“The bubble is about to pop”, right? After years of the constant drumbeat about an “inevitable” recession, the market is sitting near record highs again. But for those paying attention, the mood under the surface feels different. The leadership baton is being transferred …not toward the headline-making names that powered the last leg of the bull run, but toward the quiet, defensive corners of the market: utilities, healthcare, and consumer staples. The kinds of stocks you buy when growth gets wobbly and investors start seeking shelter.
And yet, despite the sector rotation, the broader indexes remain firm. It’s almost as if you’re daring us to overthink it.
One of our favorite recurring themes here at Dear Mr. Market is what we like to call the “Broken Clock Club” — the group of perma-bears, doomcasters, and media pundits who reliably forecast financial catastrophe year after year. Like a broken clock, they’re eventually right… but for all the wrong reasons and far too late to be of any use to investors.
Let’s rewind to December 2023. Headlines were ablaze with bold predictions of economic calamity. Chief among them was the infamous economist Harry Dent, who warned of a 1929-style market crash hitting in early 2024. (click here to review that article that grabbed a lot of nervous eyeballs back then). Dent’s call wasn’t exactly an outlier; it echoed a chorus of dire predictions centered on Fed policy, inflation hangovers, geopolitical instability, commercial real estate defaults, and consumer weakness.
Yet here we are, approaching mid-2025, with the S&P 500 not only above its December 2023 levels, but clawing its way back and approaching highs throughout the first half of this year. What gives?
Ah, Mr. Market, you’ve never been one for subtlety, have you? We’ve all grown accustomed to your erratic behavior, but these past few weeks, you’ve outdone yourself. The dizzying heights we’ve climbed recently have turned into a sharp, gut-wrenching descent. It’s like we were steadily walking up the stairs, only to realize we were stepping into an elevator shaft, and now gravity is having its way with us.
The Stairs Up: Slow, Steady, and Full of Hope
For the past year, we’ve been witnessing a remarkable climb in the market. Fueled by optimism, the scent of economic recovery was in the air. Tech stocks were soaring, companies were beating earnings expectations, and the Fed’s steady (or perhaps stubborn) hand reassured us that we were on fairly solid ground. Like the patient climb of a seasoned mountaineer, each step forward felt measured, deliberate. Investors were content, seeing their portfolios grow incrementally with each passing day.
If your alma mater or favorite college team did not make the tournament on Selection Sunday, we’ve got another option for you!
Even if you don’t like or follow college basketball, we think you’ll enjoy what we pioneered and have put together.
My Portfolio Guide, LLC was the first investment firm to publish a March Madness investing bracket where we share our picks and match them up against each other. We break down and assign each of the four “regions” with an asset class and then pick teams (stocks) that we think have the best chance at doing well relative to others.
Not only is this “exercise” a way for us to share our ideas from a macro perspective, but it offers a fun platform to dig into a couple specific investments and themes we are following or excited about in the year ahead.
Click here or below to see or enlarge the entire bracket for 2024.
Our Final Four Investing Bracket slots 48 positions against each other and we mainly want to show why we see one investment doing better than another over the course of the next year. One caveat to keep in mind is that while there are 48 total investments within our bracket, it does not mean we like them all; some are there for illustrative purposes or to discuss a certain theme playing out in the stock market. Lastly, the way these are initially “seeded” does not reflect our current confidence in them. For example, a #1 seeded investment could lose right out of the gate just as a #12 could potentially win it all. In other words, these investments (or “teams”) are ranked and seeded on a number of factors but one of the main drivers is how hot they recently performed within the past few months or recent year.
If you’re watching an NBA basketball game and you have one player to take a final shot to win the game, who do you choose? Like him or not the guy who has scored the second most points in the history of basketball is LeBron James and he has made 50.5% of all shots he’s ever taken. Let’s switch sports to much worse odds, like baseball, where the average hitter is around .250 for a batting average. Even the best the game has ever seen was the great Ty Cobb who hit .366 for his career. Speaking of winning or losing, the mecca of odds making is in Las Vegas of course, and if you’re ever interested in losing money, just know that on average you can come out with a winning blackjack hand only 42.4% of the time.
New year, fresh canvas, but pretty much the same problems….So what are the odds of the market going up, down, or sideways in 2024?
Can you imagine how you would be feeling if you had acted upon the advice from all the doom and gloomers the past year? How some of these financial “gurus” and economic pundits still have an audience is fascinating!?! Want to know why they still have a platform and hold many people’s attention?
Fear sells.
That’s it. Nothing more, nothing less. Normally we don’t run victory laps or spend any time patting ourselves on the back, but this year we’re going to be blunt. We’re going to remind people that if you listened to everyone and followed all the fearmongers your portfolio would be sitting in cash and you would have missed one of the better and least expected positive years ever. We’re not running around with rose colored glasses but if you listened and followed the steady hand of My Portfolio Guide, LLC this past year instead, you’re in a very decent spot and hopefully learned something for when (not if) this happens again.
The stock market WILL go down again…but it will also always eventually finish higher. Sure, 2022 was a dismal and quite frankly unprecedented rough year, and couple that with all the worrisome headlines of massive debt, inverted yield curves, geo-political issues etc., you would naturally be influenced to run for the hills. We were crystal clear that we thought, albeit not a popular opinion, this year would finish positive and we would see a strong Q4. We’ve held onto this stance even through a very negative late summer (August through October) where the market pulled back considerably.
Let’s first remind our readers again of who this “Mr. Market” character is. Our investment blog and star personality is in reference to Benjamin Graham’s metaphor in his book “The Intelligent Investor,” where he personifies the stock market as Mr. Market, an emotional and erratic character. Over the past few decades, rarely have we seen such unprecedented market action but also a total tug of war between emotions, volatility, politics, and who will win ; the bulls or the bears. If you’re in the camp of being scared, confused, or frustrated…you are definitely not alone.
It is with a sense of awe and intrigue that we find ourselves reflecting upon the first half of 2023. In the world of finance and investment, prognostications and predictions often hold sway, shaping the decisions of market participants. However, it seems that the experts and pundits who were convinced of an impending recession this year may have misjudged the situation. Indeed, we are witnessing what could be deemed as the most telegraphed recession that never happened, at least not yet.
Throughout the past year, a chorus of voices emerged, proclaiming that the global economy was teetering on the edge of a precipice. They cited various factors, including rising inflation, geopolitical tensions, and lingering effects of the pandemic, as harbingers of an impending economic downturn. The warnings were dire, and many investors began bracing themselves for the storm.
Yet, as the months unfold, the predicted recession has remains elusive. Economic indicators have displayed some resilience and even showed signs of strength in certain sectors. Employment numbers continued to improve, consumer spending remained robust, and corporate earnings surprised to the upside. It became evident that the narrative of a looming recession is not unfolding as expected.
So why did so many experts and pundits get it wrong? One could argue that the very nature of predictions is inherently flawed. The global economy is a complex system influenced by countless variables, and attempting to distill its trajectory into a neat forecast is a formidable challenge. The interconnectedness of markets, the intricate dance of supply and demand, and the psychological aspects of investor sentiment all contribute to the unpredictability of the economic landscape.
You’ve behaved fairly well after some insanely raucous behavior last year. You (the market) has actually surprised a lot of folks just barely six weeks into the year. While there is plenty of calendar left in 2023, we’re watching you and it’s simply interesting to see that half the room doesn’t trust your next move while the other half wants to… but still can’t!
The books are closed on 2022, and what a year it was! The past few years have brought the word “unprecedented” to a whole new level. Both stocks and bonds were down in 2022, which is extremely rare and actually only happened twice in the past 100 years! (1931 and 1969). We won’t rehash it all but it’s not just that stocks were down almost -20%, but rather that what was supposed to offset some of that drawdown, never did. Historically bonds have basically always mitigated some of the pain of stocks getting tattered but not last year. 10-year treasury bonds were also down -15% and if you want real pain, 30 year bonds got torched by almost -30%. Name a stretch in your lifetime that was worse? Even if you’re 90 years old…you can’t.
So, enough about what has happened but our focus today is on how this plays with your mind. Below we’ve written a list of all the financial media talking heads as well as economic experts who are notpredicting a major recession. Look through our extensive list of names and what do you see?
Oh wait…there are no names listed. Feel free to comment below or let us know if we missed anyone but rarely have we ever seen such an environment of groupthink that it begs the question…what if they’re all wrong? There have been some major economists who in times past have really missed the mark but for some reason they still have a platform and the ability to get your attention. In a future article (or letter to you, Mr. Market) we’ll do a little report card on all the “gurus” who somehow still command everyone’s eyeballs but often can’t correctly guess how many fingers they have. OK…perhaps we’re laying it on a little thick here but hopefully you get the point. There is too much groupthink going on right now and it’s times like these when it pays to take a little bit of a contrarian view.
We wrapped up January in surprisingly good fashion (again…almost everyone got it wrong but we’ll modestly remind clients we did not). Couple that with what is the proverbial “Santa Claus” rally period and you have some interesting history to look at. When stocks are lower the year prior, but gained during the Santa Claus period and first five days of January…we’ve seen a market average +27% the next year. Could it happen this time? Maybe not to that extent but if it doesn’t it will be the first time ever it didn’t at least go higher (nine for nine prior).
Now nobody said it would be smooth sailing (it rarely is). Expect a bit of a cooling down period as we now digest Q4 earnings season until month end. It also happens to be seasonally be a time for a natural pause or break with the back half of February being historically weak.
Regardless, barring some major unexpected calamity, this likely pause in the markets is a perfect opportunity to not only catch your breath (with Mr. Market) but also take a few chips off the table in areas you’ve been wishing you had earlier. For example, most people who had way too much tech on the way up got slaughtered in 2022 with the Nasdaq peeling off -33%. Now that we’ve seen a nice bump in tech stocks to start the year, why not sell some and reallocate to another area?
If you read the recent quarterly newsletter from My Portfolio Guide, LLC, you’ll note the areas we still like. Commodities are down to start the year…what a great place to be building a hedge if you missed their run-up prior. Along those same lines, what also helped our model portfolios last year (relative to what most people had outside of stocks and bonds) was gold. The dollar will retreat some more (unhitching the trailer) so we couldn’t be more bullish on gold being a key component in this environment. One more area that has slumped a bit to start the year are oil stocks (another rare bright spot in 2022). In typical human and emotional fashion, people somehow don’t want single digit multiple (i.e. cheap!) stocks with high yielding dividends. What’s not to like?!? Even Joe Biden told us earlier this week during the State of the Union that we’ll need oil for at least another 10 years…
Lastly, if you’re in the mood on making bets….Here’s a tip for all those watching the Super Bowl this Sunday. If you don’t have a dog in the hunt and are simply “hoping for a good game”…change your tune right now; you should want a blowout (perhaps not for entertainment value but for the market). In years when there is a single digit win during the Super Bowl the market only averages +5% and higher less than 60% of the time. However, on years with double digit margins of victory the market averages +11% and a 79% chance of going higher.
As silly as the “Super Bowl Indicator” is by the way, we did write about it last year (click here) and true to form…perhaps that’s why the market got drilled (kidding!). The Eagles are slight favorites but if you’re just an investment geek and want to root for a team…the football Gods all say the Chiefs need to win and ideally by 10 points or more. It likely won’t happen so enjoy the game and those expensive commercials. By the way, they used to cost advertisers a cool $1 million a few years ago for a primetime spot but are now upwards of $7 million! (and we have the gall to complain about $7 eggs?!?)
Aside from extending our warmest wishes to you for a Happy Thanksgiving, we want to remind you that there is something else happening this time of year. We’re entering the strongest part of the year for the stock market as well as one that historically has the best chance to surprise everyone to the upside now that the midterm elections have passed.
Dear Mr. Market: 