Colin’s Note: We’re already a quarter of the way through 2024.
Markets are still running hot… and next week signals the start of a new cycle of company earnings.
That means every major company will give us a progress report for the first three months of 2024… and more importantly, most will give a financial outlook for the next quarter and beyond.
That makes the next four weeks the most important weeks of 2024 for investors.
So whether you’ve been sitting on your heels waiting for the right time to get back into the markets in earnest… or you leaped at the opportunity to get back in after a bummer 2022 and have been riding out all the new highs, one thing is certain…
You need a game plan for the weeks and months ahead, and now is the time to get that together.
I get into it all in today’s video. Simply click below to watch… Or, if you prefer to read, my team and I have provided a transcript, edited for flow.
Bleeding Edge subscribers, hopefully, you guys are doing well.
Three months are in the books and we’re now actually a quarter of the way through 2024.
It seems like, right now, everything in these markets is up. Just from the beginning of this year, the S&P 500 is up about 10%… The Nasdaq is up around 9%… and Bitcoin is up an astonishing 57%.
Gold is up about 8%. Even sectors that have kind of lagged behind a little bit – like healthcare and financials – are also making 52-week highs.
Many of you watching or reading this likely fall into one of two categories. You were either a little too conservative and have been sitting on a pile of cash, earning a couple of percentage points of interest…
Or you made some of the right moves getting back into this market but in hindsight could have been maybe a little bit more aggressive when the prices of all these stocks were a little bit lower.
The first thing to realize is that no matter which camp you sit in, you made the right decision.
Sitting on cash and earning some interest for the first time in something like 15 years? That’s not a mistake.
And being disciplined and getting back into the markets after the nasty fall many stocks took in 2022 was also the right move.
The truth is, no matter which route you took then, you’re in the perfect position now to capitalize on what’s going to happen next.
The truth is – and nobody wants to say this, but – nobody knows for certain what will happen next.
I listened to folks who have been calling for a recession now for several years in a row. And the “hold in hope” crowd has been wrong, too. Stocks like PayPal, Match Group, and many in the biotech sector simply have little chance of reaching the pandemic levels anytime soon.
But here’s what we do now.
Next week, we’ll begin a new cycle of company earnings reports. Every major company from Microsoft to Apple will give us a progress report for the first three months of 2024, and more importantly, most will give us a financial outlook for the next quarter and beyond.
Later this week, I’ll be giving you a preview of the financial sector – or the major banks – and what to look for when they report their earnings next week. The truth is, this is important. The next four weeks will be the most important month of 2024 in terms of investing.
With seemingly every market pushing higher and higher, this round of corporate earnings will decide if that can continue… or if markets will ultimately begin to fall.
The most important thing you can do right now is develop a game plan.
The reason we need a game plan is buying into this market could become very, very difficult. That’s because our instinct is when stocks have rallied as much as they have over the past three months, we feel like they must be ready to crash or fall.
And that’s why the next four weeks are so important.
With a solid round of corporate earnings and guidance, that could easily send markets even higher. Just look at stocks like Nvidia and Microsoft over the past year. You could have bought them after the initial hype of artificial intelligence really took off and still be sitting on huge – even life-changing – gains.
I hear it all the time from investors. Sometimes we recommend a stock that has already rallied. Many feel that it’s too late to get in or we’re late to the party. The truth is, it might be harder to buy a stock that has gone up 50% in a short period than to buy one that has fallen 50%.
But in reality, financial performance and potential really can drive stocks higher for a long time.
Now, speaking of stocks that are falling, the next four weeks could usher in a round of profit-taking and selling on Wall Street. If – and when – this materializes, the macro pundits who have been calling for a recession for several years now will get louder and louder as they feel like their chance to be right has finally come.
Words like “market crashing,” “bubbles popping,” and “defensive strategies,” will gain traction.
And all of it will be a distraction.
The markets will be falling for one of two reasons…
First, if the market has gotten ahead of itself and priced in revenue and profits that simply won’t show up until maybe a later date. I often refer to this as a rerating of stocks or a resetting of expectations.
Under this scenario, we will be – and are – active buyers of falling stocks. When you have a resetting of expectations and a rerating of stocks, as long as the profit potential and revenue potential in the future are still there, we are a buyer in that scenario.
The second scenario is a little worse. That’s one where things have materially changed and revenue and profits just simply aren’t going to be there.
You can look at sectors like electric vehicles and solar stocks. They’ve experienced this over the past 12 months. Just looking at the financials of stocks like Rivian, Lucid, and even Tesla reveals what happens when demand actually dries up.
The next four weeks will decide which direction we go.
Now, I know you don’t subscribe to this newsletter or watch the videos to have me tell you stocks are going to go either up or down over the next four weeks. Anyone can tell you that.
So here’s what I think is going to happen.
Expectations are simply too high nearly across the board. As excited as I am about artificial intelligence, it’s still very, very early.
Companies like Microsoft are rumored to be spending more than $100 billion on a single data center. For context, Microsoft today spends $50 billion annually across all 200 or so of its data centers and property plant equipment. The reality is that this investment cycle where we’re talking about tens of billions of dollars – $100 billion – won’t be immediately offset by revenue.
In short, that means these companies will take a hit on the profits. That’s going to be Google, Apple, Amazon, and many other technology companies in the same boat.
Semiconductor stocks have rightly priced in a lot of this growth. But there are only so many chips that can be ordered and delivered in a single year.
This round of earnings over the next four weeks will likely see stocks fall from the highs, giving us excellent buying opportunities for high-quality stocks at lower prices.
And, again, later this week I’ll return to give you specific financial metrics to look at so you’re prepared for this critical four-week period when we’ll hear from nearly every major company in the stock market.
That was The Bleeding Edge for today. I’ll be back again later this week. Good luck with your investments.
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