Market Musings 1/16/2024

Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!

Overall, we’re optimistic for 2024. We still expect rate cut timing volatility near-term, but more confident we’ve entered the next bull market pending a mild recession this year.

The S&P 500 ended last year on a nine-week green streak rising +14% in the final months to finish 2023 up 24%. So what’s on tap for 2024?

Markets have been pretty mixed so far in 2024. The S&P 500 broke its green streak on the first week with a -1.5% drop, but rallied back the week after. Similar to the YTD start, we expect volatility near-term as #RateCut expectations settle, but more confident we’re entering the next bull market pending a #MildRecession later this year.

While last year was #RisingYields, this year’s story will be #RateCuts. The market entered the year with expectations for six cuts beginning in March. We feel that’s a bit optimistic, but still expect multiple rate cuts closer to the second half of the year. We see lots of volatility earlier in the year as markets swing on the latest macro data that’ll factor into the Fed’s decision making process. However, we expect volatility to subside once the #RateCuts cycle actually begins.

We’re likely entering the next bull market, but still expect a mild recession near-term. Markets ran last year on bullish optimism on a resilient macro and quick rate cuts as the recipe for a #Goldilocks soft landing. While we’re more optimistic with inflation moderating and #RisingYields over, we still may see lagging economic impact from record #ConsumerDebt, wavering #ConsumerNoConfidence, slowing #LaborMarkets and ongoing #CorporateBeltTightening. A mild recession may be worse than current #Goldilocks expectations, but we still see it as an overall win for the market.

While we feel good about the US economic outlook, we’re also closely monitoring rising #GlobalTension as a potential curveball. Global conflicts are on the rise with Russia’s ongoing invasion of Ukraine, the Israel-Hamas War and Houthi missile strikes. Then there’s the sleeping giant, #ChinaTension with the US trade war and potentially more aggressive stance towards Taiwan after its recent election. Markets are too global and interconnected to not have any impact should anything escalate. We also see #CyberSecurity back in focus along with the rising #GlobalTension.

#AI drove outperformance in technology and communications last year and we expect it to continue through 2024. Some of the biggest 2023 winners were Microsoft’s investment OpenAI and Nvidia’s market leading processors. We see both companies continue to benefit this year, but expect the halo to continue to grow across applications (chatbots/assistants), chatbots (ChatGPT/Bard), services (AWS/Azure) and infrastructure (servers/processors/memory).

We’re optimistic for 2024. We’ve aligned portfolios to our macro expectations. While we’re still maintaining our defensive #Flight2Safety tilt near-term, we’ve also shuffled into #AI names across sectors which we believe can outperform independently of market volatility. We’ll be looking for more clarity on #RateCuts and a #MildRecession outcome to make additional adjustments hopefully mid-year. Here’s to 2024! ๐Ÿฅ‚

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As of the publish date, Ursa portfolios may own NVDA and MSFT.ย The stocks mentioned in this article may cease to be owned by Ursa portfolios at any point.

The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursaโ€™s full disclosuresย here.

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