Stock Market at New Highs? Here's What I'm Buying Part 1 of 2

Summary

In this financial analysis, Adam discusses the S&P 500 reaching a new high, emphasizing that all-time highs are historically bullish signals, not reasons to sell. He compares the current market with historical data, highlighting the importance of earnings support for stock prices. Adam advises against buying at the peak of a wave, suggesting patience for a pullback to add positions. He also addresses sector performance, noting that while some stocks soar, others lag, creating opportunities for value investors. The video concludes with a teaser for a follow-up on identifying undervalued stocks.

Takeaways

• 📈 The S&P 500 reached a new all-time high of 5,500 points, marking the 31st time in 2024, and is up over 15% year to date.
• 🤔 Despite new highs, there's a common fear of market downturn, with experts often warning of a bubble and potential crash, but history suggests otherwise.
• 📊 Historical data shows that since 1950, the S&P 500 has set 1,250 all-time highs, averaging about 16 highs per year, which doesn't indicate a bearish market.
• 📚 The 1990s had the most all-time highs with 310, and it was a bullish decade with a 32% market gain, while the 2000s had the least with only 13, marking a bearish decade.
• 📉 The fear of selling at a peak is common, but all-time highs are more of a bullish signal, reflecting market and economic strength.
• 🚀 Companies leading the market today, like Nvidia, Microsoft, and Apple, are fundamentally strong with significant earnings growth, unlike the dot-com bubble.
• 💡 Earnings per share are supporting the S&P 500's rise, indicating a healthy market not driven by speculation alone.
• 📉 Market corrections are normal and expected; investors should look for key support levels to add to positions during retracements.
• 💸 Sector performance is uneven, with technology and communication services leading gains, while some sectors like real estate and basic materials lag behind.
• 🧐 Diversification can lead to underperformance in the short term if certain sectors are not in market favor, but it's key for long-term outperformance.
• 🔍 Investors should distinguish between unloved stocks that are undervalued due to temporary issues and those with long-term structural problems.

Q & A

What milestone did the S&P 500 reach on Thursday?

The S&P 500 reached a new all-time high of 5,500 points on Thursday.

How many times has the US market set an all-time high in 2024 according to the transcript?

According to the transcript, the US market set an all-time high 31 times in 2024.

What is the average number of all-time highs the S&P 500 has made per year since 1950?

Since 1950, the S&P 500 has made an average of 16 all-time highs per year.

Which decade had the most all-time highs in the S&P 500, and what was the market gain during that period?

The 1990s had the most all-time highs with 310, and the market gained 32% during that decade.

What is the difference between the market condition during the dot-com bubble and the current market, according to the speaker?

During the dot-com bubble, stock prices were driven by hype and speculation without strong earnings, whereas today's leading stocks like Nvidia, Microsoft, and Apple have strong earnings supporting their share prices.

What is the speaker's view on all-time highs as a signal for market behavior?

The speaker believes that all-time highs are a bullish signal, indicating market and economic strength, rather than a bearish signal to sell stocks.

What is the speaker's strategy for buying stocks or ETFs?

The speaker prefers to buy on a pullback or retracement, not during a wave up pattern, and waits for significant support levels to average in or add to positions.

What are the three key support levels the speaker identifies for the S&P 500?

The three key support levels identified are the 20 EMA at 5173, the previous swing low coinciding with the 40 EMA at 4954, and the 50 moving average on weekly candles coinciding with the previous swing high.

Why might an investor's portfolio not be performing as well as the S&P 500, despite the market being up?

An investor's portfolio might not be performing as well if it is not heavily weighted in the sectors or companies that are driving the market gains, such as AI-related hardware companies.

What is the speaker's approach to investing in companies that have not participated in the AI Bull Run?

The speaker advises to evaluate these companies individually; some may be great companies down temporarily for non-fundamental reasons, while others may have long-term structural problems and should be avoided.

What does the speaker suggest for investors who are not currently outperforming the S&P 500?

The speaker suggests that short-term underperformance is not a sign of poor investing skills, as market rotation and sector performance can vary. Instead, focusing on long-term investment in quality businesses will likely result in outperforming the S&P 500 over time.