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If you happened to be in the business of producing or consuming A.I. chips (NVDA +60%, META +38%) you’ve done very well in 2024 thus far. Also, if one’s business model revolves around the negation of chips—potato or tortilla—this year has been very kind to you (LLY +29%). Those three firms, not necessarily the first names to come to mind to swing the index, have accounted for more than 40% of the S&P 500’s YTD upside.

Growth continued its fantastic start to the year with Royal Blue Growth +10% YTD. That gain has bolstered the median P/E multiple of this Mega-Cap proxy to 42x—near its contemporary high of 45x recorded at the end of 2021.

In February, the S&P 500 outperformed the S&P 400 by 2%, helping to widen our Ratio of Ratios by a congruent amount. Currently, the meandering Small Cap discount sits right at both its one- and two-year moving averages.

Our Up/Down ratio reads 1.06 for the second month of Q4 results. That is a vast improvement from the take-away-your-shoelaces “one-month” reading of 0.66. The current ratio lands toward the bottom of our depressing eight-quarter range of “two-month” figures.

Our Risk Aversion Index edged down again in February and stayed on the “Lower-Risk” signal generated at the end of January.

Improvement in bank lending trends should be a tailwind for economic activity, while steeper yield curves also imply a looser lending environment lies ahead. Another area supporting U.S. economic resilience is the wealth effect: The surging wealth effect is boosting consumer confidence which, in turn, leads to higher consumption.

It’s been 26 months since the all-time peaks the NYSE Weekly and Daily Advance/Declines Lines. The weakness in the Daily version is especially troublesome given the strong upward bias it’s exhbited since 2001. In addition, figures for 52-Wk. New Highs and New Lows have been anemic relative to the major index gains—especially among NASDAQ stocks.

Breadth and leadership of this bull market have fallen short of the typical patterns of early-cycle bulls, even if contrasted only to other new bulls that did not emerge from recessionary lows, like 1962-66 and 1987-90. Still, participation looks broad enough that the odds are against an imminent cyclical peak.

The team at Caron Wealth Management recently published a modification of the January Barometer strategy, and the results are far-superior: With only two exceptions, when SPX closed higher in both January and February, the index ended the year (ten months later) with an additional average gain of 12%.

Recent gains have failed to lift the market-cap/GDP ratio back to old highs and, to date, no major index has fully reversed its bear-market loss if the cumulative effect of 2+ years of consumer price increases are considered—small caps look especially bad when viewed through that lens.

During a summer internship almost 40 years ago, we’d stay a few minutes late on the Chicago Merc’s trading floor for the Thursday afternoon release of the Fed’s money supply numbers. Today, thanks to the joint efforts of “JJ” (Jay Powell and Janet Yellen), the analysis of monetary trends is infinitely more complex.

Mentions of the yield curve by the financial media and market pundits have plummeted the last few months. That’s understandable, but dangerous. We remember the same happening in 2007—with one of the more memorable dismissals coming from Fed Chair Bernanke.

We must acknowledge that our current thinking on the stock market and U.S. economy is based on an element of circularity of which we’re not completely comfortable.

Our 30x bubble-P/E threshold did a good job of capturing the most speculative phase of the Technology Bubble, as the S&P 500 traded north of that ceiling from early 1999 until the fall of 2000. That bubble and its aftermath should serve as a reminder that the already tenuous connection between the stock market and the economic cycle can become even more unstable during bubble periods.

We are not sure whether the stock market’s upswing has reached an altitude that qualifies as “bubbly.”  Based on numerous measures, the S&P 500 looks dangerously close.

Analysts often address sales and net income but rarely speak to the middle lines of the income statement. Our methodology works through each major line item—from sales to net profit—comparing the most recent quarter to the same quarter of a year earlier.

We are curious if factor ETFs have provided downside protection in recent years’ selloffs or whether their defensive nature, shown by academic studies, is lost in the translation to live-money portfolios.

Read this week's Major Trend.

The S&P 500 posted its fourth consecutive monthly gain (+5.2%) in February. The index has advanced 22% since the end of October.

See this week's MTI update