We are only 2 weeks into 2024 and the market has been on a roller coaster ride. In my opinion, so much has happened and while the world is still figuring it all out, I have rebalanced some of the stocks in my growth portfolio to better position them for the year ahead.
Before diving into my specific purchases and sales, I think it's important to take a step back and look at what has happened so far. The events of the past few weeks have had a significant impact on my decision-making process. By sharing these insights, I hope to shed light on the reasoning behind my trades and, in turn, provide readers with not only a summary of recent events, but also valuable information for navigating volatility.
Read till the end *Bonus Segment* In My Crypto Assignments!
Top 5 market events in the last 2 weeks
1. Bitcoin ETFs
I think this matter needs no further explanation. It is important to note that the markets usually do not have a significant rally on the day of the news. Instead, positive catalysts are “baked” into the price over time. Note how BTC retreated almost 8% (yellow circle) on the same day started trading various ETFs. Considering that almost $655 million worth of entries entered the market, we saw some profit-taking by traders who are still “selling the news”.
My thoughts on BTC ETFs,
- Interesting to see how ETH didn't pull back as much as BTC on Friday. I think we would also see ETH ETFs in the future, so prices didn't fall as much as “buyers bought on rumours”.
- Food for thought: Bitcoin aims to be a path to decentralized finance. In simple terms, it allows people to transact without intermediaries. Now that it's an ETF, the flow of the fund is routed by an intermediary. While the underlying asset class remains largely decentralized, it requires some thought as to how much centralization we need to allow to make Bitcoin accessible to the masses.
- Overall, for me, this list of ETFs is bullish for the markets.
2. Inflation
To build on point 1 where the market likes to price in events in advance, we are at a point where the markets are pricing in interest rate cuts. Unfortunately, we may have to wait a little longer, as the Federal Reserve is unlikely to impose any more rate hikes (more on that later) or rate cuts.
Looking at the chart below, the Consumer Price Index (which measures item inflation) increased by 0.3% across all items in December 2023, compared to a target of 0.2%. Although overall inflation remains on a downward trend, ultimately inflation is not falling as much as expected.
3. Sector rotation (Mag 7 for industry and other sectors)
The much-anticipated “extend” of the bull market seems to have taken its first step, as we looked far from the rotation. 7 wonderful stocks to other sectors. In the first trading week of 2024, the Magnificent 7 stocks (represented by the MAGS ETF, equal weight in all 7 stocks) retreated almost 10%. Although they have since recovered, going forward, I believe these large tech stocks will be viewed as “flight to safety” plays. In the meantime, investors have likely trimmed some of their positions in these stocks and shifted them to other sectors that could provide higher returns.
4. Red Sea Attacks
Now there are attacks on merchant ships in the Red Sea.
Recent attacks by Houthi militias on commercial vessels in the Red Sea have put the vital shipping region in the spotlight. Yemen-based rebels say they target ships linked to Israel In protest against Israel's war against Hamas in Gaza.
Red Sea crisis: Expert unloads on Houthi attacks and other security threats
Unfortunately, that “first” stock is (likely) to hit this market cap Tesla, as their supply chain has been disrupted. Note that the Red Sea is one of the world's most important routes for energy and consumer cargo, so it is not known whether current events will lead to further delays.
5. Cuts and unemployment
Although this is a very sensitive issue, from an economist's point of view, cuts are the main indicator of falling inflation rates. When people lose their jobs, their spending power tends to drop. On that note, it is unfortunate that observers have seen a bit more of a reduction than anticipated, as we are also witnessing here in Singapore. The latest Lazada Saga has unfolded. To add to Lazada, other notable companies are also laying off workers. Notable names include
- Audible – It's laying off 5% of its workforce, citing an “increasingly challenging landscape,” according to a memo obtained by Business Insider.
- Discord – 17% of employees are being laid off, affecting 170 people. In an internal memo obtained by The Verge, Discord CEO Jason Citron blamed the cuts on the company growing too fast.
- Disney – TechCrunch previously reported that Pixar would face 20% layoffs this year, with the studio's 1,300-strong team down to less than 1,000 in the coming months.
- Google – It has laid off hundreds of employees in its Google Assistant division and the team that manages the Pixel, Nest and Fitbit hardware. The company confirmed to TechCrunch that Fitbit co-founders James Park and Eric Friedman are also leaving.
- Amazon is laying off “several hundred” workers at Prime Video and MGM Studios, according to a memo obtained by TechCrunch. The cuts come after 500 releases on Amazon's Twitch.
- Twitch – Reportedly laying off 500 employees, 35% of current workforce, amid ongoing struggle for profitability in the face of rising costs and community backlash. The pending layoffs come after hundreds more workers were laid off in 2023.
- and more at Tech Crunch
What has changed in my 2024 Outlook?
With the facts outlined above, here are some of my thoughts moving forward to 2024.
- For now, crypto seems to have finally found some “legs” in the world of traditional finance.
- As for interest rates, it's likely that we won't see a cut anytime soon, as inflation is still not where it needs to be. Also, we shouldn't see any further increases because job losses are increasing as they have been.
- Volatility continues as wars are still raging on a global scale. Shipping lines connect the world and vulnerabilities in them can have unintended spillover effects.
- I continue to hold great stocks, but have cut some to redirect to other undervalued companies. More like this
My first 2 purchases in 2024
1. Walt Disney Co (NYSE: DIS)
Having bought Disney from earlier $100 last year, I have been looking for more opportunities to down average in my position. Last week, I identified one Golden Cross (Where 50 day moving average crosses 200 day moving average) based on Disney's price action, usually indicates a trend reversal in the stock.
I don't doubt that Disney is highly regarded among observers in the absence of positive catalysts in the near term, but I believe that their financial moat remains strong despite the current headwinds.
The competition for market supremacy is heating up, and in the current context, Shopee seems to be better positioned to take over the market this year than its Lazada rivals. I think this is not only in Singapore, but also in the region. Consumer confidence in Lazada has certainly been shaken by the recent cutback exercise and I expect Shopee to win today.
Technically, there doesn't seem to be much of a catalyst for action, but I keep breaking through $35 bearing in mind that support is strong at this level. Momentum is also building in this range, as indicated by the RSI, which may be where the selling stops.
My first 2 are sold in 2024
1. Unity Software Inc (NYSE: U)
I entered 2024 bullish unity but what worries me most now is the divergence in the stock market. Unfortunately, as markets go up, stocks not only lag behind, but in this case, they're trading in the opposite direction. While their downsizing exercises aren't surprising, it's also unusual how IronSource's founders (the company they merged in late 2022) have gone about it. When the creators leave, this tells me that there is more going on than meets the eye.
With the technicals suggesting a descending triangle formation, I would buy this stock again if it were to return to $25.
2. 7 great stocks
I keep holding on 7 wonderful stocks, especially Amazon, Google and Microsoft. However, these stocks have had a great 2023 and I can't help but see limited upside for these stocks in 2024. Given that all 3 stocks above have given me close to 40% returns since I bought them in Q2 2023, I've decided to take some Profits off the table to check them out, as most of them are trading not too far from their 2022 all-time highs.
As long as my conviction in these conditions remains, there is no loss in updating yields as prices rise.
* Bonus Segment * In Crypto Allocations
I remain bullish on crypto, and with current market conditions, I open my crypto brokerage apps much more often than my stock apps (please let me know if you're doing the same in the comments). Despite the recent positive catalyst, I remain a CLEAN DEALER I am only 14 days away from my crypto holdings in 2024.
Based on my analysis of Bitcoin, while the bull rally is still intact, the momentum seems to be fading, suggesting that we may see some sort of retracement in the near term. Therefore, I have been selling some of my altcoins and keeping those profits in USDT until the time comes when I can re-enter such positions when they are oversold.
In general, what emotion is driving the market right now?
Looking to the future, and specifically to 2024, it is important for us to note that greed is still driving the market. While I personally remain invested in the markets, I have adopted a strategy of periodically taking profits and redirecting them into my war chest. This approach allows us to move into 2024 and beyond with a greater sense of readiness. How are you preparing your portfolio for 2024? Share your thoughts in the comments below!
