9/16 – 9/20 Red Rock Update
Building Wealth in the Secular Bull Market to 2036
Stocks peak about every 36 years, most recently in 1929, 1965, and 2000. This 36-year cycle can be traced all the way back to the earliest eras in recorded human history, back to Pythagoras and Plato and the Axial Age around 600BC. After each peak comes a period of decline (punctuated by bear market rallies) that typically lasts 16 years or so. Then, with the excesses of the prior bull period wrung out and investors most depressed, the next 20-year run to the next market top can begin. We're in that Golden Age now – take advantage of it!
Howdy, Bull-Riders:
he Fed! The FED!! THE FED!!! Well, I was wrong and we're all glad that's over. For the first time in four years, Fed Chairman Powell cut the Fed funds rate. Instead of the quarter-point cut I expected, he bowed to Wall Street's demands for a half-point cut to a new range between 4.75% and 5.00%, down from a 23-year high of 5.25% to 5.50% Stocks immediately jumped, giving Wall Street a chance to sell or short before Wednesday's rug pull that gave traders a chance to reload for yesterday's rally.
The dot plot shows two additional quarter-point cuts this year followed by four more in 2025 and two more in 2026. I still believe future cuts will be smaller and come slower than most expect until an actual recession hits. But despite pessimistic views on global economic growth over the next 12 months (net 42% expect weaker, top chart), a soft landing is increasingly seen as the most likely outcome (bottom chart).
Fed officials now see the unemployment rate ending the year at 4.4%, up from their previous forecast of 4.0%. Inflation is seen ending the year at 2.6% and 2.2% in 2025. They think GDP will grow 2.0% instead of 2.1% this year and hold the 2% level for the next two years.
Powell cast the Fed's 50bps cut in non-scary terms: “We are committed to maintaining our economy’s strength. This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained.”
Market Outlook
The venerable Dow Jones Industrial Average closed over 42,000 for the first time ever. The S&P 500 added 2.1% since last Thursday to new record highs yesterday over 5700. The second half of September usually is bearish, so don't be surprised if Wall Street tries to run the Index all the way down to its 200-day moving average at 5194. That would be an almost 10% correction to shake loose some cheap stock for the fourth-quarter rally. The S&P is up 19.8% year-to-date.
The Nasdaq Composite gained 2.5% and also set intraday and closing records, in this case over 18,000. It is up 20.0% for the year. The SPDR S&P Biotech Exchange-Traded Fund (XBI) climbed 3.4% as the biotech recovery rolls on. It now is up a respectable 14.7% year-to-date. The small-cap Russell 2000 soared 5.8% as small-cap finally caught a bid and is up 11.1% in 2024.
This was fast:
h/t @chigrl
The fractal dimension is finally up to the 30 level, which usually marks the end of a trend. It has a long way to go in either time or price to get to 55 and be fully consolidated.
Economy
The Atlanta Fed's GDPNow model increased to +2.9% as both consumer spending and business investment stay strong. The Blur Chip economists are starting to raise their outlook, too, although they are lagging by a full percentage point.
Real core retail sales hit another record high in August. Consumer spending is supported by rising real wages.
h/t @ericwallerstein
Treasury bonds will rally in the short-term, but constantly rising government spending, financed by issuing more Treasury bonds, is a major problem that won't go away no matter who is President. Only the House of Representatives can fix this. 2024 Treasury bond issuance is expected to hit $1.9 trillion, higher than even the peak of the 2008 Great Financial Crisis levels.
h/t @GameofTrades_
Below The Paywall This Week
* * Supercycle incoming!
* * Mostly good news
* * Requires unprecedented scale, reach, and capital
* * A surprise appearance
* * If you're an ERP reseller, I'm sorry, but your time is over
* * EBITDA margins from 3.6% in 2023 to 23.9% in 2028 and 30.3% in 2030
* * How to un-throttle smartphone performance
* * At T minus 0 – literally the last second
* * Short-sellers about to get their faces ripped off
* * Supply deals in place with LNG exporters
* * Who continued to import gold during the entire rally?
* * A 1:1 bitcoin token on the ethereum and Base blockchains
Coming Events for Free Subscribers
All times below are EDT.
Sunday, September 22
Fall Equinox – 8:43am
Tuesday, September 24
Short Interest - After the close
Thursday, September 26
June quarter GDP - 8:300am – Third estimate
Friday, September 27
Personal Consumption Expenditures Index - 8:30am – The Fed's favorite inflation indicator
Golden Age Portfolio Update
After last week's 10.8% gain, this was another good week for the portfolio as it added 2.3%. We're now up an all-time high 39.8% with much more to come in the yearend rally. Let's dig in...and JOIN US!
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RIP JD Souther
Souther co-wrote some of the biggest hits for the Eagles, including Best of My Love, Heartache Tonight, and New Kid in Town.
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Want stunning image generation in the blink of an eye? Create accurate, high-quality images in under a second—completely free to use!
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Your Editor,
Paid subscriber or not, if you would click the ♥ symbol below it would really help me get the word out.