Federal Reserve

Gold & Silver Stole The Show!

Posted on by George Mahfouz

Despite the overall markets booking impressive gains in 2025, it was gold and silver that stole the show. Gold (see chart here) went up and eye-popping 65% last year, while silver (see chart here) booked an unbelievable 135% return in 2025. That’s right, 65% and 135% annual returns on these precious metals (click here) which also set all-time highs. This type of parabolic move in gold and silver has not been seen in decades.

The overall markets also posted double digit gains with the Dow Jones Industrial Average (see chart here) gaining over 13% on the year, the S&P 500 (see chart here) booked a 16% plus gain, the Nasdaq Composite (see chart here) gained 20% and the small-cap Russell 2000 (see chart here) closed the year up 12%.

Needless the say the bulls were very happy with how the markets fared last year. As we head into the new year, I am looking for a similar backdrop at least at it pertains to the overall markets. In December, not only did the Federal Reserve cut interest rates they moved from quantitative tightening (QT) to quantitative easing (QE). This move essentially is going to flood the system with liquidity and capital flow that will move into the markets over the course of time. I know we are near or at record highs but there is an old saying on Wall Street and that is “don’t fight the Fed”. Meaning, when the Federal Reserve begins to implement accommodative policies such as moving from “QT” to “QE” markets typically respond favorably.

Make no mistake there are still risks out there from the geo-political backdrop to the instability out of Washington D.C. Without question when this volatility comes in and it will, the markets will act accordingly. So as much as this bull market can still run, I expect dramatic selloffs along the way.

Wishing everyone a safe and most prosperous New Year 🙂

~George

Not So Fast…

Posted on by George Mahfouz

Not so fast was the message that Jerome Powell signaled in last week’s Federal Reserve policy speech. Yes, the Federal Reserve cut the benchmark interest rate by 1/4 point to the 3.75-4.00 range which is what the market expected. However, after cutting the benchmark rate, Chairman Powell took to the podium (click here) and commented “there is no assurance that a December rate cut would occur” which immediately sent the stocks and the crypto market lower. Investors were caught off guard that the Chairman guided in this manner. In fairness to the Powell’s updated guidance, he also stated that because of the government shutdown there are no government economic data reports being released for the Fed to base any future decision on further interest rate cuts which makes sense.

What makes more sense is that Congress comes together now to reopen the government for all the reasons we know, including the restart of key economic reports that are issued by the government. How in the world can the Federal Reserve base policy decisions when they do not get the data they need from the government to assess the current state of the economy?  Investing and making investment decisions is already a complex process and the last thing we need is the leadership of this country to make it even more complex. Let’s hope Congress can come together sooner than later and reopen the government.

The good news is that the Fed did cut rates last week and this should bode well for the equity and crypto markets. Couple this with a better-than-expected Q3 earnings reporting season from corporate America and we should rally into year-end, especially if the government reopens. There are other factors at play such as coming to an agreement with China on trade and continuation of corporate earnings growth. Should all these factors align, then I would not be surprised to see a year-end rally.

Of course there is no guarantee that everything will align by year-end but despite the current uncertainties that we face what is impressive to me is that the Dow Jones Industrial Average (see chart here) the S&P 500 (see chart here), the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) are still trading near all-time highs.

Good luck to all 🙂

~George

Same Old, Same Old…

Posted on by George Mahfouz

It’s the same old, same old for the stock market. New record highs were set today on the S&P 500 (see chart here) and the Nasdaq Composite (see chart here)! Wait a minute, didn’t the government partially shutdown earlier this week? And yet the markets are still hitting all-time highs! Well hopefully the gov. figures this out as quickly as possible so that what is shut down can reopen. As the S&P 500 and the Nasdaq hit all-time highs today, both the Dow Jones Industrial Average (see chart here) and the small-cap Russell 2000 (see chart here) are within striking distance of their respective all-times highs as well.

So, what in the world is going on with our markets? For starters, corporate earnings for the most part have exceeded expectations up to this point despite the swath of tariffs that have been imposed this year. Secondly, the Federal Reserve cut interest rates last month and have signaled they are prepared to reduce rates further if needed. From the looks of things, lower rates are becoming more obvious as the job market continues to struggle. Normally, I would be concerned of how frothy the markets look and there are pockets of the market that are frothy. However, if corporate America continues to deliver better than expected earnings, coupled with a more accommodative Federal Reserve, the chances of stocks going higher into year-end is a strong possibility. I am not suggesting this will be the case, but I am beyond impressed with how resilient the stock market continues to be.

As I look at the technical shape of the key indexes the Dow Jones Industrial Average (see chart here) and the Russell 2000 (see chart here) are comfortably trading above their 20-day, 50-day and 200 day moving averages. Furthermore, both indexes are below the 70 value level of the Relative Strength Index aka the RSI. The 70-value level of the RSI is considered entering overbought territory. So, it appears that these two indices have room to run. A bit of a different story with the S&P 500 (see chart here) and the Nasdaq Composite (see chart here) whereas today both have tapped the 70 value level of the RSI. Please note that with the RSI  it is not uncommon for stocks or indexes to go past the initial overbought level of 70 and proceed to as high as 80 and in some instances the 90 value level of the RSI. An 80 and especially a 90 value level is viewed as extremely overbought according the RSI principles. No matter what the case is, this bull market seemingly is not tired yet.

Good luck to all 🙂

~George

Broken Records, Literally…

Posted on by George Mahfouz

Records continue to be broken as both the Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) set records highs yet again last week. Yes, what typically is a softer month for stocks these major averages ignored history and recorded all-time highs. The Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) lagged a bit, but still is within striking distance of their all-time highs.

With all the uncertainty out of Washington, whether it’s the ongoing tariffs saga or the continuing demands directed at the Federal Reserve, how is it possible that index records are continuing to be set? One factor is the Federal Reserve is changing its tone on interest rates. The pressure has been on the Fed to start reducing rates since the beginning of the year. The Federal Reserve has a dual mandate pertaining to interest rate policies and that mandate is jobs and inflation. Unfortunately for the Fed, they are in a pickle. On one hand the job market has deteriorated over the past months, however, inflation continues to tick up. This is why the Fed has had their hands tied so far this year. But with the latest dismal job report that was issued in August, this has tilted the Fed to change their guidance to a more dovish tone. The markets have certainly has responded as evidenced by the new records that the Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) have set.

Speaking of the jobs report, the August jobs report is schedule to be release on Friday September 5th. All eyes will be on this report which should cement rate cuts. If we see an even weaker than expected number, this could case the upcoming rate cut to be even more aggressive than the street is expecting. Whatever the case may be, I expect a volatile week ahead for the markets with plenty of opportunities.

Good luck to all 🙂

~George

 

About A Month Away…

Posted on by George Mahfouz

We are about a month away from the election and the markets seemingly don’t care or have any new concerns. Once again both the Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) hit records. The Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) are trading positively as well.

Without question there is even more confidence in the markets now that the Federal Reserve is cutting interest rate. Not only did the Fed cut interest rates by 1/2  point last month, Jerome Powell the Chairman of the Federal Reserve signaled more rate cuts are forthcoming. Couple this new sentiment from the Federal Reserve along with growing confidence in the economy and the job market, it’s no wonder the Dow Jones (see chart here) and the S&P 500 (see chart here) are once again setting all-time highs. Some pundits are beginning to call this a “goldilocks economy” while others are waiting for the next shoe to drop. As far as the next big catalyst is concerned, well clearly it’s the upcoming Presidential election. However, here in October we will begin to see Q3 earnings results being reported from corporate America. This too is expected to be a tell-tale sign of how companies are currently faring and we should definitely see how the consumer is feeling, especially with the rate cut and the positive impact that is having on consumers. This new backdrop should begin trickling down to corporate America revenues and future forecasts.

Let’s take a quick look at the technical shape of the indexes. The Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) are trading near the upper end of the trading range they have been in. Please note neither index is in “overbought” territory yet but are approaching the 70 level of the RSI aka the Relative Strength Index. As I look at the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here), these indexes are finding support at their 20-day moving averages. So technically speaking things look to be ok here too.

Good luck to all 🙂

~George

All Time High For The Dow!

Posted on by George Mahfouz

Yet another all-time high was set for the Dow Jones Industrial Average! (see chart here and below). Stocks continuing their winning ways especially for the Dow Jones Industrial Average which closed out the month of August at 41,563 setting a fresh record high. The S&P 500 (see chart here) is flirting with a new high as well, however, both the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) are playing catch up.

For some the stock market performance here in 2024 is a head scratcher. Pundits are asking why is the stock market continuing to outperform despite the headwinds our country faces? The immediate knee jerk response to that question is seemingly easy to answer; inflation is cooling, and the Federal Reserve is signaling rate cuts. I am not so sure it is that easy of an answer. Sure, inflation is indeed adjusting down and the Fed seems to be ready to cut rates, however, I would also have to add in that the calendar is also playing a role. Historically, election years tend to positive years for stocks, this along with the Fed seemingly ready to cut rates is a set-up for market outperformance, hence all-time highs have been plentiful throughout this calendar year. That being said, I would not be surprised to see volatility pick right back up as we head into September. Historically, September is a tough month for stocks, (click here). Pundits call it the September effect which basically is an historical average over the past 100 years on how the market performs in the month of September and that metric demonstrates a consistent downward trend in this given month. Now past performance does not guarantee future results, but this is something I will pay attention to.

Whatever the case is, we are now heading straight into year end with a Presidential Election to boot. I do expect a lot of action and volatility straight ahead. Good luck to all 🙂

~George

 

Strongest Performance In 5 Years…

Posted on by George Mahfouz

Stocks took off in the first quarter with the S&P 500 (see chart here) delivering its strongest Q1 performance in 5 years gaining over 10%. The Dow Jones Industrial Average (see chart here) also closed Q1 with a gain of 5.6%, the Nasdaq Composite (see chart here) finished the quarter up over 9% and the small-cap Russell 2000 (see chart here) finished up around 5%. So, as I posted last month, stocks continue their record setting ways.

So why are the markets continuing to demonstrate strength despite interest rates remaining high relative to when this bull market started? I think part of the answer is right there. The Federal Reserve is continuing to indicate that three interest rate cuts remain in place for 2024 which is bullish for the markets.

Another first quarter driver of the markets can be attributed to the “Magnificent 7”. Nvidia (Symbol: NVDA), Meta Platforms (Symbol: Meta), Amazon (Symbol: AMZN), Microsoft (Symbol: MSFT), Alphabet (Symbol: GOOGL), Apple (AAPL) and Tesla (TSLA) are the Magnificent 7 and are responsible for 40% of the S&P 500’s (see chart here) gain in Q1. This dynamic too attributed to the momentum stocks witnessed in the first quarter although there are a couple of chinks appearing in the armor of the Magnificent 7 and that is the recent under performance of Apple and Tesla. Personally, I would like to see a broader rally here not just 7 stocks that are making up a big percentage of the overall gains.

That being said, and now that the first quarter of the year is in the books, earnings reporting season begins here in April. Earnings season should be the next catalyst as to where stocks and indexes go. As I just spoke to, I would like to see a broader based rally and Q1’s earnings results just might deliver results that could extend this year’s impressive rally. However, if corporate America issues flat to softer results, we could see a pause in this rally and even a potential pullback.

Good luck to all 🙂

~George

Record Highs For Stocks!

Posted on by George Mahfouz

Record highs for stocks are hitting the tape with both the Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) hit all time highs yesterday. The Dow Jones Industrial Average hit a high of 38,588 while the S&P 500 traded at 4931 before closing slightly lower. However, the Nasdaq Composite (see chart here) and the Russell 2000 (see chart here) did not hit their all-time highs but the uptrend in those indexes continue.

So why are two of the major averages at all-time highs? For one I think the markets have been anticipating the Federal Reserve to start cutting interest rates this year. However, Fed Chair Jerome Powell yesterday said rate cuts in the near term is not likely. Suffice to say the markets did sell off yesterday after Chair Powell’s remarks. The other factor driving stocks higher is the undeniable strength our economy and the job market. The latest Gross Domestic Product (GDP) report surprised analysts yet again. Economists were expecting the GDP to come in at an annualized growth rate of 1.5%. Instead, the economy grew on an annualized basis of 3.3%. I’d say that’s a beat! The GDP is a measure used to evaluate the strength of the economy. The GDP is the total market value of the final goods and services produced in a given country.

Going forward without question the strength of the economy and job market, along with inflation, will be guiding the Federal Reserve as to the timing of when they will begin to cut rates. Until then, the strength of companies’ earnings results, geo political factors and our own political backdrop should be the catalysts that determine where the markets trade.

Last but not least, the technical backdrop of the key indexes is in decent shape. Yes, the Dow Jones Industrial and the S&P 500 did breach the 70 RSI level briefly but has retreated some since going into overbought territory. All in all, from a technical standpoint, I do not see any alarming trends.

Good luck to all 🙂

~George

 

 

Cheers To The Markets!

Posted on by George Mahfouz

Cheers to the markets and what a year for stocks! 2023 turned out to be a spectacular year for the stock market as not many expected the markets to rip-roar as it did last year. The Dow Jones Industrial Average (see chart here) finished the year up almost 14 percent. The S&P 500 (see chart here) closed the year up 24%. The Nasdaq Composite (see chart here) closed the year up a whopping 44 percent. A big part of the Nasdaq’s eye-popping performance was how the “Magnificent 7” performed. For those of you who do not know who the Magnificent 7 are, it is the big tech group made up of Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT), Google owner Alphabet (NasdaqGS: GOOGL), Amazon (NasdaqGS: AMZN), Nvidia (NasdaqGS: NVDA) and Meta Platforms (NasdaqGS: META) and Tesla (NasdaqGS: TSLA). Finally, the small-cap Russell 2000 (see chart here) closed the year up 15%.

Many stock market experts did not expect such a stellar year for stocks. Let’s dig in and see what happened. For starters, inflation itself retreated faster than anyone expected which now has the Federal Reserve speaking to cutting rates in 2024. This metric alone is very bullish for stocks. Then factor in how strong the economy has been it’s no wonder we are at or near all-time highs. What’s equally impressive is how the markets have shrugged off the geopolitical backdrop. From two wars that seemingly have no end is sight, to the U.S. political divide, to China’s stagnant economy, nothing seems to be bothering the markets, at least not yet.

As we now look forward to 2024, I think we are in for a doozy of a year, at least from a volatility standpoint. We are also in an election year, and this alone should create higher volatility. I would also expect that after such a strong performance in 2023 that a pause and/or even a correction of some sort could potentially be in the cards for the markets in general.

Wishing everyone the healthiest, happiest, and most prosperous new year 🙂

~George

The Bounce Was Indeed Real…

Posted on by George Mahfouz

In my November 1st blog, I asked the question was the bounce real? Fast forward to today and indeed the bounce the markets experienced in the early fall not only held but took off to and are nearing all-time highs. The Dow Jones Industrials (see chart here) closed yesterday at 36,245, the S&P 500 (see chart here) closed at 4,594 the Nasdaq Composite (see chart here) closed at 14,305 and the small-cap Russell 2000 (see chart here) finished the month out at 1,862.

It’s truly incredible to see how resilient the markets are considering the current interest rate environment and how inflation continues to impact the consumer. Rising interest rates tend to impact the stock market negatively and inflation impacts the consumer negatively too. So why are the markets approaching all-time highs? Could it be that the economy grew at a faster rate in the 3rd quarter than previously reported? Or could it be that the Federal Reserve may be ready to slow down or pause its current interest rate policy? I am not sure on either front, but what is apparent is that the markets are brushing off the current backdrop of Fed’s economic policy and the ongoing inflationary pressures. One thing I have learned over the years is the trend is your friend and these markets continue to trend up.

That being said, let’s look at a key technical indicator that many traders and investors rely on to see if we are approaching or at overbought conditions. According to the Relative Strength Index aka the RSI both the Dow Jones Industrial Average (see chart here) and the S&P 500 (see chart here) have crossed and are trading above the 70 value level. The 70-value level according to the relative strength index is the beginning of overbought conditions. The Nasdaq Composite (see chart here) and the Russell 2000 (see chart here) are fast approaching the 70-value level. I do want to point out that stocks and indexes can remain overbought for extended periods of time, but I would not be surprised if we see somewhat of a pause or possibly a reversal here in the month of December to this very impressive rally we are currently in.

It’s always a good idea to consult a certified financial advisor before making any adjustments to your portfolio. Good luck to all 🙂

~George