July 2024

  Yesterday, tech stocks dropped almost 3% and the route appears to be continuing today. Are we flirting with the beginning of a painful correction? Frequently, we have discussed how the Magnificent Seven has really been driving the S&P 500 to new heights, and yet many pundits, including Goldman Sachs' top analysts are warning us of an AI/tech bubble. One thing that a lot of pundits feel is weighing on markets and the ability of markets to go ever higher is what's called the "Trump Trade". We have mentioned many times that historically elections don't matter, but the markets are beginning to price in the assumption that Trump is going to win the election this year. Another item I'd like to talk about is stock valuations. Stocks have gone up since 2022 by an astonishing 70%. The market is up 28 of the last 37 weeks. It's the best run...

  The market is up 14% in the first half of 2024. What's driving these returns, and are they sustainable? We've had a very strong first half in the market, but it's also very concentrated.  60% of the gains come from five stocks, NVIDIA, Microsoft, Amazon, Meta, which is Facebook, and Apple. Notably missing is Tesla. Tesla is actually down 15% as strains of reality are finally beginning to impose their weight on the stock, and that's despite the recent Tesla rally. In the second quarter of this year, NVIDIA, Apple, and Microsoft made up 90% of the rally. In the same six month period, an equal weighted S&P 500 index. By equal weighted, we mean the same dollar value of each stock, not cap weighted. And an equal weighted S&P 500 index showed just a four percent gain. We need diversification to protect returns, to protect the portfolio. But...