Making Hay Monday – November 25th, 2024
Making Hay Monday
High-level macro-market insights, actionable economic forecasts, and plenty of friendly candor to give you a fighting chance in the day’s financial fray.
Wishing you all a very happy Thanksgiving weekend!
Hello, Readers, and Happy Thanksgiving Week!
Today’s MHM is formatted along the lines of an extended Trading Alert. We’ve also updated the Asset-Class Lists because our MHMs just aren’t complete without those. Like a Thanksgiving meal without the stuffing – unthinkable.
If you’d like to see more Trading Alert content like this from Haymaker, let us know in the comments section. Your input means a lot to us.
We’re looking forward to finishing up the year with some actionable ideas and 2025 forecasts. Before getting that underway, let’s all have a beautiful week with those we love.
The Haymaker Team
The U.S. stock market has been outperforming the rest of the world for so long that this appears to be a permanent condition. Perhaps that is true but the degree to which it has continued to leave the planet’s other equity markets in the dust now appears to be a function of a uniquely American bubble.
Hartnett, BofA
An obvious reason U.S. shares have been star performers in recent decades, and especially the last 10 years, was due to far superior relative earnings performance. It is assumed that the profits explosion by Magnificent Seven type companies was the main driver of that. To a degree, such a perception is likely valid. However, the main force behind America’s earnings boom over the last 30 years has been declining interest rates and taxes. Real profit growth has doubled over that period versus the prior three decades. This is despite much weaker GDP growth, particularly since 2000 and also slower real operating income increases (i.e., before taxes and interest). With Donald Trump vectoring to slash the corporate tax rate to 15% and the Fed beginning an interest rate cutting cycle, perhaps this amazing trend has further to run. Based on current U.S. stock valuations, it better.
Rosenberg, BWD
“As Haymaker founder and president, I hereby pardon this fortunate turkey whose digital rendering I am, for some reason, quite fond of.” -David “The Haymaker” Hay
“In fact, in many ways, demand for leverage has never been greater than it is today despite the fact that it has rarely if ever been more expensive. This points to a degree of euphoric speculation that is both exceedingly rare and highly dangerous…another irony: while retail investors are gorging on leverage like never before, the smart money has simultaneously become more defensive than ever before.” -Jesse Felder, The Felder Report
Haymaker Note: We have some specific trading recommendations in this Making Hay Monday that are only available to our paying subscribers. At this gratitude-appropriate time of the year, we would be most thankful if you would become part of our effort to help investors protect their wealth during what is likely to be a chaotic, but opportunity-filled, second Trump administration.
Power Punchers
With the passage of two years’ time, it is easy to forget how painful 2022 was for financial markets. That was the year which saw the popping of what this newsletter has long referred to as Bubble 3.0. In fact, that orgy of speculative excess caused the aged Haymaker to publish a book with that title in early 2022.
At this point, for a long list of U.S. stocks, though, it’s definitely a case of convenient amnesia. The 70% to 80% evisceration endured by a multitude of equities that had been trading at insane valuations at the end of 2021 has mostly been forgotten. 2024 is almost certain to be the second consecutive 20% plus return year for the S&P 500. Surprisingly, the S&P 500 is actually ahead of the NASDAQ 100 so far this year but both have gained in the neighborhood of 25%, a very nice zip code indeed. However, considering the boost the “Naz” has received from Nvidia, which has had less of an impact on the S&P, that’s a bit surprising.
It is worth pondering what has driven this exceptional performance. Has it been earnings? To an extent, yes. They are currently running 8% to 9% higher than a year ago, but that’s much lower than the approximate 40% total return (i.e., including dividends) for the S&P since 10/1/2023…
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IMPORTANT DISCLOSURES
This material has been distributed solely for informational and educational purposes only and is not a solicitation or an offer to buy any security or to participate in any trading strategy. All material presented is compiled from sources believed to be reliable, but accuracy, adequacy, or completeness cannot be guaranteed, and David Hay makes no representation as to its accuracy, adequacy, or completeness.
The information herein is based on David Hay’s beliefs, as well as certain assumptions regarding future events based on information available to David Hay on a formal and informal basis as of the date of this publication. The material may include projections or other forward-looking statements regarding future events, targets or expectations. Past performance is no guarantee of future results. There is no guarantee that any opinions, forecasts, projections, risk assumptions, or commentary discussed herein will be realized or that an investment strategy will be successful. Actual experience may not reflect all of these opinions, forecasts, projections, risk assumptions, or commentary.
David Hay shall have no responsibility for: (i) determining that any opinion, forecast, projection, risk assumption, or commentary discussed herein is suitable for any particular reader; (ii) monitoring whether any opinion, forecast, projection, risk assumption, or commentary discussed herein continues to be suitable for any reader; or (iii) tailoring any opinion, forecast, projection, risk assumption, or commentary discussed herein to any particular reader’s investment objectives, guidelines, or restrictions. Receipt of this material does not, by itself, imply that David Hay has an advisory agreement, oral or otherwise, with any reader.
David Hay serves on the Investment Committee in his capacity as Co-Chief Investment Officer of Evergreen Gavekal (“Evergreen”), registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940. The registration of Evergreen in no way implies a certain level of skill or expertise or that the SEC has endorsed the firm or David Hay. Investment decisions for Evergreen clients are made by the Evergreen Investment Committee. Please note that while David Hay co-manages the investment program on behalf of Evergreen clients, this publication is not affiliated with Evergreen and do not necessarily reflect the views of the Investment Committee. The information herein reflects the personal views of David Hay as a seasoned investor in the financial markets and any recommendations noted may be materially different than the investment strategies that Evergreen manages on behalf of, or recommends to, its clients.
Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this material, will be profitable, equal any corresponding indicated performance level(s), or be suitable for your portfolio. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
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