Although we’re currently in a quiet period for the market, there’s no denying that 2024 has been very strong for stocks so far. Case in point:
- The S&P 500 broke to new highs.
- The NASDAQ hit a new record high.
- The Dow is less than 3% from cracking 40,000 for the first time ever.
And year-to-date, the S&P 500 and NASDAQ are up more than 7%, while the Dow is up more than 3%.
I should also add that the fourth-quarter earnings season blew analysts away. Back on January 26, the S&P 500 was estimated to post an earnings decline of 1.4% for the fourth quarter, according to FactSet. At that time, only 25% of S&P 500 companies had released results, and they were “subpar” by FactSet standards.
But now? Analysts are calling for an earnings growth rate of 4%. Of the 97% of S&P 500 companies that have released results, 73% topped analysts’ earnings estimates and 64% beat analysts’ revenue estimates.
The fact of the matter is we remain in an environment with easy year-over-year comparisons that will persist for the next couple quarters. Furthermore, the Federal Reserve should commence cutting key interest rates no later than its June Federal Open Market Committee (FOMC) meeting. In addition, the presidential election cycle is now in full swing. Historically, the stock market rallies right up to the November presidential election, and this year is following that historical pattern.
With so much going right for the stock market, you might be wondering… What could go wrong?
That’s the question I’ll answer in today’s Market 360. We’ll consider the three wildcards that could stall the market. I’ll also tell you what you need to do to protect your portfolio from a potential market pullback.
Global Tensions
The U.S. is clearly entangled in too many wars around the world, like Ukraine and the Middle East. It also has troops in Iraq, Syria, Somalia, Congo and other “hot spots.” The U.S. military is not yet in Guyana, even though Venezuela moved light tanks and missile-equipped patrol boats to the Guyana border. The Venezuelan Minister of Defense, Vladimir Padrino, accused Exxon Mobil Corporation (XOM) of relying on the American military for security.
Padrino on X (formerly Twitter) said, “They will receive a proportional, forceful response in the maritime area that rightfully belongs to Venezuela” and added, “The Essequibo is ours!” Exxon Mobil spokesperson, Michelle Gray, in a statement said, “We are not going anywhere – our focus remains on developing the resources efficiently and responsibly, per our agreement with the Guyanese government.” Obviously, the border dispute between Venezuela and Guyana just got more interesting!
State of the Union & Potential Government Shutdown
This presidential election cycle is odd, since the presidential candidates are not arguing about the economy. Instead, they’re focusing on border control, international aid, wars, and both food and energy inflation that hurts Americans who are living paycheck to paycheck. There is expected to be positive change for all these issues, regardless of who gets elected.
President Biden’s State of the Union speech tonight should be very interesting. President Biden is disgusted with Congress. Not only does he blame Congress for Ukraine’s recent defeat in the town of Avdiivka due to a lack of military aid, but he also fears a government shutdown. Congress controls federal spending, and it has been divided when it comes to setting a 2024 budget. Ironically, when government does not function properly, the private sector tends to prosper.
Federal Reserve Delays Rate Cuts
Our central bank has made it clear that it wants to see inflation drop to its 2% target before cutting key interest rates. Unfortunately, we’re not there yet. The latest consumer and wholesale inflation rose more than anticipated, igniting some fears that the Fed would postpone key interest rate cuts. The Personal Consumption Expenditures (PCE) price index, the Fed’s favorite inflation indicator, is also still above 2%. PCE is up 2.4% in the past 12 months. Core PCE, which excludes food and energy, is up 2.8% in the past 12 months. That was the largest monthly gain in a year for core PCE, so it’s much more likely that the Fed will wait until June to cut key interest rates (though I’d much prefer they cut in May).
How to Protect Your Portfolio
The bottom line: There are certainly events and developments that could cause stocks to hit the pause button on the recent rally, which is why you need to protect your portfolio if the market rally stalls.
The best way to do that is by investing in fundamentally superior stocks. The reality is fundamentally superior stocks bounce like fresh tennis balls, while fundamentally weak stocks fall like rocks.
If you’re not sure where to find the best fundamentally superior stocks, then look no further than my Growth Investor Buy Lists. My Growth Investor stocks surged more than 18% year-to-date, more than doubling the S&P 500’s gain. It’s clear to me that 2024 is off to an even stronger start than 1999, a year where I had multiple portfolios soar more than 100%. Needless to say, I’m proud that my Growth Investor Buy Lists hold the new market leaders and are well-positioned to prosper this year.
Last Friday, I recommended four new stocks – all of which boast stunning fundamentals and should climb higher this year. For the names and ticker symbols, join me at Growth Investor today. As soon as you sign up, you’ll have full access to my Buy Lists, as well as all my Monthly Issues, Weekly Updates, Special Market Podcasts – and more!
(Already a Growth Investor subscriber? Go here to log in to the members-only website.)
Sincerely,
Louis Navellier
Editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Exxon Mobil Corporation (XOM)
