Entries by Mark Maloney

Market Commentary April 2024

A chart really is worth a thousand words. Technical strategists say that investors in any given period are either in the mood to “sell the rally” (bear markets) or “buy the dip” (bull markets). If 2022 was all about sell-the-rally, 2023 was (mostly) about buy-the-dip and the strategy was intense and infallible during the final quarter. Year-to-date, the dips have been shorter and shallower, usually less than 1%, before bullish buying has reasserted itself though with less intensity than in Q4. Some technical investors see weakening buy-the-dip enthusiasm as a warning sign of a near-term top. But for over a year, investors have been more inclined to buy dips than to sell rallies. Until we see a change in that trend, the likely direction is upward.

Market Commentary March 2024

Record highs for everyone – Tokyo, New York, Frankfurt, Paris but poor old London isn’t getting a look in. Maybe that’s a good thing. We don’t like all this froth. Yet according to Bank of America, overseas investors should not get too concerned. “An all-time high is not a sell signal. It’s worth remembering equity markets efficiently reflect earnings growth through time. Stock prices don’t have memories so, barring a major de-rating, 2024 could be a strong year for equities”. UK investors should not become too despondent either. Apart from those all-important ‘D’ attributes (diversification and dividends), an easing rate cycle will make old utility stocks far more attractive and expected weakness in the sterling/dollar exchange rate should drive gains in firms with substantial overseas earnings.

Market Commentary February 2024

The “Energizer Bunny” stock market seems to have a lot of juice left, as the major US indices power to new all-time highs. Each day and each week, the market goes up and the rubber band is stretched further and further. Since the low of 27th October, the S&P 500 has soared almost 20%. Generally, gains like these occur during the early stages of a bull market. The 14-week RSI (a momentum indicator) hit 72% in late January, indicating the market is overbought. Just because we are overbought though does not necessarily mean stocks are necessarily approaching a top. In most cases, the market eventually pauses only to continue moving higher.

Market Commentary January 2024

We wish all our clients and readers a very Happy New Year. John Bogle, the founder of index-tracking firm Vanguard, once said “Intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won’t be foolish enough to think they can consistently outsmart the market.” As we know, 2023 followed a nasty bear market in many stocks, especially in the Technology sector. Coming into the new year, investors generally were bearish and not loaded with tech stocks. Well, if you just owned the S&P 500, you have done quite well. But the 71% of stocks in the S&P 500 have underperformed the index, with most of the gains coming from a few tech giants. While Mr Bogle has probably rolled over in his grave based on the concentration of returns this year, his simple advice worked again.

Market Commentary December 2023

During various recovery spurts, the one thing that has been consistently lacking in this market has been breadth. A handful of AI superhero stocks cannot carry the market forever. Since making its recent lows in the 4,120s at the end of October, the S&P 500 has bounced back strongly. Are we finally seeing signals of better breadth, at least on a short-term basis? One month ago, just 33% of US stocks were trading above their 20-day simple moving average (SMA) trendline. That percentage has moved up to 65%. Short-term SMAs can be unreliable and tend to flap like a pennant in the breeze based on the market mood. While the 20-day breadth trend is encouraging, the market has a long way to go before establishing sufficient longterm breadth to signal that this advance has staying power.