by Bryan Perry
April 16, 2024
Russia’s full-scale invasion into Ukraine began on February 24, 2022. The day before Russian tanks rolled in, the S&P 500 was trading at 4,225. As of last Friday, it closed at 5,123, representing a 21% gain in 26 months. The NASDAQ was trading at 13,037 then, and closed last Friday at 16,175, representing a gain of 24%. The Dow has gained 14.6% during the same time, and the Russell 2000 has gained a smaller 3%.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Despite the war in Ukraine, the long recovery from CoVid, 11 rate hikes by the Federal Reserve, ongoing tensions and tariffs with China, a high-profile shuttering of five notable regional banks, a soaring Federal debt that is growing by $1 trillion every 100 days, a new spike in inflation, the collapse of FTX, and an ongoing crisis on our southern border, the Dow, S&P and NASDAQ all hit new all-time highs in early April.
Investors now have to contend with a whole new geopolitical risk that might involve direct U.S. military engagement, and I don’t know anyone outside the military-industrial complex (MIC) that wants another Iraq or Afghanistan situation that lasts several years. The MIC has never met a war they didn’t embrace, but with the annual interest on the national debt now surpassing the annual defense budget, ramping up for a regional war with Iran and other Arab nations would put tremendous pressure on the U.S. Treasury.
The direct attack by Israel on the Iranian consulate in Syria, and Iran’s response of directly firing 300 drones and rockets at Israel over the weekend, plainly shows that Iran’s proxy war with Israel is now a full-on direct war between the two countries. Israel is militarily far superior to Iran, so with Jordan and Iraq standing between Israel and Iran (see map), the war will be fought by air, with Hezbollah representing a northern land threat that Israel will eventually have to neutralize, just as it has been doing with Hamas to the south.
If the U.S. can defend, protect and supply its advanced military and intelligence lines to Israel, it is probable that Israel can finish the job of eliminating Hamas, taking out Hezbollah in due course, and neutralizing Iran’s military threat to a point of a mutual ceasefire, but not before Iran exhausts its abilities to conduct further ballistic missile attacks, cyber-attacks on key infrastructure, beefing up Hezbollah and using asymmetrical methods of warfare that include guerrilla tactics, sabotage and suicide bombers, as has been their practice in the past. Israel has shown the resolve and fortitude to withstand these threats for the last 75 years, and it goes without saying that the U.S. will stand shoulder-to-shoulder with Israel.
The Chances of a Recession are Now the Lowest in Two Years
The U.S. economy is demonstrating firm resilience. The weekend Wall Street Journal published a survey where the results were that “Business and academic economists lowered the chances of a recession within the next year to 29% from 39% in the January survey. That was the lowest probability since April 2022, when the chances of a recession were set at 28%. Just 10% of survey respondents think the economy will experience at least one quarter of negative growth over the next 12 months, down from 33% in January.”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Regardless of the optimism of this survey, conducted before Iran’s attack on Israel, market volatility is on the rise with the CBOE Volatility Index (VIX) hitting 19, its highest level for 2024 YTD. One can easily argue that with oil prices spiking, plus an unknown level of U.S. military engagement overseas, investors should consider staying focused on major themes that have led the market to date: Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IoT), Robotics and Automation, Cloud Computing (Data Centers), Edge Computing (processing data closer to devices), and Software-as-a-Service (SaaS).
Clearly, the technology-rich NASDAQ has been where the best performance has been registered, and by looking at the internal and external risks to the broader stock market, big-cap tech remains, in my view, the sector that will offer the best risk-adjusted returns for 2024. As the market landscape becomes more uneven, investors can look forward to what should be a strong first-quarter earnings season, rewarding those with the ability to initiate or add to positions in America’s greatest technology companies.
All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Global Implications of Rising Energy Prices
Income Mail by Bryan Perry
Factoring In the New War Realities
Growth Mail by Gary Alexander
How to Create a Roaring (2nd Half of the) Twenties
Global Mail by Ivan Martchev
Possible Rising Recriminations Face the Stock Market
Sector Spotlight by Jason Bodner
Is a Market Cataclysm Coming Soon?
View Full Archive
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Bryan Perry
SENIOR DIRECTOR
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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