2024: the year of thrills and spills
(2024-Feb-19)
Last March we predicted the interim top of US Stock to occur in July of 2023 despite extreme bullishness at the time. The actual top occurred on 31-July-2023. The forecast was based on the reliable seasonality of US Stocks but specialized to pre-election years. What about election years? The answer is that things are really quite different for elections years consistent with both buyers and sellers holding back until the election is decided and then whole of the years (average) rise is crammed into the last two months in a monster Santa-Claus rally. The chart below is courtesy of our friend Callum Thomas at Top-Down charts.
As can be seen there are tops in mid-February, early April, while the folkloric May top is relegated to late-June. Be wary of the nasty ol’ September as well. For those who follow this site, know that over the next few years we expect a return of inflation, and a range bound (albeit a wide range) Stock market.
As of this writing the SPDR S&P 500 ETF, or the SPY, stands just below $492B in assets. On 23-December-2023, then $478 billion the SPY pulled in $20.8 billion in just one day. For that week, SPY raked in $24 billion in total, also considered a record in its 30-year history. We also know that today, SPY is 50% invested in only 7 symbols! What this means is diversification has become (and more so everyday) a quaint notion of the past.
However, diversification is only a mathematical concept. Like other forms of protection, it is easily forgotten in the heat of the moment. Not only the thrills-and-spills resulting from lack of diversification are not going away, but they will only be amplified. As such, 2024’s expected seasonal amplified gyrations will be a great practice-run for what is to come.