Time in The Market vs. Timing The Market

December 18, 2023

Happy Monday! 
Global stock markets rallied 2.5% last week after the US central bank said they expect 3 interest rate cuts in 2024. (Phew, that's a welcome sigh of relief for anyone with debt.) This brings the total performance for the year to 25%!

If you missed the rally because you were sitting in cash waiting for a better "entry point," remember what Warren Buffet says: "TIME IN the market is better than TIMING the market." He knows that well. After all, 99% of his wealth was created after his 50th birthday. 

With Warren's wise words, we want to wish everyone a wonderful holiday season as we take a break and resume our newsletter on January 8th. May you rest, self-reflect and recharge for a killer 2024! 

And if you want to nail those New Years Resolutions before you even wrote them down, join us for the Investor Accelerator Course starting on January 8th! We already have a cozy group ready to master their investing skills and grow their confidence in managing their wealth. Use the 50% discount code (EARLYBIRD50) before January 1st. 

 – Margarita T., CFA.

MARKETS

Lower Interest Rates in 2024. Whoop!

Source: Morningstar, MarketWatch. Data as of December 15, 2023.
Indexes listed above are (in order): MSCI World Net (USD), STOXX Europe 600 (EUR), MSCI Pacific (USD), S&P 500 (USD), MSCI Emerging Markets IMI Net (USD).

Economics - 4 Central Banks Kept Rates on Hold.

  • 🇪🇺 ECB, 🇺🇸 Fed, 🇬🇧 BoE, and🇨🇭Swiss Central Bank kept interest rates unchanged, as expected. What was different this time was the Fed statement that they expect 3 rate cuts in 2024. The market, the exuberant and impatient teen that it sometimes resembles, now expects 6 rate cuts in 2024. Higher stock prices already reflect that optimism.

  • As of early Monday morning, central banks tried to tame the enthusiasm. One Fed official said it’s ‘premature’ to discuss a reduction in March, while another said he expects cuts in 3Q24.

Markets - Greed is In

  • Feeling greedy... The CNN Fear and Greed Index remained yet again on "Greed" after the Fed's expectation to cut rates. Whoop! 

  • Lisa Shalett, CIO of Morgan Stanley, warns in the latest GIC Weekly Report that the market's recent rally sounds a lot like "this time is different." This phrase is often considered a warning sign in financial markets because it reflects a belief that historical patterns or rules don't apply to the current situation. She argues that the markets assumes three rare scenarios will happen at the same time: a mild recession, fast interest rate cuts, and that the AI gains will mostly go to large tech companies. Can all three assumptions happen just as the market expects? Time will tell.

  • The reaction in Europe was more muted as economic activity indicators for the Eurozone pointed to a continued deterioration.

  • A more optimistic counter-argument: there are different areas of the market that have been rallying this month. It's not just the Magnificent Seven or Tech stocks. Small companies and Real Estate stocks have risen much faster, making the rally more "broad," which could point to a more sustainable increase in the markets. 

Coming up this week 

  • Friday, 🇬🇧 UK - early close at 12:30. New Zealand closed for Christmas.

  • 🇪🇺 EU 🇬🇧 UK CPI releases. 🇺🇸 GDP release.

  • Earnings releases by Fedex, Nike Carnival.

SIP OF FINANCE KNOWLEDGE

 3 WAYS FINANCIAL ADVISORS CAN MANAGE YOUR MONEY

1) Full Discretion: The Financial Advisor can buy and sell any investment they deem appropriate in your account without asking your permission or giving you advance notice. It's the most typical way advisory relationships work as it's the most efficient. 

2) Limited Discretion: The Advisor can buy or sell investments only if they receive your permission. Advisors tend to not like this arrangement as it slows them down and it could mean you trade after some of their other clients (which is never good). But if you don't trade often and control is important to you, it can work well.

3) No Discretion: The Advisor has no access into your account. Typically this is an hourly-fee arrangement where you get ad hoc advice and then you go into your trading account and implement that advice on your own. It requires more effort on your part and a higher skillset.

NOTABLE GLOBAL NEWS

Finance Latte AB is not a registered investment advisor. This content is for informational purposes only and should not be interpreted as investment or tax advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice. Past performance does not guarantee future results. Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment.

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