Please Don’t Be Dumb Money…

The US stock market is experiencing a significant rally in 2024, with the S&P 500 up over 26%, reminiscent of the late 1990s bull market. Despite concerns about high valuations and potential recession, the current economic environment and Federal Reserve policies are similar to the late 1990s, potentially supporting continued market growth, though the possibility of inflation rising and a potential market correction remains.

High Stock Market Valuation

• 00:00:00 The US stock market has seen a significant inflow of money into ETFs, reaching $150 billion, a level only seen once in the last decade. The S&P 500 is experiencing a record advance, exceeding 26% in 2024, while the PE ratio is at a level only seen once in the late 1990s. This high PE ratio indicates that the stock market's current pricing is in the 90th percentile of the last 40 years, and many analysts consider it an ‘irrational’ or ‘irrationally exuberant’ market.

Recession Possibility

• 00:02:39 The biggest risk to the stock market is considered to be a potential recession, which can significantly decrease economic growth and impact stock prices. The US job market is being closely monitored as a key indicator, with initial jobless claims recently declining after being relatively stable for a year. The yield curve has historically preceded a rise in jobless claims, suggesting a potential increase in claims soon.

Federal Reserve Policies

• 00:04:12 The Federal Reserve has kept interest rates stable and even slightly lowered them since mid-2023, similar to the late 1990s. This stability in interest rates, coupled with stable economic growth, is fueling excitement among stock market investors. The Fed's actions in the 1990s were supported by a decline in inflation, and a similar pattern is being observed today, although a recent slight uptick in inflation has raised concerns about a potential rate hike.

Inflation and Inflation Expectations

• 00:04:41 Core inflation has decreased substantially over the past couple of years, allowing the Fed to maintain its current policies. However, there has been a minor increase in inflation recently, triggering anxieties about a potential interest rate increase by the Federal Reserve. Based on historical patterns, temporary inflation spikes haven't derailed the overall downward trend in inflation, leading some to believe that the current bull market may continue.

Diversified Trading Portfolio

• 00:06:17 The presenter’s trading portfolio is heavily diversified, with positions in cryptocurrencies, Turkish, Malaysian, and Chinese stocks, as well as a uranium miner, NXE. The US utility sector is highlighted as one of the few reasonably priced parts of the US market, offering attractive technicals. The presenter’s 2024 trading results are 68% winning trades and 36% losing trades and clients are encouraged to take advantage of a Black Friday discount on their trading strategy.