Acetaminophen or Small Cap Fever?

Warm Greetings from Bankfluence! As we immerse ourselves in the joyous spirit of the Holiday Season, we extend our heartfelt wishes for happiness, safety, and love to everyone. For those fortunate enough to share this special time with family and loved ones, may you relish each moment and, above all, savor the beauty of being present in the warmth of these celebrations!

As we reflect on the financial landscape, we are delighted to share the news of remarkable progress. As of the closing bell last Friday, the Dow Jones Industrial Average (DOW), S&P 500, and Nasdaq have each displayed impressive gains of approximately 4.10%, 4.28%, and 5.95%, respectively, since the start of December 1, 2023. This positive trajectory is nothing short of astonishing, especially in light of the performance of these indices in the previous month.

It's safe to say that our initial expectations for December took an unexpected turn. The scenarios we anticipated, namely a modest pullback ranging between 3-5% or a period of consolidation, seem to have been pleasantly disrupted by a different narrative. History may rhyme, but the 4-6% positive gains we've witnessed so far align with a scenario not initially outlined in Bankfluence's playbook. In the ever-evolving world of finance, we find ourselves pleasantly surprised by the twists and turns of the market, reaffirming the dynamic nature of our financial landscape.

Nevertheless, in the spirit of adaptability, we successfully tailored our approach week after week, culminating in a commendable portfolio performance to conclude the year. Reflecting on the prevailing sentiments among investors as the year draws to a close, we find ourselves deeply grateful. Despite being on the wrong side of the market for a significant part of the year, our strategic acumen proved accurate when it truly mattered.

We extend our appreciation to the enigmatic Mr. Market for acknowledging and valuing our unconventional investment style and the patience exhibited throughout the year.

Now, let us delve into the unfolding events of the past week to gain further insights.

Weekly sector performance ranked as follows:

• Communication Services - 4.17%

• Basic Materials - 2.71%

• Energy - 2.16% 

• Healthcare - 1.63%

• Industrials - 1.20%

• Consumer Defensive - 0.91%

• Financial - 0.81%

• Consumer Cyclical - 0.45%

• Real Estate - 0.38%

•  Technology - 0.68%

• Utilities - (0.50%)

The standout performer of the week was undeniably the Communication Services Sector, boasting an impressive overall gain of 4.17%. Remarkably, if memory serves correctly, this marks the most substantial one-week surge by any sector since the inception of Bankfluence's publication.

As the seasoned cab drivers would affirm, we find ourselves in the much-anticipated 'Santa Claus Rally' (SCR) period, initiated last week and slated to extend a few days into the New Year. While the lore surrounding this period includes phrases like 'If Santa Claus should fail to call, bears may come to Broad and Wall,' recent history (2021/2022, to be exact) witnessed Santa's call, and yet the bears made an unexpected entrance. Hence, a word to the wise – consider adding an extra dash of skepticism to those milk and cookies this year!

Contemplating the unpredictable nature of Mr. Market, one cannot help but entertain the prospect of a curveball where Santa decides to skip the call, and the bears opt for a no-show. In such a scenario, how does one navigate the unforeseen? Picture this: Santa indeed makes the call, and Bankfluence, true to its nature, experiences a momentary panic before swiftly texting back, "Did you call?" Because who answers phone calls anymore?

Stay vigilant across all scenarios as we unveil in the coming days the innovative opinions Bankfluence has cultivated for the upcoming week.

Amidst the festive cheer and discussions surrounding SCR, Bankfluence cherishes a beloved tradition this season: the anticipation of 'Next Year's Predictions.' This customary affair never fails to captivate, with forecasts spanning a broad spectrum. Currently, the predictions for the S&P 500 range from 3300 to 6000, encapsulating insights from both traditional Wall Street analysts and unconventional "X" platform prognostications, where emotions often run high.

Notably, Mr. Yardeni has entered the scene boldly, forecasting a year-end target of 5400 for 2024. Relative to Friday's close, this implies an approximately 13.6% increase—a seemingly attainable figure when considering the S&P's roughly 23% gain this year. As we embark on this intriguing journey of predictions, we wish everyone the best of luck, and, in the timeless words of wisdom, 'May the Odds Be Ever in Your Favor' (insert mockingjay whistle).

Let's delve into the current fervor surrounding Small Cap investments, a phenomenon that has taken center stage. Whether it's Bankfluence's hiatus from the "X" scene or the sheer ubiquity of the trade on the platform, the question arises: can this Small Cap Fever be as straightforward as it seems? While the charts, examined through the lens of a proficient technical analyst, suggest its viability, we find ourselves pondering a deeper question—does the very anticipation of this trend by the masses threaten its realization? Reflecting on the past four markets, we encounter scenarios that defied conventional expectations.

In 2020, the global pandemic sent markets plummeting by ~30%, only to witness a rapid recovery that caught many off guard. Who had the global pandemic playbook?

The subsequent year, 2021, unfolded as a continuation of the pandemic, marked by economic shutdowns, yet the market boasted gains exceeding 20%. Who had that playbook?

In 2022, amidst declarations of 'transitory' inflation, Santa Claus made his call, and yet the bears still descended upon Broad and Wall. Who had that playbook?

Moving into 2023, the year commenced with recession fears and ended with the unexpected rise of the Artificial Intelligence revolution and the emergence of the Magnificent 7. While many claim foresight, performance data reveals a stark contrast. If one didn't overweight QQQs or catch the perfect wave, competing with the S&P proved challenging.

With a limited few accurately predicting any of these events, and an even smaller percentage correct about more than one, the question of whether Small Cap Fever will materialize as the widely predicted investment looms. Four years of data suggest a cautious approach, yet broadening the scope introduces an element of uncertainty.

Bankfluence's sole prediction for 2024: the market will not be as straightforward or as challenging as expectations dictate. The true narrative remains in the process of unfolding. It is our belief that companies often overlooked, devoid of media attention, will emerge as outperformers. Consider, for instance, Abercrombie & Fitch's remarkable 304% year—now, who had that playbook?

Bankfluence eagerly anticipates the opportunity to discern and navigate those market dynamics alongside you, strategically riding the waves of financial opportunities.