Flakey Friday – US Beyond Extreme – Cull Noise

Fri 09 Feb 2024

By Brian Dennehy

Access Level | public

Market commentary


quoteLast Friday was unique in markets, if not also a bit flakey. 

For example, since 1926 the two main US indices have never both hit new peaks on a day when the number of stocks going down was twice as great as the number going up. (Thanks to Peter Eliades via Elliott Wave International for that observation.)

Apart from the day following the 1987 Crash, the S&P 500 has never gone up more than 1% when two-thirds of the index constituents have gone down. (Thanks to Louis-Vincent Gave.)

Shares in Meta, the Facebook company, went up in that one day more than the total value of Disney.

Looking at the bigger historical picture, here are some snips from a John Hussman paper this week, as he reflects on the pivotal US stock market:

  • “Our most reliable valuation measures are again beyond every extreme in US history prior to March 2021, apart from 5 weeks surrounding the 1929 peak.”
  • “Abandoning investment discipline amid the most extreme market conditions in history would be a costly way to buy a fleeting sigh of relief.”
  • “Based on dozens of measures… current market conditions now cluster around the worst 0.1% in history.”
  • “The handful of similarly extreme instances were typically followed by abrupt losses of 10-30%... with losses at the smaller end often seeing deeper follow-through later.”
  • “The forward P/E ratio is beyond every extreme in history except for periods closely surrounding the 2000 and 2022 market extremes.”

Your newspapers and the internet are full of opinions and proclamations, most with very little factual basis. That is why I bring you all of the above.  Facts. No noise.

Sadly, seeking out more opinions does not mean you are better informed, and your curiosity gene will undermine your investment performance if you allow it to do so, as I covered here in “I culled the FT subscription – Curiosity Killed Your Investment”.

In contrast to all of that negative stuff, albeit factual, we have some great material to share with you next week. This is on the opportunity in the UK, particularly those UK funds with a Value-style. 

And keep an eye on China. Their (cheap) stock market is closed now, midst their New Year celebrations, but their government is getting closer to being obliged to take bigger steps to boost confidence, in contrast to the drip drip of the last year. That in turn could give a boost to Asia more generally. Stay alert.

This and much more is covered in the 44th edition of the TopFunds Guide which is out next week.


Market commentary


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