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Let the good times roll!

A good market just got better. A petering rally has been reinvigorated. And the good times may continue to roll through January.

In terms of the market, with the Federal Reserve signaling that the interest rate hiking cycle is over and that there may even be rate cuts in 2024 the bulls cheered this news as the S&P 500 gained 2.5% last week, the Dow rallied 2.9%, and the Nasdaq added 2.85%.

The new year is starting with big momentum. The S&P 500 had a torrid late-year rally where it soared about 16% between late October and the end of the year. Stocks closed out the year with nine straight up weeks, the longest streak since 2004.

The final numbers are in. And they’re impressive.

After a bear market in 2022, the market indexes came back sharply in 2023. That’s not unusual. Prior to last year, there had been nine years of negative S&P 500 returns since 1980. Seven of those down years were followed by up years, and four of those seven up years posted returns of 20% or higher. The market doesn’t usually stay beaten down for long.

The Magnificent Seven stocks had a phenomenal run in 2023 that pushed the S&P and Nasdaq back near all-time highs. What does 2024 have in store?

WHAT TO DO NOW: Remain bullish, but take action where needed. The market (and especially growth stocks) have taken a beating in the first two days of the year—there are reasons to believe this is partly due to seasonal shenanigans, so we’re not overreacting, but we’re also not holding and hoping. In the Model Portfolio, we’ll sell half of DraftKings (DKNG), which is our weakest stock, and place Duolingo (DUOL) on Hold, leaving us with around 25% in cash. We do see some potential buys setting up, but we’ll hold the cash for now and see if growth stocks (and the market) can find support.

In this week’s video, Mike Cintolo talks about the market’s under-the-surface improvement that he’s seeing; no indicators have changed, which will need to happen for him to extend his line in a big way, but there’s no question most stuff has seen improvement and more stocks are beginning to act properly. Mike did a little buying this week and is hoping to add more should the market be able to build on the recent action.

In this week’s video, Mike Cintolo talks about the market’s under-the-surface improvement that he’s seeing; no indicators have changed, which will need to happen for him to extend his line in a big way, but there’s no question most stuff has seen improvement and more stocks are beginning to act properly. Mike did a little buying this week and is hoping to add more should the market be able to build on the recent action.

Small caps are having a very nice week as a lot of rate-sensitive areas of the market zoom higher following the Fed’s meeting and Jerome Powell’s press conference yesterday.

I’ve been saying I think small caps are very attractive lately, so the directional move here isn’t a surprise, though the pace of this week’s gains is rather eye opening. The S&P 600 Small Cap index is up about 7% over the last two days through midday Thursday!

There were no earnings reports or ratings changes this week.

This week Chris and Brad talk about the latest Chinese GDP numbers and whether it’s safe to invest in China, Tesla’s earnings release, and what they’re seeing with Regional banks now that they’re reporting. After that, they break down FAANG stocks, their popular ascent as market shorthand, and whether Microsoft is “sexy” enough to sit at the cool kids’ table.

The big events this week were the November inflation report and the Fed’s meeting, and both (especially the latter) were very pleasing to the market—the fact that the Fed is forecasting three rate cuts next year tells us at the very least that the rate hike cycle is almost surely over, which helped stocks and bonds rally nicely. As of this morning, big-cap indexes are up about 2.5% on the week, while small- and mid-cap indexes are up more than 5%.

Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.

The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.

The Fed’s actions (holding rates steady) and words (seeing three rate cuts next year) has supercharged the broad market this week, keeping our market timing indicators positive while most leaders are in fine shape. We will say that, with the good news out, sentiment has picked up, so we’re still content to move gradually and pick our spots with new buying. Tonight, we’re filling out our position in one name while starting a half-sized stake in a new leader, leaving us with around one-quarter in cash.

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