The Week in Charts (11/13/24)

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The most important charts and themes in markets and investing…

1) Deja Vu All Over Again?

As Yogi Berra once said: “it’s like deja vu all over again.”

In 2016, the stock market surged higher after the election…

In 2020, the stock market surged higher after the election…

And in 2024, the stock market has surged higher after the election…

2) A Rally for the Ages

2024 is turning into a rally for the ages:

• The S&P 500 has already hit 51 all-time closing highs, the 7th most in history.

• At 6,001, the S&P 500 is now 600 points above above the highest 2024 year-end price target from Wall Street strategists and over 23% above the average target (4,861).

• This is the best start to a year for the S&P 500 since 1995 and 11th best in history.

• The S&P 500 has hit 12 100-point milestones in 2024, crossing above 6,000 last week for the first time.

3) Post-Election Winners and Losers

We’ve seen some wild post-election moves so far…

The Winners:

• Crypto. Bitcoin is up 28% since the election, surpassing its prior record from back in March and hitting 17 more $1,000-point milestones.

• Tesla is up 31% since the election and back in the $1 trillion market cap club for the first time since April 2022.

• Bank stocks surged higher after the election, widening their outperformance over the past year.

• Small Cap (Russell 2000) stocks have outperformed since the election and hit their first all-time high since November 2021.

• US Large Caps. The Dow crossed above 44,000 for the first time, its 7th 1,000-point milestone of the year.

• The US Dollar Index is nearing its highest level of the year.

The Losers:

• Long-Term Treasury Bonds are down as yields have risen to their highest level since early July.

• While US Stocks have rallied, International Stocks have moved lower, pushing the ratio of International to US down to another all-time low.

• While Bitcoin has gone parabolic, Gold has sold off. At $41 billion, the AUM of the largest Bitcoin ETF ($IBIT) has surged past the AUM of the Gold ETF from the same fund company ($IAU, $32 billion).

• Oil has moved lower and with it Gasoline prices. The national average Gas Price in the US has moved down to $3.08 per gallon, the lowest level since January.

• Chinese equities have moved lower since the election (-7%) and taken Emerging Markets down with them. The Ratio of EM to US stocks is now at a 25-year low and not far from an all-time low.

• With the uncertainty over the election removed, volatility has been crushed, with the $VIX moving from above 20 down to 14. This is the lowest level since July.

4) Easing Into a Melt-up

There were no surprises in the Fed announcement last week. As expected, the FOMC Committee voted unanimously to cut interest rates by 0.25%, bringing the Fed Funds Rate down to a new range of 4.50-4.75%.

The market is currently saying they will cut rates another 25 bps in December (to 4.25-4.50%), bringing the cumulative rate cuts this year up to 100 bps.

But continuing to ease at this pace in 2025 may prove more difficult, with the market now pricing in only 50 bps of additional rate cuts for the entire year.

5) Intel Out, Nvidia In

Nvidia was added to the Dow last week after gaining 2,770% over the past 5 years.

Who did it replace?

Intel, which was down 48% over the last 5 years.

5 years ago Intel had a market cap of $251 billion versus $128 billion for Nvidia.

Today, Intel’s market has fallen to $113 billion while Nvidia’s has surged to $3.65 trillion, making it the largest company in the world.

Does that mean Nvidia is the largest holding in the Dow?

No. The Dow is a bizarre index that uses share prices instead of market values to determine its weights.

So while Nvidia is the largest company in the Dow by market cap, its weighting based on its share price is just 2.1%, 21st largest among the 30 components.

6) Buffett Getting More Bearish?

Is Warren Buffett getting more bearish?

Judging by his actions, it certainly seems so.

Berkshire Hathaway’s Cash Pile has spiked to a record $325 billion, more than doubling over the past year. $35 billion of the $48 billion increase in cash during the 3rd quarter came from net stock sales with Berkshire continuing to sell its stakes in Apple and Bank of America.

Berkshire Hathaway is now holding over 28% of their Assets in Cash, the highest percentage since 2004. Its historical average cash position: 14%.

Why might the greatest value investor of all time be raising cash?

Higher valuations and the lack of compelling opportunities.

Berkshire’s largest holding, Apple, now trades at 37x earnings and 9x sales. Back when Berkshire first purchased the stock in 2016 it sold for just 10x earnings and 2x sales.

Overall US equity valuations continue to rise as well. The S&P 500’s CAPE Ratio has crossed above 38 for just the 3rd time in history and is now higher than 98% of historical valuations.

7) A Few Interesting Stats…

a) The Fed’s balance sheet is now at its lowest level since August 2020, down $2 trillion from its peak in April 2022. How much more QT is needed to unwind all of the QE from March 2020 through April 2022? $2.8 trillion.

b) The interest payments on US National Debt have spiked to a record $1.1 trillion annual rate, increasing 120% over the past 4 years.

c) The US Bond Market has now been in a drawdown for over 51 months, by far the longest in history.

d) The Average and Median 401(k) balance by age group…

e) 68 million Social Security beneficiaries will see a 2.5% cost of living adjustment beginning in January 2025. Benefit payments have jumped 22% over the past 4 years due to the spike in inflation, the biggest 4-year increase since 1982-85.

f) The maximum earnings subject to the Social Security Tax will move up to $176,100 in 2025, a 4.4% increase from 2024.

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The post The Week in Charts (11/13/24) appeared first on Charlie Bilello’s Blog.