Where We Have Been
It would be an understatement to say that the stock markets, in general, have had a fantastic year. This comes after a superlative year in 2023. All told, the 2022 Massacre, or what I referred to as the 100 Year Flood, seems like a distant memory. That was due to over fiscal stimulus and aggressive FOMC tightening. You should, however, expect those poor years to occur occasionally in investing. Those that can stick it out through thick and thin will be rewarded. Just look back at the 1987 stock market crash and the 2008 financial crisis. At the time, it looked like the world was coming to an end. However, it did not. Those were extreme corrections which, thanks to sharp monetary policy and bargain hunting, allowed the markets to regain their footing and soar to new heights.
Where We Are Now
Following the election of Donald Trump as the once and future President of the United States and a Republican sweep of the Congress, the stock markets rallied from that day on through the end of the month (I would note that the rally continues into December). The S&P 500 (SPX) rallied about 5.7% to break through the 6,000 level for the first time in history. The NASDAQ 100 (NDX) added about 5.2% and eclipsed the 21,000 level.
I would like to point out that there is a convergence in the returns, albeit not perfectly, between the SPX and NDX. This is due to the fact that eight of the top stock components in the SPX comprise the top ten stocks in the NDX. While I do not have that data, I would be willing to say that a decade ago, that would not be the case. So, indexing is no longer worth paying for. It’s all about stock selection. Furthermore, the Dow Jones Industrials (INDU), which has been irrelevant for decades is now for all intents and purposes a financial dinosaur.
The two stocks in the SPX top 10 which are not in the NDX top 10 are Berkshire Hathaway Class B (BRK/B) and JP Morgan Chase (JPM). The top three in the SPX and NDX are Apple (AAPL), Nvidia (NVDA) and Microsoft (MSFT).
Where We Are Heading
I am still in the process of formulating my 2025 expectations. That will be presented in the first week of January as the annual “My Gut Feeling for 2025”. But here is a little taste: with the SPX rallying 20% for two consecutive years, barring any unforeseen December correction, what happens in Year 3 after two consecutive such years? We must go back to my database for the SPX which goes back to 1950 and run that query. Here are the results:
Please note that this analysis is on the SPX price return, not the SPX Total Return (SPXTR) which includes dividends. I do not have data for the SPXTR but eyeballing the SPX data, if we factor in assumed dividends, there would be two more instances of back-to-back 20% SPX returns:1975-76 followed by a decline of 11.5% and 1998-99 which was followed by a decline of 10.14%.
Now as we head down the stretch for 2024, I am less focused on trading and portfolio adjustments (why pay more taxes in 2024?) and am concentrating on annual client reviews. Clients should have received an email regarding how to set up for such meetings, and I urge them to take us up on that. If you have not received such an email, please contact Carly at carly@lakeviewasset.com to set up a meeting.
Additionally, we have been taking care of client RMDs (required minimum distributions) for IRAs. I suggest you contact one of us if you are required to take an RMD for this year and have not yet done so.
Lastly, please note that all text messages must be sent to our main line: (702) 749-9343 going forward.
Art Cashin
Wall Street lost a legend this week with the passing of Art Cashin. I met him on several occasions in my career on Wall Street. He was a genteel man who was a virtual encyclopedia of the New York Stock Exchange (NYSE) and Wall Street. I can still remember like it was yesterday when he described in detail being on the NYSE floor when President Kennedy was shot and killed. We will miss his participation of the annual tradition of singing of “Wait Till the Sun Shines, Nellie” live on the NYSE on the last trading day of the year. Rest in Peace, Art.
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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC were long JPM, AAPL, NVDA & MSFT, although positions may change at any time. The mention of a stock is not a recommendation and may not be a suitable investment for your individual situation.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, (LVAM) an investment advisor representative, specializing in high-net-worth private wealth management. LVAM is a separate entity of Osaic Advisory Services, LLC, a registered investment advisor.
For more information on investing with LakeView Asset Management, LLC call us at 702-749-9343 or request more information by clicking on the contact button on the top right-hand corner of the website or by emailing Scott at scott@lakeviewasset.com or Carly at carly@lakeviewasset.com. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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