Retail Investors Blog

Powell's focus on data-dependency will likely dominate this FOMC week. With a resilient economy and low unemployment, 2-3 rate cuts seem feasible. However, the market is anticipating 4-6 cuts, which could lead to near-term volatility for being overly optimistic.  Stay informed, analyze incoming data, and be prepared for potential market swings.

Netflix's earnings helped bolster market optimism after the closing bell on January 23rd. I particularly like this movement because it will likely draw in FOMO (fear of missing out), which could fuel a larger market downturn in the near future.  Of course, I could be wrong, but here's how I think it might play out: The Federal Reserve (Fed) will likely take a more hawkish stance at the next two Federal Open Market Committee (FOMC) meetings. This could trigger market fears and uncertainty, leading to a sell-off and a flight to safe havens. Large-cap stocks could continue to be a safe haven for investors and ETF institutions during this period. The main reason the Fed is unlikely to cut rates quickly is due to several key economic indicators: The unemployment rate and jobless claims remain low, inflation showed potential for an uptick after the CPI data of 3.4%, and consumer spending continues to be strong. These factors give the Fed the comfort to keep rates steady for a while l...

Major US indices continued their climb on a wave of market optimism, though the pace slowed slightly. The S&P 500 edged up 0.2%, setting a new record high after last week's breakout achievement. Both the Nasdaq and Dow Jones saw modest gains, with Dow Jones surpassing 38,000 for the first time ever. However, the muted movements across all three indices hinted at a cooling in overall optimism, with investors adopting a more cautious stance . Key observations: Tech and consumer discretionary sectors led early gains. Bonds became more appealing with falling US Treasury yields. Low volatility reflected a stable market environment. Declining Treasury yields boosted bond attractiveness but sparked potential concerns about future inflation. More advancing than declining stocks across all three indices indicated a broad market advance. Moderate trading volume suggested a healthy level of participation and a balanced mix of pessimism and optimism. Investor sentiment remained bullish, an...

Overall, the January 19th market performance reflected a confluence of factors: positive economic data, easing concerns about inflation and interest rates, and strong sector-specific momentum in technology. This led to a broad-based rally and new record highs for the S&P 500 and Dow Jones indices , with all three major indices closing in the green and two of them setting new record highs. Indices Performance: S&P 500:   +1. 2% to 4, 839. 81 (new record high) Dow Jones Industrial Average:   +1. 1% to 37, 863. 80 (new record high) Nasdaq Composite:   +1. 7% to 15, 310. 97 (first time above 15, 300 in two years) Key attributes: Tech sector:   Led the rally,   bolstered by positive earnings outlook from semiconductor companies like Taiwan Semiconductor Manufacturing Co.   (TSM) the optimism on AI revolution. This belief fueled the excitement in companies like Super Micro Computer Inc with its stock price jumped +35.94%, ticker SMCI. Full disclosure. I...

The chart of Russell 2000 Index indicates three major support levels at ~$1,800, ~$1,720, and ~$1,637. It highlights to the potential of Russel 2000 Index going lower to below $1,800 given the current low jobless claims, good retail sales data, consumers resiliency, and FED’s stance over interest rate hikes. This index represents the well-known small cap stocks, which also highlights the possibility of many small cap stocks continuing on the downward slope.  Patience is required if you are sitting on cash and bullish on small caps over long term. There will be better entry in the next 3 months. Stay tuned for more updates.

On January 18th, 2024, the mixed market reaffirmed the market volatility and uncertainty. For example, the S&P 500 delivered a choppy performance. Tech initially powered gains, such as Apple's 3. 2% jump and TSMC’s 9.79%, aiming for 4, 800 by midday. Optimism surrounding AI fueled the climb. However, profit-taking and Fed uncertainty pulled the rug, causing a gradual slide. A late rally salvaged a modest 0. 07% gain, but the day's chart displayed a tug-of-war between bullish and bearish forces. Despite inflation seemingly under control, the timing of a potential rate cut sparks debate. Given a recent jobless claims data 187, 000,   lower than both the forecast (207, 000) and the previous week's revised data (203, 000).   This marks the lowest level since September 24,  2022. This data continues to highlight great job market and enhance consumers resiliency. My assessment indicates the FED will not cut rates until June 11-12 to secure inflation cont...

On January 17, 2024, the stock market declined across all major indices:   -Dow Jones Industrial Average (DJIA): down 0.3% to 37,266.67 -S&P 500: down 0.6% to 4,739.21 -Nasdaq Composite: down 0.6% to 14,855.62   The decline triggered by rising bond yields after the stronger-than-expected retail sales data, which fueled concerns over sticky inflation and the possibility of the Federal Reserve delaying interest rate cuts. This negatively impacts growth-oriented and small cap stocks.   Why is that? The stronger-than-expected retail sales data indicates the economy is doing fine and consumers are resilient, which works against the Federal Reserve efforts to achieve its 2% inflation objective. This forces the Federal Reserve to take conservative approach and will not cut rates aggressively as the market expected. This explains the stronger decline in small cap stocks compared to the large cap stocks because small caps tend to underperform during high interest rate environm...

Bearish Midterm and Volatile Times Ahead? Equity markets may face turbulence in the first half of 2024, potentially remaining flat or declining. Small-cap stocks might offer some glimmer of hope in the second half, but caution is key. While a big swing for profits during market dips might be tempting, prioritize cash until clear opportunities emerge. According to John Handcock Investment Management websites:  “This has been one of the longest late-cycle periods in history with the yield curve being inverted and Leading Economic Indicators being negative on a year-over-year basis for roughly a year and a half without a recession. The questions we have to grapple with are classic: Is this time different? Will economic cycles rhyme with those in the past? In our view, this late-cycle period has simply been extended due to the massive pandemic-era fiscal stimulus of 2020/2021. As that stimulus finally becomes depleted—and as the lagged impact of Fed tightening starts to bite—we see a c...