Santa was a “No show” – But it was not a bad year, new themes set to play out

• It’s a new year….2024 was not a disaster by any measure.

• Stay focused – the issues have not changed.

• XI Xi starts the year with a ‘warning’

• Quantum Computing ‘takes off’

• Try the Shepherds Pie.

Happy new year! The volatility continued into year end for stocks, Santa took a break – the S&P closed out the year at 5881- off 2.6% from all time high - but in the end – it was a good year. For the day – the Dow was down 30 pts, the S&P down 25, the Nasdaq lost 176 pts, the Russell added 3 pts, the Transports added 9 while the Equal Weighted S&P added 10 pts.

For the year – it would be hard to say you are disappointed if you had a well-balanced, diversified portfolio – Why? Because the The Dow added 12%, the S&P +23%, Nasdaq closed out the year +30%, the Russell +11%, the Transports were flat while the Equal Weighted S&P added 11%.

For the record here is how the 11 sectors performed: Communications led the pack + 38%, Info Tech + 35%, Consumer Discretionary + 29%, Financials + 28%, Utilities (the most boring sector there is) added 19%, Industrials + 15%, Consumer Staples + 12%, Energy +2%, Real Estate + 1.7%, Healthcare + 1% and Basic Materials ended the year -1.8%.

There were clear individual ‘large cap’ standouts in the crowd that excited investors: PLTR + 257%, VST + 257%, NVDA + 171%, UAL +135%, GEV +131%. And there were some ‘new’ names in the small cap space that are becoming increasingly interesting while remaining very volatile…And those include names in the Quantum Computing space – a sector that rose to prominence late in the year but are worth a look. Investors can easily access the space using the Defiance ETF – QTUM +55% in 2024 – individual names within include RGTI +1800%, IONQ +275%, QUBT +1750% - along with a handful of others, with all that ‘action’ happening in the last 6 weeks of the year as the chatter grew more mainstream.

I was on the Big Money Show on Fox Business on Tuesday – we discussed this – click on the link to see my commentary.

What else was interesting?

Bitcoin was a winner – gaining 150% to end the year in the $95k range while Ethereum gained 53% ending the year in the $3500 range. Both are expected to surge again this year as enthusiasts are excited about the potential opportunity that the new administration presents. Gold rallied 21% on the back of rising geo-political tensions, inflation worries and a lot of central bank buying. Calls for $3000 gold by year end 2025 are all the rage….it will be the same factors that drive the action.

Bonds got crushed as yields surged. The TLT lost 11%, the TLH gave back 7.4% while the AGG was the ‘bond winner’ losing only 2% on the year. This morning, we woke up to 3 and 6 month yields of 4.2% and 4.1% respectively. The 2 yr is yielding 4.2%, the 10 yr is yielding 4.53% while the 30-yr bond is yielding 4.75%. 12 month CD rates are paying you 4.75%. 30 Yr mortgage rates are back above 7%.

Oil ended t. year at $71.72 – essentially up 3% after trading as low as $64 and as high as $80. Expectations for oil in 2025 are for it to remain relatively stable – the EIA expects US crude to average $71/barrel. The street argument is that demand is waning – My argument is that demand is just fine, it’s an ‘oversupply’ issue. And it’s the NON-OPEC suppliers that are causing the Saudi’s so have heartburn. And if Trump keeps his promise – the US will become the swing producer once again and that will keep a lid on oil prices.

US futures are UP this morning as the excitement for the new year takes root. Dow futures are up 215 pts, the S&P’s up 38, the Nasdaq ahead by 175 and the Russell is ahead by 15 pts. It’s the ‘final two trading days of the 2024 holiday season where many participants are still away from their desks. Remember – volumes will remain muted, and moves will be exaggerated as the action will be driven by algo’s.

Remember what I told you on Tuesday…. The algo’s are programmed to react to breaches in price action. When they breach those prices to the downside – the selling intensifies sending stocks even lower…. and then the same is true when they recognize that the selling created opportunities (think bargains) and then they shift to taking stocks higher again…. creating lots of action for the day traders and lots of noise for the long-term investor.

Eco data today – although don’t expect it to be a market mover includes Mortgage apps, Initial Jobless Claims oof 221k, Continuing Claims of 1.89 mil, S&P US Manufacturing PMI – expected to be 48.3 (contractionary) and m/m Construction Spending – expected to be +0.3%. The data becomes important again next week with the release of the December NFP report on Friday the 10th.

Look – it is a new year, we are getting a new administration, but the same issues exist – they don’t just go away because the calendar changed. Concerns over the economy, concerns over rising inflation, concerns about what JJ is going to do, concerns about rising geo-political tensions that now include a new shot across the bow. Yesterday – China’s Xi Xi – reminded the world that no one is going to stop the ‘reunification’ of Taiwan into the Greater China - an issue that I discuss often and one that could and would create more global disruption. Don’t go building your portfolio on the politics – build it on long term analysis that includes strong fundamentals and strong investment theses. Take advantage of price dislocations created by the ‘herd mentality’ – only changing your investments when the thesis changes.

European markets are all lower…. France getting whacked again…. down 1.2% - recall France was the underperformer in 2024. Lots of political unrest – both in France and now in Germany. (Germany dissolved their Assembly last week and is looking for snap elections in February) and that appears to be more of an issue for the Eurozone than the French unrest.

The S&P starts the year at 5,881 - I am not convinced that the pullback is over…...I still think there is more work to do for markets…. but that will be the opportunity for the long-term investor. Earnings season begins on January 15th with the release of Big Bank earnings from JPM, C, BK, GS, WFC.

We have more eco data to consider and another round of inflation data due out on the 14th and 15th and then we have the January FOMC meeting at month end….

Shepherd’s Pie

This is a great, easy ‘comfort food’ dish. One that is good on a cold night as it contains everything you need in one dish. Meat, veggies and mashed potatoes. So, light the fire and curl up on the couch…

For this you need: Carrots, onions, olive oil, ground beef (chuck), butter, frozen peas, canned corn, tomato paste and a shot of red wine (optional).

Sauté chopped carrots and onions in some olive oil until soft – 8 / 10 mins… add ground beef – but use ground chuck – as it has a higher fat content and gives the pie a robust juicy flavor. Season with S&P. Once all browned and cooked nicely – drain any of the fat that has accumulated. Add about 2 tablespoons of butter, frozen peas and canned corn. Mix well. Next add tomato paste (Contadina always works nicely) and a shot of red wine – let simmer for a bit. (maybe 12 / 15 mins). Turn off the burner and get a baking dish. Grease with butter and add the mixture. Top this off with homemade mashed potatoes and sprinkle some grated parmigiana cheese on top. Put in the oven and bake for about 20 mins or until the mashed has a golden-brown tint.

When done – remove from oven – and let stand for 5 mins. Serve on warmed plates. Gather the family – put on a nice family movie and enjoy your time together.