The market experienced a decline following Powell’s Wednesday speech, indicating that a March rate cut is unlikely. However, a strong rebound the next day suggests that the current uptrend momentum remains robust, with the SPX staying above its short-term moving average. Despite this resilience, it’s evident that the dominance of the “magnificent 7” stocks (excluding Tesla) persist, highlighting the uneven distribution of market performance. Notably, Nvidia gained more than 23% in January while Tesla dropped nearly 27%, exacerbating the polarization between these two stocks. This trend mirrors the broader divergence observed between the S&P 500 and small-cap stocks, prompting investors to remain attentive to the potential outcome of strategies for future-proofing their investments
Since surpassing its previous all-time high on January 19, 2024, some investors may experience FOMO (Fear of Missing Out). However, as we enter February, historical data reveals it to be the second-worst month for the S&P 500 in the past century and the third-worst since 2000. For the Nasdaq, it’s the worst month since 2000. Despite this, the volatility presents an opportunity for investor participation, particularly in February during an election year.
In January, our long-term investment portfolio yielded a return of 12.64%, resulting in a cumulative gain of 107.44% since May 2020. Our dynamic investment portfolio achieved a gain of 1.43%, albeit tempered by the drag from crypto mining stocks and Tesla, contributing to an overall return of 48.74% since May 2020 (refer to our latest performance report for detailed insights). As predicted in the previous quarter, our structured note portfolio demonstrated notable improvement in the context of exiting investments, driven by positive trends observed in January.
Recently, many companies have been cutting costs in response to economic uncertainties. While this trend started in the tech sector, it has now spread to other industries. However, this raises questions about whether it signals a potential “soft landing” scenario.
While individual companies may see immediate benefits from reducing their workforce, widespread layoffs could indicate broader economic vulnerabilities and potentially lead to a recession. The inversion of the treasury yield curve, a historically reliable predictor of economic downturns, is of particular concern in this context. Let’s hope that this indicator does not foreshadow significant economic challenges ahead.