Market Commentary from Atticus Wealth Management
February 2024 – 1st Quarter
What History Says About Markets Reaching All-Time Highs
Fyodor Dostoevsky once insightfully observed that humans tend to dwell more on their troubles than on their joys, suggesting a pervasive inclination to view the glass as half empty. This perspective resonates profoundly with the sentiments of many investors towards the economy and financial markets, particularly in recent times. Amidst the ebbs and flows of recessions and bull markets, investors often grapple with fears that either the downturns will persist indefinitely or the recoveries will be fleeting. This apprehension can make it challenging to adhere to long-term financial strategies, despite historical evidence suggesting resilience over time. In the current robust market climate, maintaining focus and commitment to investment goals is paramount.
1 The Market has Achieved Several New All-Time Highs this Year
The stock market has notched several record-breaking highs this year, following a vigorous bull market recovery. The S&P 500 and Dow Jones Industrial Average have ascended above their early 2022 peaks. While this upward trajectory is encouraging for investors, it also prompts reflections on whether the market’s rapid ascent might be overly exuberant, especially considering the recessionary fears and concerns over swift Federal Reserve rate hikes that dominated discussions just a year prior. In navigating these waters, investors should bear in mind three critical considerations.
Firstly, achieving new all-time highs is a natural occurrence in bull markets, reflecting the market’s inherent long-term growth trend. Historical data from 2013 to 2021 illustrates that reaching new highs is a common feature of market cycles, with the S&P 500 marking an average of 38 new peaks annually during this period. Therefore, these milestones should not inherently provoke anxiety about impending market downturns.
2 The Economy Grew at a Healthy Pace in 2023
Secondly, the market’s performance should be viewed through the lens of the broader business cycle and underlying economic indicators rather than isolated price movements. Recent economic data, such as the unexpectedly robust GDP growth rate of 3.3% for Q4 2023, underscores the economy’s strength and its implications for market dynamics. This growth, driven by various sectors including technology, industrials, financials, and healthcare, highlights the importance of focusing on fundamental economic health over short-term market fluctuations.
3 The Market Rewards Persistence
Lastly, historical patterns caution against waiting for market corrections before investing, as this strategy often leads to missed opportunities. Data on the opportunity costs associated with waiting for market pullbacks demonstrates that staying invested tends to yield better outcomes than attempting to time the market. This approach also o”ers the added benefit of peace of mind from having a consistent investment strategy.
4 The Bottom Line
Despite the natural human inclination to focus on potential negatives, particularly in times of market prosperity, it’s crucial to resist making impulsive decisions based on transient news or market levels. Instead, investors should concentrate on maintaining a well-diversified portfolio to navigate through market volatility and capitalize on the underlying economic growth driving the current market highs. Ultimately, the key to success in investing lies in staying engaged and committed to one’s financial objectives, undeterred by the inevitable fluctuations of the market landscape.
5 Looking Ahead
Atticus’ market analysis paints a picture of mixed signals. In the near term, there’s a hint that the US stock market may be on the brink of a minor, corrective pullback. This is based on a variety of factors: inconsistent market indicators, a rise in market uncertainty as shown by the CBOE Volatility Index (VIX), reduced trading activity, the traditionally challenging month of February, overly positive investor outlook, and signs that the S&P 500 might be at a near-term peak.
However, the view changes when we look further ahead. Atticus maintains a positive stance for the medium term, supported by indicators that have been bullish since November 2nd. This confidence largely comes from the impressive performance of major technology stocks, especially those in the Artificial Intelligence sector, which have pushed the market to new heights. Even though there’s an acknowledgment of the possibility for a market correction, it would take a substantial fall below a key support point around an S&P 500 level of 4800 to truly signal a downturn.
For now, the approach is one of caution in the short term. But, looking ahead, the strategy remains upbeat, anticipating that the market will continue its upward trajectory in the medium term.
ABOUT ATTICUS WEALTH MANAGEMENT
Atticus Wealth Management is a fee-only private client and institutional wealth management firm servicing clients across the United States. Our curated team of investment managers and financial planners aims to provide an excellent investment experience through the highest degree of dedication.
THE VIEW FROM THE TOP
Market Commentary from Atticus Wealth Management
February 2024 – 1st Quarter
What History Says About Markets Reaching All-Time Highs
Fyodor Dostoevsky once insightfully observed that humans tend to dwell more on their troubles than on their joys, suggesting a pervasive inclination to view the glass as half empty. This perspective resonates profoundly with the sentiments of many investors towards the economy and financial markets, particularly in recent times. Amidst the ebbs and flows of recessions and bull markets, investors often grapple with fears that either the downturns will persist indefinitely or the recoveries will be fleeting. This apprehension can make it challenging to adhere to long-term financial strategies, despite historical evidence suggesting resilience over time. In the current robust market climate, maintaining focus and commitment to investment goals is paramount.
1 The Market has Achieved Several New All-Time Highs this Year
The stock market has notched several record-breaking highs this year, following a vigorous bull market recovery. The S&P 500 and Dow Jones Industrial Average have ascended above their early 2022 peaks. While this upward trajectory is encouraging for investors, it also prompts reflections on whether the market’s rapid ascent might be overly exuberant, especially considering the recessionary fears and concerns over swift Federal Reserve rate hikes that dominated discussions just a year prior. In navigating these waters, investors should bear in mind three critical considerations.
Firstly, achieving new all-time highs is a natural occurrence in bull markets, reflecting the market’s inherent long-term growth trend. Historical data from 2013 to 2021 illustrates that reaching new highs is a common feature of market cycles, with the S&P 500 marking an average of 38 new peaks annually during this period. Therefore, these milestones should not inherently provoke anxiety about impending market downturns.
2 The Economy Grew at a Healthy Pace in 2023
Secondly, the market’s performance should be viewed through the lens of the broader business cycle and underlying economic indicators rather than isolated price movements. Recent economic data, such as the unexpectedly robust GDP growth rate of 3.3% for Q4 2023, underscores the economy’s strength and its implications for market dynamics. This growth, driven by various sectors including technology, industrials, financials, and healthcare, highlights the importance of focusing on fundamental economic health over short-term market fluctuations.
3 The Market Rewards Persistence
Lastly, historical patterns caution against waiting for market corrections before investing, as this strategy often leads to missed opportunities. Data on the opportunity costs associated with waiting for market pullbacks demonstrates that staying invested tends to yield better outcomes than attempting to time the market. This approach also o”ers the added benefit of peace of mind from having a consistent investment strategy.
4 The Bottom Line
Despite the natural human inclination to focus on potential negatives, particularly in times of market prosperity, it’s crucial to resist making impulsive decisions based on transient news or market levels. Instead, investors should concentrate on maintaining a well-diversified portfolio to navigate through market volatility and capitalize on the underlying economic growth driving the current market highs. Ultimately, the key to success in investing lies in staying engaged and committed to one’s financial objectives, undeterred by the inevitable fluctuations of the market landscape.
5 Looking Ahead
Atticus’ market analysis paints a picture of mixed signals. In the near term, there’s a hint that the US stock market may be on the brink of a minor, corrective pullback. This is based on a variety of factors: inconsistent market indicators, a rise in market uncertainty as shown by the CBOE Volatility Index (VIX), reduced trading activity, the traditionally challenging month of February, overly positive investor outlook, and signs that the S&P 500 might be at a near-term peak.
However, the view changes when we look further ahead. Atticus maintains a positive stance for the medium term, supported by indicators that have been bullish since November 2nd. This confidence largely comes from the impressive performance of major technology stocks, especially those in the Artificial Intelligence sector, which have pushed the market to new heights. Even though there’s an acknowledgment of the possibility for a market correction, it would take a substantial fall below a key support point around an S&P 500 level of 4800 to truly signal a downturn.
For now, the approach is one of caution in the short term. But, looking ahead, the strategy remains upbeat, anticipating that the market will continue its upward trajectory in the medium term.
ABOUT ATTICUS WEALTH MANAGEMENT
Atticus Wealth Management is a fee-only private client and institutional wealth management firm servicing clients across the United States. Our curated team of investment managers and financial planners aims to provide an excellent investment experience through the highest degree of dedication.
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