by Bryan Perry

February 13, 2024

For the first six weeks of 2024, the Dow (+2.6%), S&P 500 (+5.4%), and NASDAQ (+6.5%) have added to their 2023 gains, with the more concentrated NASDAQ 100 leading all averages, up over 9% and the Russell 2000 lagging with a small (-0.1%) loss year-to-date. Coming to the final third of earnings reporting season, we’ve seen generally decent results, but not that impressive. From the latest FactSet Earnings Insight published February 9, the market is expensive as far as historic measures of P/E ratios are concerned. The S&P now trades at 20.3 times earnings – above both the 5-and-10-year averages by a notable margin.

Key Metrics Bullet Points 1

(Source: FactSet Earnings Insight, February 9, 2024)

This lofty (20+) P/E ratio is due to euphoria surrounding AI and the out-performance of the Mag-7 and other mega-cap tech stocks and select blue chips in other sectors, like weight-loss drugs, a couple of key Industrials in the Dow, a couple of consumer discretionary leaders, the duopoly in credit card processors, and a couple of transportation stocks that have the ability to move the needle on index performance, so we are seeing a market riding high on strong consumer demand that accounts for 70% of U.S. GDP growth.

What we are really seeing are enormous pools of money pouring into a shrinking number of stocks traded on the Big Board since the late 1990s. Since Y2K, fewer companies are going public, M&A activity is robust and companies are buying their shares in record amounts. This trend has long-term implications, as it reduces market leadership to fewer big companies, and it increases potential volatility due to the higher concentration of market weightings. reported on February 10 that the total market cap of the U.S. stock market stood at $54.6 trillion, up from $31.8 trillion at the end of 2019, a gain of 41.2%, reflecting the influence the mighty NASDAQ 100, where the top 10 holdings make up 45.2% of total assets.

Here is the sector listing for last week, with technology clearly leading the way, and utilities in last place:


Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Stock Investors Seem to Ignore Rising Debt Levels at Elevated Interest Rates

Despite record issuance of debt by the U.S. government, the dollar has rallied 3% since the start of 2024. According to the U.S. Treasury, $776 billion in debt was issued in Q4 2024, the most the government has ever borrowed due to stimulus measures. The Treasury also announced its plan to borrow $776 billion this quarter and $816 billion next quarter at a time when the bond yields are elevated, driving up interest costs.

Both Bitcoin and gold are back in the high end of their respective ranges, which runs counter to a strong dollar, in theory. The 5-year chart of the Gold SPDR ETF (GLD), below, seemed to be creating a pattern of a major ascending pennant formation, with an inverse head-and-shoulders formation in late 2022. It’s my view that if shares of GLD break above $193, on volume, further significant upside will soon follow.

GLD Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

For the S&P 500 to rise another 10% to 5,500, it seems that more of the same kinds of headlines have to cross the tape – i.e., tamer inflation rates, decent employment data – even if it seems manipulated at times – plus the expectation of spring rate cuts, more affordable energy prices, a weak Chinese economy that keeps Xi Jinping preoccupied, limited U.S. exposure to wars in the Middle East and Ukraine, and some attention to the looming commercial real estate reset, and how much U.S. debt the world wants to own.

Investors that have focused too much on the macro risks have missed out on this great rally. The media sells fear and spends considerably less time on how well things are going for so many great companies, be they big-, mid- or small-cap. There are always plenty of long-side investment themes that buck a negative tape, but presidential election years, going back to 1928, deliver market rallies three times out of four.

The market is off to a good start for 2024, but there is still over $8.8 trillion in money on the sidelines (according to The Wall Street Journal article January 18, 2024), earning 5%+ in an economy that looks to have skirted a recession, which is the #1 key takeaway so far.

The great majority of those in the business of predicting the future of the U.S. economy, with their PhDs and seven-figure salaries, were dead wrong, at least so far. Given enough time, they may be right, but too many investors sat out this rally and are now wondering when to get in. If you buy the indexes now, you are just chasing momentum, but if you are stock picking, then there are attractive opportunities galore.

All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Bull Markets Climb a Wall of Worry

Income Mail by Bryan Perry
Key Market Takeaways in a Record-Setting Week

Growth Mail by Gary Alexander
Rapid U.S. GDP Growth is Disputed by Two Other Measures

Global Mail by Ivan Martchev
The Tape is Getting a Little Stretched

Sector Spotlight by Jason Bodner
Buy, Sell, … or Do Nothing?

View Full Archive
Read Past Issues Here

About The Author

Bryan Perry

Bryan Perry

Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.

Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry

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