Limping Out of 2024

THE WORST LAST WEEK OF THE YEAR SINCE 1937.

According to Wayne Whaley, 2024 experienced the worst last week of a year since 1937. His work underscores that the market rebounded the following week after big year-end deadlines.

Lack of Traction

For a moment, the market looked like it would finish the year on a high note, but the early rally faded.

‘Mag Seven’ Shine

Although the Street began to dislike and eventually hate the dominance of the so-called ‘Mag Seven,’ these names wouldn’t stop moving higher. There was a moment in July when they faded quickly, and the conventional wisdom was to load up on value stocks, small-caps, and bonds. Conventional wisdom was wrong, and even if current weakness persists, I think it would be a mistake to forsake these names for laggards seeking a spark beyond the notion they are “due.”

But where can we find diversification?

Undoubtedly, value sectors and stocks will get more attention this year. On Tuesday, they were the only factors in the market's rally along various market caps. 

The chart is attractive. A double bottom, rate of change (ROC) is turning higher, and money flow (MFI) is improving.

Note:“Value” outperformed factor groups among small and mid-cap names in January.

Looking for Fast Start

The market has a strong history of getting out of the gate fast in the first two weeks of the year, whether it’s small-caps, large-caps, value, or growth. Buyers will materialize if there is a sense that history is repeating itself.

Wall Street’s Reluctant Bulls

Last year, Wall Street blew it big time. It was too bearish coming into this year, and made wrong guesses every step of the way. Some of the repeated mistakes can be chalked up to pride and ego (some might also call it arrogance), and another big part of the mistake is that everyone is painting by numbers.

They all use the same valuation metrics and decision-making process, assuming an orderly rotation from haves to have-nots. The cycle is not orderly and is no longer a cycle. Small-caps have underperformed for four years, and emerging markets have been a wreck for two decades, but in the next two weeks, there will be an avalanche of articles exhorting their fantastic upside potential.

Today’s Session

Equity futures are higher this morning, but the market feels tentative now. Optimism will have to be met with results. This morning, Tesla (TSLA) shares were higher and appeared ready to rebound after Tuesday’s close.

Then, the company reported its full-year deliveries for 2024, which missed the forecast. The 495,000 deliveries were down from 504,000 in 2023 – its first annual decline in the company’s history. 

Let’s see how things shake out.

Comments

When I look at long term trends like average monthly results for the SP500, I only go back to 1995 when online trading began. That innovation created a democratization of the stock market and started what I refer to as the modern era of the market. Grateful for what you do. August Belmont on 1/3/2025 3:34:03 PM

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