Case for even STRONGER 2024 emerging. Lunar New Year starts 2/10 and 2024 is Year of the Dragon. Since 1871, S&P 500 up 13% median gain = 5,350. Since 1979, Russell 2000 outperforms 88% of time.

VIDEO: Chinese new year starts 2/10 and 2024 is the year of the Dragon.  Since 1871, equities do particularly well during the Dragon years, gaining 12%.  And small-caps outperform 88% of the time.

Please click below to watch our Macro Minute (duration: 4:04).

The S&P 500 touched 5,000 during Thursday’s session. While this is only a “round” number and does not bear true significance, we view this as a magnet level since the start of 2024. And now we will see how markets react around 5,000:

• The S&P 500 and global equities are in a broadening and strengthening bull market. This started in October 2022 and we think it is time for those skeptical to recognize that global stocks making new highs is a very big milestone. And the question we have is how equities behave after reaching 5,000.
• The Lunar New Year, or Chinese New Year, starts 2/10 this Saturday. And 2024 is the year of the Dragon. Dragon is pronounced “long” in Chinese (thanks Sean Farrell, our Digital Assets head, for pointing this out). And actually, the year of the Dragon lives up to its reputation:
  – since 1871, returns by lunar year
  – Dragon (2024) 12.7% median, 75% win-ratio SPY 0.14%
  – of the 12 Lunar years, only Rabbit is better (2023)
  – 12.7% implies S&P 500 5,350-5,400, so upside to our 5,200 case
• More interesting is the return of small-caps IWM 0.05%  in the year of the Dragon:
  – since 1979, relative returns vs S&P 500 by lunar year
  – Dragon (2024) +610bp median, 88% win-ratio
  – this supports our case for small-caps to outperform in 2024
• Perhaps more interesting, looking at the returns by zodiac for small caps:
  – since 1979, the years following Dragon
  – Dragon, Snake, Horse, Goat, Monkey, Rooster
  – are all great years for small-caps vs S&P 500
  – Relative: +880bp, +440bp, +1,800bp, +1,100bp, +430bp
  – See a pattern? We are entering a 6-year favorable period
• Why should small-caps outperform? The two strongest arguments for our thesis for small-caps are:
  First, Small-caps relative P/B vs S&P 500 is 44%
  – same as 1999 and that was the launch point of 12-year of gains
  – Lunar calendar sort of argues this
  Second, small-caps benefit from investor inflows into equities
  – as this broadens market participation
  – we see inflows broadening in 2024
• For the first time in 2024, weekly equity flows were positive at $5.6 billion. So roughly 6 weeks into 2024, and we finally see investor inflows. Weekly inflows totalled $5.6 billion partially reversing $25 billion of outlows so far. We expect investor inflows to turn positive 2024, reversing 2 consecutive years of outflows:
  – 2022 outflows: $54 billion
  – 2023 outflows: $112 billion
• One might wonder how stocks can rise if investors are liquidating stocks. Well, there are other factors. Companies buyback stock and thus represent demand. Moreover, hedge funds change their gross leverage and this represents changes in demand. Finally, DRIP, or dividend reinvestment plans also represent natural demand. Thus, in a year of negative flows for equities, large caps do better:
  – large-caps buyback stocks
  – large-caps pay dividends
  – hedge funds tend to buy large-caps
• The last 2 years that saw meaningful equity inflows are 2017 and 2021:
  – 2017 +$187 billion demand, S&P 500 rose +19%
  – 2021 +$295 billion demand, S&P 500 rose +28%
• Why should 2024 see demand rise for stocks? Easy:
  – Fed is dovish and ready to cut interest rates
  – Corporate profits are accelerating
  – ISM is turning up
  – Global equities hitting all-time highs
  – inflation is falling

Bottom line: The case for a stronger 2024 is emerging

Our base case for 2024 is looking too conservative at S&P 500 5,200. Likely, the upside is 5,400 to 5,500. Does this mean stocks have to rise there now?

• we do not think so
• we still see 5,000 as a critical level and will watch for how stocks act around this level
• our emerging concern is the uncertainty of how the Fed will determine when to cut rates
• we know for the full year this will not matter
• but for stocks between now and that point, investors might get anxious
• moreover, interest rates are still pushing higher, which is a headwind for stocks

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36 Granny Shot Ideas and 46 SMID Granny Shot Ideas: We performed our quarterly rebalance on 1/17. Full stock list here -> Click here

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Key incoming data February:

• 2/01 8:30am ET 4QP 2023 Nonfarm ProductivityMixed
• 2/01 9:45am ET S&P Global Manufacturing PMI January FinalTame
• 2/01 10am ET January ISM ManufacturingMixed
• 2/02 8:30am ET January Jobs Report Hot
• 2/02 10am ET: U. Mich. Sentiment and Inflation Expectation January FinalTame
• 2/05 9:45am ET S&P Global Services & Composite PMI January FinalTame
• 2/05 10am ET January ISM ServicesTame
• 2/07 9am ET Manheim Used Vehicle Index January Final
• 2/09 CPI Revisions
• 2/13 8:30am ET January CPI 
• 2/14 PPI Revisions
• 2/15 8:30am ET February Empire Manufacturing Survey 
• 2/15 8:30am ET February Philly Fed Business Outlook Survey
• 2/15 8:30am ET January Retail Sales Data
• 2/15 10am EST February NAHB Housing Market Index 
• 2/16 8:30am ET January PPI
• 2/16 8:30am ET February New York Fed Business Activity Survey
• 2/16 10am ET U. Mich. Sentiment and Inflation Expectation February Prelim
• 2/19 9am ET Manheim Used Vehicle Index February Mid-Month
• 2/21 2pm ET January FOMC Meeting Minutes
• 2/22 9:45am ET S&P Global PMI February Prelim 
• 2/26 9:30am ET February Dallas Fed Manufacturing Activity Survey
• 2/27 9am ET February S&P CoreLogic CS home price 
• 2/27 10am ET February Conference Board Consumer Confidence
• 2/28 8:30am ET 4QS 2023 GDP
• 2/29 8:30am ET January PCE

Key incoming data January:

• 1/02 9:45am ET S&P Global Manufacturing PMI December FinalMixed
• 1/03 10am ET December ISM ManufacturingTame
• 1/03 10am ET JOLTS Job Openings NovemberTame
• 1/03 2pm ET December FOMC Meeting MinutesTame
• 1/04 9:45am ET S&P Global Services & Composite PMI December FinalTame
• 1/05 8:30am ET December Jobs ReportMixed
• 1/05 10am ET December ISM ServicesTame
• 1/08 9am ET Manheim Used Vehicle Index December FinalTame
• 1/11 8:30am ET December CPIDetails Suggest Tame
• 1/12 8:30am ET December PPITame
• 1/16 8:30am ET January Empire Manufacturing SurveyTame
• 1/17 8:30am ET January New York Fed Business Activity SurveyTame
• 1/17 8:30am ET December Retail Sales DataStrong
• 1/17 9am ET Manheim Used Vehicle Index January Mid-MonthTame
• 1/17 10am EST January NAHB Housing Market IndexMixed
• 1/18 8:30am ET January Philly Fed Business Outlook SurveyTame
• 1/19 10am ET U. Mich. Sentiment and Inflation Expectation January PrelimTame
• 1/24 9:45am ET S&P Global PMI January PrelimMixed
• 1/25 8:30am ET 4QA 2023 GDPMixed
• 1/26 8:30am ET December PCETame
• 1/29 9:30am ET Dallas Fed January Manufacturing Activity SurveyTame
• 1/30 9am ET January S&P CoreLogic CS home priceTame
• 1/30 10am ET January Conference Board Consumer ConfidenceTame
• 1/30 10am ET JOLTS Job Openings DecemberMixed
• 1/31 2pm ET FOMC Rate DecisionTame

Key incoming data December

• 12/01 9:45am ET S&P Global Manufacturing PMI November FinalTame 
• 12/01 10am ET November ISM ManufacturingStrong 
• 12/05 9:45am ET S&P Global Services & Composite PMI November FinalStrong 
• 12/05 10am ET JOLTS Job Openings OctoberTame 
• 12/05 10am ET November ISM ServicesStrong 
• 12/06 8:30am ET 3QF 2023 Nonfarm ProductivityStrong 
• 12/07 9am ET Manheim Used Vehicle Index November FinalTame 
• 12/08 8:30am ET November Jobs ReportTame 
• 12/08 10am ET U. Mich. Sentiment and Inflation Expectation December PrelimTame 
• 12/12 8:30am ET November CPITame 
• 12/13 8:30am ET November PPITame
• 12/13 2pm ET FOMC Rate DecisionDovish
• 12/14 8:30am ET November Retail Sales DataTame
• 12/15 8:30am ET December Empire Manufacturing SurveyTame
• 12/15 9:45am ET S&P Global PMI December PrelimTame
• 12/18 8:30am ET December New York Fed Business Activity SurveyTame
• 12/18 10am ET December NAHB Housing Market IndexTame
• 12/19 9am ET Manheim Used Vehicle Index December Mid-MonthTame
• 12/20 10am ET December Conference Board Consumer ConfidenceTame
• 12/21 8:30am ET 3QT 2023 GDPMixed
• 12/21 8:30am ET December Philly Fed Business Outlook SurveyMixed
• 12/22 8:30am ET November PCE Tame
• 12/22 10am ET: U. Mich. Sentiment and Inflation Expectation December FinalTame
• 12/26 9am ET December S&P CoreLogic CS home priceTame
• 12/26 10:30am ET Dallas Fed December Manufacturing Activity Survey Tame
• 12/29 9:45am ET December Chicago PMI

Key incoming data November

• 11/01 9:45am ET S&P Global PMI October FinalTame 
• 11/01 10am ET JOLTS Job Openings SeptemberMixed
• 11/01 10am ET October ISM ManufacturingTame
• 11/01 10am ET Treasury 4Q23 Quarterly Refunding Press ConferenceTame
• 11/01 2pm ET FOMC Rate DecisionDovish
• 11/02 8:30am ET: 3Q23 Nonfarm ProductivityTame
• 11/03 8:30am ET October Jobs Report Tame
• 11/03 10am ET October ISM ServicesMixed
• 11/07 9am ET Manheim Used Vehicle Index October FinalTame
• 11/10 10am ET U. Mich. November prelim Sentiment and Inflation Expectation Hot
• 11/14 8:30am ET October CPI Tame
• 11/15 8:30am ET October PPI Tame
• 11/15 8:30am ET November Empire Manufacturing Survey Resilient
• 11/15 8:30am ET October Retail Sales DataResilient
• 11/16 8:30am ET November New York Fed Business Activity SurveyTame
• 11/16 8:30am ET November Philly Fed Business Outlook Survey Tame
• 11/16 10am ET November NAHB Housing Market Index Tame
• 11/17 9am ET Manheim Used Vehicle Index November Mid-MonthTame
• 11/21 2pm ET Nov FOMC Meeting MinutesTame
• 11/22 10am ET: U. Mich. November final Sentiment and Inflation ExpectationTame
• 11/24 9:45am ET S&P Global PMI November Prelim Mixed
• 11/27 10:30am ET Dallas Fed November Manufacturing Activity SurveyTame
• 11/28 9am ET November S&P CoreLogic CS home price Tame
• 11/28 10am ET November Conference Board Consumer ConfidenceTame
• 11/29 8:30am ET 3QS 2023 GDPStrong
• 11/29 2pm ET Fed Releases Beige BookTame
• 11/30 8:30am ET October PCETame

Key incoming data October

•  10/2 10am ET September ISM ManufacturingTame
•  10/3 10am ET JOLTS Job Openings AugustHot
•  10/4 10am ET September ISM ServicesTame
•  10/6 8:30am ET September Jobs ReportMixed
•  10/6 9am ET Manheim Used Vehicle Index September FinalTame
• 10/10 11am NY Fed Inflation ExpectationsMixed
•  10/11 8:30am ET September PPIMixed
•  10/11 2pm ET Sep FOMC Meeting MinutesTame
•  10/12 8:30am ET September CPIMixed
•  10/13 10am ET U. Mich. September prelim 1-yr inflationMixed
•  10/16 8:30am ET October Empire Manufacturing SurveyTame
•  10/17 8:30am ET October New York Fed Business Activity SurveyTame
• 10/17 8:30am ET September Retail Sales DataHot
•  10/17 9am ET Manheim October Mid-Month Used Vehicle Value IndexTame
•  10/17 10am ET October NAHB Housing Market IndexTame
• 10/18 8:30am ET September Housing StartsTame
• 10/18 2pm ET Fed releases Beige BookTame
•  10/19 8:30am ET October Philly Fed Business Outlook SurveyTame
• 10/19 10am ET Existing Home SalesTame
• 10/19 12pm ET Fed (including Powell) at Economic Club of New York
•  10/24 9:45am ET S&P Global PMI October PrelimTame
•  10/26 8:30am ET 3Q 2023 GDP AdvanceStrong
•  10/27 8:30am ET September PCETame
•  10/27 10am ET Oct F UMich Sentiment and Inflation expectationTame
•  10/30 10:30am ET Dallas Fed September Manufacturing Activity SurveyTame
• 10/31 8:30am ET 3Q23 Employment Cost IndexMixed
•  10/31 9am ET August S&P CoreLogic CS home priceMixed
•  10/31 10am ET October Conference Board Consumer ConfidenceTame

Key incoming data September

•  9/1 8:30am ET August Jobs ReportTame
•  9/1 10am ET August ISM ManufacturingTame
•  9/6 10am ET August ISM ServicesMixed
•  9/6 2pm ET Fed releases Beige BookTame
•  9/8 9am ET Manheim Used Vehicle Index August FinalTame
•  9/8 2Q23 Fed Flow of Funds ReportTame
•   9/13 8:30am ET August CPIMixed
•  9/14 8:30am ET August PPITame
•  9/15 8:30am ET September Empire Manufacturing SurveyTame
•  9/15 10am ET U. Mich. September prelim 1-yr inflationTame
•  9/18 8:30am ET September New York Fed Business Activity SurveyTame
•  9/18 10am ET September NAHB Housing Market IndexTame
•  9/19 9am ET Manheim September Mid-Month Used Vehicle Value IndexMixed
•  9/20 2pm ET September FOMC rates decisionMarket saw Hawkish
•  9/21 8:30am ET September Philly Fed Business Outlook SurveyMixed
•  9/22 9:45am ET S&P Global PMI September Prelim
•  9/25 10:30am ET Dallas Fed September Manufacturing Activity Survey
•  9/26 9am ET July S&P CoreLogic CS home price
•  9/26 10am ET September Conference Board Consumer Confidence

Key incoming data August

• 8/1 10am ET July ISM ManufacturingTame
• 8/1 10am ET JOLTS Job Openings JunTame
• 8/2 8:15am ADP National Employment ReportHot
• 8/3 10am ET July ISM ServicesTame
• 8/4 8:30am ET July Jobs reportTame
• 8/7 11am ET Manheim Used Vehicle Index July FinalTame
• 8/10 8:30am ET July CPITame
• 8/11 8:30am ET July PPITame
• 8/11 10am ET U. Mich. July prelim 1-yr inflation Tame
• 8/11 Atlanta Fed Wage Tracker JulyTame
• 8/15 8:30am ET Aug Empire Manufacturing SurveyMixed 
• 8/15 10am ET Aug NAHB Housing Market IndexTame
• 8/16 8:30am ET Aug New York Fed Business Activity SurveyNeutral
• 8/16 2pm ET FOMC MinutesMixed 
• 8/17 8:30am ET Aug Philly Fed Business Outlook SurveyPositive
• 8/17 Manheim Aug Mid-Month Used Vehicle Value IndexTame
• 8/23 9:45am ET S&P Global PMI Aug PrelimWeak
• 8/25 10am ET Aug Final U Mich 1-yr inflationMixed
• 8/28 10:30am ET Dallas Fed Aug Manufacturing Activity SurveyTame
• 8/29 9am ET June S&P CoreLogic CS home priceTame
• 8/29 10am ET Aug Conference Board Consumer ConfidenceTame
• 8/29 10 am ET Jul JOLTSTame
• 8/31 8:30am ET July PCETame

Key incoming data July

• 7/3 10am ET June ISM ManufacturingTame
• 7/6 8:15am ADP National Employment Report Hot
• 7/6 10am ET June ISM ServicesTame
• 7/6 10 am ET May JOLTSTame
• 7/7 8:30am ET June Jobs reportMixed
• 7/10 11am ET Manheim Used Vehicle Index June FinalTame
• 7/12 8:30am ET June CPITame
• 7/13 8:30am ET June PPITame
• 7/13 Atlanta Fed Wage Tracker JuneTame
• 7/14 10am ET U. Mich. June prelim 1-yr inflationMixed
• 7/17 8:30am July Empire Manufacturing Survey
• 7/18 8:30am July New York Fed Business Activity Survey
• 7/18 10am July NAHB Housing Market Indexin-line
• 7/18 Manheim July Mid-Month Used Vehicle Value IndexTame
• 7/25 9am ET May S&P CoreLogic CS home priceTame
• 7/25 10am ET July Conference Board Consumer ConfidenceTame
• 7/26 2pm ET July FOMC rates decisionTame
• 7/28 8:30am ET June PCE Tame
• 7/28 8:30am ET 2Q ECI Employment Cost Index Tame
• 7/28 10am ET July Final U Mich 1-yr inflation Tame

Key data from June

• 6/1 10am ET May ISM ManufacturingTame
• 6/2 8:30am ET May Jobs reportTame
• 6/5 10am ET May ISM ServicesTame
• 6/7 Manheim Used Vehicle Value Index MayTame
• 6/9 Atlanta Fed Wage Tracker AprilTame
• 6/13 8:30am ET May CPITame
• 6/14 8:30am ET May PPITame
• 6/14 2pm ET April FOMC rates decisionTame
• 6/16 10am ET U. Mich. May prelim 1-yr inflationTame
• 6/27 9am ET April S&P CoreLogic CS home priceTame
• 6/27 10am ET June Conference Board Consumer ConfidenceTame
• 6/30 8:30am ET May PCETame
• 6/30 10am ET June Final U Mich 1-yr inflationTame

Key data from May

• 5/1 10am ET April ISM Manufacturing (PMIs turn up)Positive inflection
• 5/2 10am ET Mar JOLTSSofter than consensus
• 5/3 10am ET April ISM ServicesTame
• 5/3 2pm Fed May FOMC rates decisionDovish
• 5/5 8:30am ET April Jobs reportTame
• 5/5 Manheim Used Vehicle Value Index AprilTame
• 5/8 2pm ET April 2023 Senior Loan Officer Opinion SurveyBetter than feared
• 5/10 8:30am ET April CPITame
• 5/11 8:30am ET April PPITame
• 5/12 10am ET U. Mich. April prelim 1-yr inflation Tame
• 5/12 Atlanta Fed Wage Tracker April Tame
• 5/24 2pm ET May FOMC minutesDovish
• 5/26 8:30am ET PCE April Tame
• 5/26 10am ET U. Mich. April final 1-yr inflation Tame
• 5/31 10am ET JOLTS April job openings