Weekly Market Commentary Videos for Investors

Here Comes the Tricky Part!

Q: Should investors buy Bitcoin Exchange Traded Funds (ETFs)?
A: So far, the premise of massive money flows into Bitcoin driven by the launch of ETFs has not come to fruition. The charts below for Fidelity and BlackRock ETFs illustrate that point for now.

Q: Why are the equity markets “smooshy” year to date?
A: The McGowanGroup sees three factors at play. 1. The December celebration rally corresponded to the likely Federal Reserve’s reversal to lower interest rates has not yet occurred. 2. Current Earnings Reports have been mixed. 3. The 10 Year U.S. Treasury yield has spiked to over 4.13% at the highs this week. Stay tuned to this week’s program as Spencer McGowan and Alex Tollen breakdown insights for investors.

CryptoMania, Artificial Intelligence Mania & Weight Loss Mania?

Q: What was this week’s news regarding the major Bitcoin Drama?
A: Monday Bitcoin spiked to near $48k per coin when a seemingly authentic tweet from the SEC’s X account announced approval of Spot Bitcoin Exchange Traded Funds (ETFs). A short time later, the SEC tweeted that their X account had been hacked & the previous message was unauthorized. At the end of the week the SEC did approve Bitcoin ETFs setting the stage for another speculative frenzy over what we like to call “Digital Beanie Babies”.

Q: Should investors trade the approval of the Spot Bitcoin ETFs?
A: McGowanGroup clients currently have great assets with impressive gain potential in their portfolios. After a very impressive two years of outperforming the indexes in our model portfolios, The McGowanGroup will not be adding Bitcoin ETFs to our managed portfolios at this time. The McGowanGroup is focused on real assets with more predictable outcomes, but we will work with clients interested in personalized customizations.

Q: What is the Artificial Intelligence (AI) Supercycle?
A: According to inGen Dynamics: “The AI Supercycle refers to the period of unprecedented growth and innovation in artificial intelligence technology that we are currently witnessing”.

As January Goes So Goes the Rest of the Year?

2 Years in the Desert
The large equity gains in the financial markets of 2023 essentially returned the major indexes to the same levels as the close of 2021, no progress for 2 years. Overall, our managed accounts performed above the indexes with great resiliency during the declines.

A 2024 Magic Carpet Ride?
One of the primary factors over the past 2 years, of course, was the Federal Reserve interest rate tightening cycle, which corresponded to the bear market of 2022. Future cash flows are worth less when cash rates are relatively high. The Federal Reserve’s most recent projections show a return to a more normal 2.5% over the next 3 years for the Federal Funds Rate and corresponding rates on Treasury Bills. For high cash flow assets, a lower discount rate increases the net present value of future cash flows.

Recession?
The Federal Reserve economic growth projections are 1.4% for 2024. Goldman Sachs forecasted growth over 2% in their 2023 year-end update.

Energy Infrastructure
As of December, Recurrent Advisors estimated that energy infrastructure companies are trading at about 6 times cash flow. Of that estimated 16%, 8% roughly represents current dividends and direct share buybacks about 8%. The resulting increase in assets under control per share would equate to about 40% over a five year period in addition to the cash dividends.

Global High Yield
Our four primary high yield managers delivered an impressive 2023. The current yield, equally weighted is above 9%1. While that is an impressive cash dividend, the estimated discount to par value under control per share, is over 20%. The resulting appreciation potential during declining interest rates could be quite impressive assuming bonds drift back towards par values.

Blue Chip Additions
The McGowanGroup Wealth Management investment committee successfully added positions in nuclear, utility assets, pharmaceuticals, and AI related technology during 2023 dips.

Our Next Steps?
Equity market rallies provide the opportunity to raise tactical safety for future resilience especially as valuation targets are harvested.

A Cautionary Note
Election years provide equal opportunities for rejoicing and lamentations. The temptation to let politics drive portfolio decisions often leads to distraction and mistakes. Let not your heart be troubled as we are on the case and grateful to serve.

We wish you and your family a happy and prosperous new year!

SPIKE!

Q: What are some of the reasons the equity markets spiked this week?
A: The Federal Reserve (Fed) indicated in Wednesday’s projections the potential for three interest rate cuts in 2024. The equity markets anticipated lower financing costs over the longer term resulting in higher profits as well as increased net present values of future cash flows.

Q: What companies are some of the big winners in the financial markets, so far, in 2023?
A: Microsoft Corp., Novo Nordisk, Vistra Corp., BWX Technologies, Inc., Visa, Inc., and Energy Transfer.

Q: How can McGowanGroup Wealth Management help investors and their families?
A: The “Team That Cares” puts a Certified Investment Management Analyst, two Certified Private Wealth Advisors, two experienced Wealth Managers, Four highly experienced Financial Services professionals, and a long-tenured Compliance Manager on your side.

14 Trading Days Left in 2023

Q: What big Texas companies are doing great in the equity markets, so far, in 2023?
A: As of December 7, 2023, Tenet Healthcare Corp. is up 43%, DR Horton, Inc. is up 51%, Cinemark Holdings, Inc. is up 65%, Dell Technologies, Inc. is up 69%, Lennox International, Inc. is up 76%, and Builders FirstSource, Inc. is up 125%!

Q: When should investors consider Tax Loss selling to reduce taxes and why is it a good idea?
A: The McGowanGroup recommends, after major financial market rallies, that investors eliminate weaker positions in the second and third quarters of the year to avoid holding positions that may come under pressure as other investors harvest tax losses to reduce taxes during the fourth quarter. In fact, tax loss selling pressure on out of favor assets/asset classes may present an ideal entry point for investors savvy enough to realize bargains near year end.

Q: What are the new IRS tax brackets for 2024?
A: Stay Tuned to today’s broadcast and follow along as Spencer McGowan & Alex Tollen cover the new updates!

Santa Clause Rally?

Q: How do the Equity Indexes usually do in December before an election year?
A: According to The Stock Trader’s Almanac, Pre-election year December average returns since 1950 (or index inception)
• Dow Jones Industrial Average Index: third best of year, +2.7%
• S&P 500 Index: third best, +2.9%
• NASDAQ Index: second best, +4.2%
• Russell 2000 Index: second best, +3.0%

What is the Great News?

Q: What was the rate of U.S. inflation for October?
A: According to the Bureau of Labor Statistics, The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on seasonally adjusted basis or Zero.

Q: Has the outlook on U.S. interest rates changed significantly?
A: UBS believes the Federal Reserve will replace the current “Higher for Longer” rates with dramatic interest rate cuts in 2024. The Dow Jones Industrial Average topped 35,000 for the first time in 19 months.

Q: Who gets the first year-end McGowanGroup Bozo Award and the first Sir John Templeton Award for 2023?
A: James Paulsen, Chief Investment Strategist at Leuthold, Predicted the S&P 500 Index could rise to 5000 in 2023 which is now about 4500. Mike Wilson, Morgan Stanley’s Chief Equity Strategist, predicted large declines in the equity markets and a large drop in company earnings for 2023.