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Our Views

- The first 4 trading days of 2024 have been a terrible start for equities with S&P 500 ( SPY 0.14%) down -1.6% and the Russell 2000 (small-caps, IWM -0.21%) down -3.5%. As our members are aware, for the last few years (the case for longer), the year tends to play out in January.
- The list of concerns in the first week of 2024 is large, but includes indications from the December FOMC minutes that the Fed that might be slower to cut rates. As we noted multiple times recently, we already expected markets to get “itchy” about cuts, so this adds to the chances that stocks could be soft until this framework is clear.
- Meanwhile, a blockade in Middle East raises marginal concerns of pickup in inflation, interest rates have crept up since December 27 to pressure equities, and the same is true for VIX.
- So 2024 will be a challenging year for markets, but we expect stocks to ultimately rally strongly in 2H24, given the remarkable resilience of the economy, a softening labor market, and investors beginning to allocate into risk assets.
- BOTTOM LINE: A tough start to 2024 reminds us 2024 will be challenging, but ultimately positive, in our view.

- Equal-weighted Value Line index peaked out near the last three peaks since 2022.
- Defensive outperformance might stall as Tech, Industrials snap back next week.
- Bitcoin Mining issues have achieved a relative breakout vs. S&P 500.

- Despite earlier rumors suggesting a potential denial and others hinting at early approval, the target remains set for the approval of all spot BTC ETF applications between January 8th and 10th.
- This significant product launch differs from the introduction of CME futures and the futures ETF, both in terms of the macroeconomic context at the time of those launches and the anticipated incremental flows resulting from the marketing efforts of blue-chip asset managers.
- The approval of a spot ETF is likely to enhance the prospects for a spot ETH ETF later this year. This could potentially establish a longer-term bottom in ETHBTC and act as a tailwind for ETH beta names.
- Key risks on the horizon include a reevaluation of the timing for rate cuts and increased duration issuance from the treasury, which could follow the next treasury refunding announcement towards the end of January.
- Core Strategy – With the approval of the spot BTC ETF appearing imminent and the DXY seemingly at a local peak, it seems prudent to lean into this market setup. We anticipate that ETH Layer 2s will continue to perform well, driven by the anticipation of EIP-4844 and increased attention towards ETH following the BTC ETF approval. With that in mind, we are increasing allocation to OP and ARB. We are also increasing STX allocation on the back of continued progress toward the Nakamoto upgrade.

- Congress returns to work next week with the first of two government-shutdown deadlines looming.
- The House GOP has honed in on the crisis at the Southern Border as a key issue and point for negotiations, with 60 Republicans visiting the border this week for a firsthand look.
- The White House and a bipartisan Senate group are already negotiating on a border package to be added to a spending bill with aid to Israel and Ukraine.
Wall Street Debrief — Weekly Roundup
Key Takeaways
- The S&P 500 fell 1.52% in a shortened trading week to close at 4,697.24. Nasdaq sank 3.25% to 14,524.07, while Bitcoin rose 3.73% from its Monday levels to about 43,863 late on Friday.
- The first trading week of 2024 suggests challenges ahead.
- Nevertheless, we remain constructive for the year, as the fundamental tailwinds for market gains remain in place.
“Your age is the sum total of your physical condition, the condition of your mind, and how you feel.” ~ Jack LaLanne
Good evening,
After the joys of the holiday season and a 2023 in which the S&P 500 rose more than 24%, the rough markets in the first four trading days of the year proved somewhat jarring. Fundstrat Head of Research Tom Lee was on a much-needed vacation this week but nevertheless weighed in on the “terrible start for equities.” Lee, who has previously spoken of how the year tends to play out in its first five trading days, said “this turmoil in the first week of trading is telling us to brace for a challenging year.”
Yet Lee’s outlook for 2024 as a whole remains constructive and largely unchanged, with a year-end S&P 500 target of 5,200, the bulk of those gains coming in the second half of the year. The tailwinds he sees driving his 2024 forecast remain in place. They include:
- Declining inflation
- A dovish Fed shifting to managing the business cycle, rather than fighting an inflation war
- Falling interest rates, benefiting consumers, corporates, and valuations
- An upward inflection in PMI boosting earnings growth
- Positive flows as sidelined investors allocate funds back into equities
In the near term, Lee points out that the strong gains of December are likely to extend into January and February: “When December is positive, markets tend to do well in January and February,” especially if December was up more than 4% (which it was).
A look at market history shows that in election years, markets tend to peak in February and consolidate into April, so investors should be alert to this trend – illustrated in our Chart of the Week – repeating in 2024.
In Lee’s view, the first half is likely to be challenging overall. The minutes from the most recent FOMC meeting on December 13 confirmed that voting members recognized the downward path of inflation and expected cuts to become appropriate sometime this year. Yet the minutes also suggested that those cuts might be slower in coming than many had hoped. And investors could get – as Lee puts it – “itchy” while they wait for the rate-cut timeline to start coming into focus.
In Head of Technical Strategy Mark Newton’s view, “over the last couple of weeks, people seem to have gotten a little bit over their skis.” During our weekly research huddle, Newton suggested that the market had perhaps been premature in pricing in rate cuts and labor-market weakness, citing some surprise upside readings in jobs data this week.
Despite those upside readings, Lee pointed out that indicators such as ISM manufacturing and ISM services, which lead jobs data, show a weakening of employment. In addition, this week’s Bureau of Labor Statistics Job Openings and Labor Turnover (JOLTS) report showed not just fewer openings, but also fewer people quitting or resigning. To Head of Data Science Ken Xuan, both signify a cooling job market.
Xuan also pointed out that ADP data showed wages declining, and at a good pace. “Obviously if wages head higher, that increases labor pressure, but you also don’t want them declining too quickly because that could signal a hard landing,” he said.
Still, bond investors expressed concern, pushing yields higher this week. “When yields fell late last year, stocks rose, and now yields are starting to creep back up a little bit and stocks have been weakening in the short run,” Newton acknowledged, so the traditional correlation between stocks and yields is still in place. Still, in his view, “momentum is still very negative on bond yields. I suspect that yields do not have much more to go on the upside and should start to roll over again soon, and that means that equities, given the correlation, should start to rally.”
Technically, “three or four days of equity weakness that haven't really done much technical damage at all,” he said. “You really still want to be a buyer of dips here,” he suggested.
FSI Sector Allocation Strategy
These are the latest strategic sector ratings from Head of Research Tom Lee and Head of Technical Strategy Mark Newton, part of the January 2024 update to the FSI Sector Allocation Strategy. FS Insight Macro and Pro subscribers can click here for ETF recommendations, precise guidance on strategic and tactical weightings, detailed commentary, and methodology.

Elsewhere
Carrefour said PepsiCo products had become “unacceptably” expensive despite falling inflation and would no longer be stocked in the French company’s stores in France, Belgium, Spain, and Italy. Customers will need to go elsewhere for brands such as Pepsi, Doritos, Quaker, and Frito-Lay. The decision comes after French President Emmanuel Macron’s claimed that large food companies were unnecessarily “jacking up the prices of some of their brands.”
A major Chinese “shadow bank” filed for bankruptcy in Beijing, with about $64 billion in liabilities but only $38 billion in assets. Zhongzhi Enterprise Group, one of the many such unofficial and unregulated investment companies in China that raise money from everyday individual investors to provide financing to private-sector companies, lent to many real-estate developers before the country’s property market collapsed.
Germany saw headline inflation rise in December, coming in at 3.7% versus the 3.2% seen in November. This was largely attributed to energy prices, however, as core inflation fell to 3.5% versus 3.8% in November.
The Chinese government reportedly removed the official whose proposed video-game prohibitions sent gaming stocks into a freefall. Feng Shixin, who as head of the Communist Party’s publishing department oversaw the videogame industry, had sought to limit consumer spending on video games and curtail in-game promotions. Feng has long viewed video games as addictive and detrimental to society. He previously imposed limits on when minors could play video games, and for how long.
Nobel laureate and microfinancing pioneer Muhammad Yunus was sentenced by a Bangladeshi court to a six-month prison term after being convicted of labor-law violations in a trial widely decried as a sham and as political retaliation for his disputes with Bangladeshi Prime Minister Sheikh Hasina. The allegations centered on employment and compensation practices at Grameen Telecom, a non-profit founded by Yunus that owns 34.2% of Bangladesh’s largest mobile services company.
And finally: Françoise Bettencourt Meyers has become the first woman to have a net worth exceeding $100 billion. The heiress to the L'Oréal empire has benefitted from the cosmetic giant’s strong stock-market performance of late. Bettencourt Meyers is the 12th richest person in the world, according to the Bloomberg Billionaires Index.
Important Events
Est.: 0.3% Prev.: 0.3%
The Core CPI measures inflation via the prices U.S. consumers paid for a basket of predetermined goods and services, excluding the more volatile food and energy components.
Est.: 210K Prev.: 202K
Measures how many Americans filed claims for unemployment benefits for the first time during the week referenced.
Est.: 0.2% Prev.: 0.0%
Core PPI measures wholesale inflation, specifically how much domestic producers of goods and services are paid for their output, excluding the more volatile Food and Energy components.
FS Insight Media
Stock List Performance
Strategy | YTD | YTD vs S&P 500 | Inception vs S&P 500 | |
Granny Shots
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+5.38%
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-2.03%
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+90.21%
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View
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