marketgauge.com/call.
Two important economic inputs this past week.
On Wednesday, the Federal Reserve Chairman, Jerome Powell, told the markets that there would be no change to interest rates, which fell in line with economists’ and market watchers’ predictions. He also stated that it was unlikely that the Fed would lower rates in March. That took some investors by surprise and resulted in an immediate sell-off which reversed course by day’s end and had little negative influence the remainder of the week.
The Federal Reserve continues to aim for the proverbial 2% inflation rate. As we showed in last week’s Market Outlook (if you have not had a chance to review it, click here), inflation has come down at a rapid rate. One of the reasons for inflation falling so fast is that the supply chain has been “fixed” and commodity prices have plunged. A good illustration of this is the following chart: