Investing Update: Has Momentum Shifted?
What I'm buying, selling & watching
We saw the stock market make a complete reversal to end the month of August. After being down almost 5%, the S&P 500 finished the month on a tear to finish down just over 1%.
The S&P 500 had a 4-day winning streak snapped Thursday. Up until that point it didn’t even have a 2-day winning streak in August. This was the strongest week since June and it cleared back above its 50-day moving average.
Mega-cap tech had their largest gain in over 3 months. It also recaptured its 50-day moving average.
The VIX closed the week at 13.08. That’s the lowest weekly close since January of 2020. The second lowest close of the last three and a half years.
The flows from retail investors reached new record highs this month. Even taking out the highs of 2021. With this much money coming in, it signals to me that this money is going to find its way into buying stocks.
With where earnings have come in and where the rising profit margins have gone, there really is no recession in sight. In fact, S&P 500 profit margins expanded in Q2 to 11.9%. That’s the highest since Q1 2022 and way above the historical average dating back to 2000 of 8.9%.
We also saw the two lagging sectors for August be staples and utilities. You don’t get that in a retreating stock market. Money usually will historically rotate into low volatility stocks when there is pressure on the markets.
August seemed like the market was taking a summer break. It gave most of the month as an opportunity to buy the dip. Then this last week the trends and momentum flipped back to risk on bullish. The data above seems to be pointing in the direction of a market rally higher.
Now we will see what September and the start to fall does for investors. September has historically been one of the worst performing months, but going in the market has a lot of bullish momentum.
3 Important Stocks To Monitor
There are certain individuals stocks that are worth monitoring to get a read on where the market and economy may be headed. Currently, there are three stocks that fit this for me. It’s Apple AAPL 0.00%↑, Walmart WMT 0.00%↑ and Nvidia NVDA 0.00%↑. All three just had an interesting and noteworthy week.
We all know Apple is the largest company in the world and that alone explains why you have to monitor it. Apple just saw 6 straight green days. That’s its longest winning streak since March 2022. It now sits only a few percent from a new all-time high.
Walmart is the world’s largest employer and retailer. Most probably aren’t aware that Walmart does almost twice the retail revenue as Amazon does. What did Walmart do this week? It just hit a new all-time high on Thursday.
Then there is Nvidia, which is the leading gainer in the S&P 500 so far in 2023 by a wide margin. Readers of Spilled Coffee know this was one of my stock picks for 2023 (Investing Update: 3 Stocks For 2023) and is one of my largest holdings. It has now surpassed Amazon AMZN 0.00%↑ as my second biggest stock winner ever. I have yet to sell a share of it. You can read my thoughts on it in, My Nvidia Plan Moving Forward
This week saw Nvidia set a new all-time closing high. With Nvidia being the leader in semiconductors as well as the AI revolution. It’s now at the forefront of technology and I think it’s now the most important company in the stock market. It’s Jensen Huang and Nvidia, not Tim Cook and Apple, who is now the captain of the stock market ship.
Student Loan Affect
We’ve all heard about the student loan repayments starting again. This is one of the most interesting charts I’ve seen. This shows the spend profile of the student loan cohort and where the money that otherwise would have been going to student loan payments has been going. It will be interesting to see how travel and retailers fare.
Moves I’ve Made
S&P 500 Index This week I added to my S&P 500 index position. As the market started to show strength and the indicators and data above came to light, I figured it was a good time to buy more.
The Coffee Table ☕
I loved Ryan Detrick’s post, Busting 7 Common Myths. He addresses the “myths” that we continue to hear over and over in the media. These are all economic concerns but some may be a bit overblown and there is more than meets the eye. A great breakdown by Ryan.
Neil Irwin shared an interesting chart in his piece in Axios, How the pandemic shifted America’s geography of income. By going to the story and then hovering over the map, you can see by every county in every state what the change has been.
It took me two years but I finally came across a bottle of Weller 12 Year at a local store. I have tried this a couple times and really like it. Now I finally have a bottle of my own! I get creamy almond and rich vanilla flavors and it finishes with pecan and dark fruits. It seems to change a bit with each drink. That’s why this is an exciting bourbon to drink. You can read more about my favorite bourbons in 10 Best Bourbons.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion. Do your own research.