“In the short run, the market is a voting machine.
In the long run, it is a weighing machine.”
The Week in Review
As we welcome the new year, full of predictions and prognostications of how to maximize our returns in 2024, it’s wise to revisit the words of Benjamin Graham, who through his voting/weighing machine quote reminds us that investing is a game for the ‘long run'. No doubt the new year will bring lots of ups and downs, threats and opportunities, as every year does. But always keep Graham’s words in mind as you formulate your investment decisions.
We ended 2023 on a tear, renewing hopes that the Santa Claus rally is something we can count on to eke a few extra dollars out of our portfolios before the calendar turns.
True to form, however, Mr. Market kicked off 2024 reminding us that we’re not truly in charge, and he did so by ending a 9-week S&P 500 winning streak.
9-Week S&P500 winning Streak ended in January.
For the first time since late October, we saw weekly declines in the major North American indices, led down by the Russell 200 Index, falling around 4%. The Nasdaq 100 wasn’t far behind, falling 3% for the week.
North American Markets
Economic data came out mixed during the week. The U.S. jobs numbers surprised on the upside, with non-farm payrolls adding 216,000 new jobs in December, the biggest monthly gain in three months and well above forecasts. On the other hand, employment in Canada was up a mere 100 jobs, down from the 25,000 jobs added a month earlier. More about these stories below.
We saw a bit of a rebound in the 10-year U.S. Treasury bond, which climbed back over 4%, reversing a three-week string of declines.
S&P 500 Weekly Overview
Week ending 1/5/24 | Market Cap >$100B
S&P TSX Weekly Overview
Week ending 1/5/24 | Market Cap >$5B
The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold. A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell. Always perform your own due diligence.
Week ending 1/5/24 | Most Overbought Stocks, based on 14-Day RSI
A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.
Week ending 1/5/24 | Most Oversold Stocks, based on 14-Day RSI
In this episode of Pulse:
The week’s most overbought and oversold stocks
Major Index Performance
Canada & U.S. Employment Reports
Apple Shares Down
Cellular Phone Prices
Short Sellers Hurt in 2023
Top Weekly Gainers and Losers
Tesla Loses Crown
Canadian’s Stop Cooking at Home
Pepsi Pulled from Shelves in Europe
Jobs: A Tale of Two Countries
Canada’s job market ended 2023 with a whimper, with the country adding a mere 100 net new jobs in December, a huge disappointment following a robust gain of 25,000 in new jobs in November. Estimates were that we’d see around 13,500 new jobs in the last month of the year, so to end up virtually flat came as a surprise.
“Today’s sluggish results suggest that the softening seen in the broader economy is finally catching up with the job market.”
Douglas Porter | Bank of Montreal Chief Economist
The unemployment rate remained at 5.80%, the same as November, and ended the year up from the 5.00% we started with back in January.
anada Unemployment Rate | December 2023
In stark contrast to our domestic jobs picture, U.S. non-farm payrolls grew 216,000, far exceeding the consensus forecast of 170,000.
U.S. Non Farm Payrolls | December 2023
It’s not expected that either of these reports will have a material affect on either the Bank of Canada’s or the U.S. Federal Reserve’s interest rate decisions in 2024. In both cases, it’s expected that we’ll see a series of rate cuts beginning as early as March, according to some economists.
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One Bad Apple
It was a tough week for the world’s largest company, Apple, with not one, but two downgrades.
First off, Barclays cut their rating to underweight on January 2nd, and that was followed two days later by Piper Sandler & Co’s Harsh Kumar cutting his rating to neutral.
“We are concerned about handset inventories. Growth rates have peaked for unit sales.”
Harsh Kumar | Piper Sandler & Co
In light of these downgrades, the markets have taken around 6% off Apple’s share price in the first week of trading in 2024. As shown in the Oversold table at the beginning of this newsletter, shares are now trading with an RSI of 28.79, below the 30 (oversold) level.
With a market capitalization of just over $2.8 Trillion, Apple is still ranked as the world’s largest company by Market Cap. Microsoft is nipping at its heels though, currently trading with a valuation of $2.73 Trillion.
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Cell Costs Climbing
Both Rogers and Bell are expected to raise the costs of their wireless plans early this year, with Rogers recently announcing an average increase of $5 month effective with bills issued after January 17th. Price hikes, however, could be as high as $9 per month in some cases.
The changes won’t apply to those customers who have existing contracts, but the price hikes may certainly inspire those who aren’t on a plan to make the change and lock in contracts now.
"We are committed to delivering mobile and residential services with the highest standard of quality and reliability to bring our customers the best network experience.”
In an earlier report, several Bell customers have been notified that they will also see rate hikes effective February 2024, in the range of $6.00 per month.
Brandon has just posted his latest YouTube video highlighting his favourite investment ideas, stocks and ETFs to buy in Canada! Check it out clicking on this link now!
How Do They Scrape By?
In less time than you could prepare your 2024 personal spending budget, the wealthiest among us have already made more money than the average Canadian will make all year.
According to “Canada’s new gilded age” report, just 8 hours into the new year Canada’s 100 highest-paid CEOs will already have made $60,600, earning an average of $7,162 an hour.
Do the math and you’ll see the richest CEOs earnings 246 times more than the average worker.
Ok, so your coffee break’s over. Back to work.
HIGH RISK INVESTING
Short Sellers take a Bath
According to data compiled by S3 Partners Research, U.S. and Canadian investors who bet against the markets in 2023 saw paper losses of $194.9 billion in the year.
2023 was an “exceedingly difficult year” for short sellers.
S3 Partners Research
With lots of economic headwinds facing the markets when 2023 kicked off, aggressive investors took large bets against stocks. Interest rates were still rising, inflation was still high, and the general consensus was that we’d see a recession at some point during the year. The only question was how harsh it would be. As it turns out, that never materialized.
With the Magnificent 7 leading the way, bets against companies like Tesla, Nvidia, Apple, Meta, Microsoft and Amazon resulted in huge losses for short sellers.
Personally, I’ve never sold a stock short, and have no plans to do so. Sure, as Michael Burry proved, you can make a ton of money if you make the right call, but the risk on the downside is significant. But unless you’ve got very (and I mean very) deep pockets, this is a sport better left to the pros.
Top 10 Weekly Gainers
TSX, NYSE & Nasdaq Exchanges | Market Cap >$10B
Top 10 Weekly Losers
TSX, NYSE & Nasdaq Exchanges | Market Cap >$10B
In Other News this Week
🚘 Tesla has lost its crown as the world’s top EV maker, with Chinese vehicle maker BYD outselling Tesla in the final quarter of 2023. Full Story
🍳 We hear a lot of complaints about the high costs of food, however we may be seeing the first generation of Canadians who don’t cook at home, further exacerbating the problem. Read More
🥤 Stores in Europe are pulling Pepsi products of their shelves to push back against “unacceptable price increases”. Learn More