Stock Market This Week

Stock Market This Week – 01/06/24

Stock Market This Week

Stock Market This Week – 01/06/24

The first week in 2024 was a short trading week. But investors sold off stocks, especially tech stocks. Why? The job numbers were better than expected, indicating the United States economy is still growing, and jobs are plentiful, reducing the prospect of an interest rate cut. 

Many people did not expect this. Looking back at economist predictions for 2023, 58% said the U.S. would enter a recession, and 69% stated the Federal Reserve could not increase interest rates and lower inflation to 2% without causing a recession. Thankfully, 2023 worked out better than their predictions.

The American economy has proven to be incredibly resilient. In 2023, it overcame a banking crisis, high inflation, rising interest rates, weak manufacturing, a strong dollar, and geopolitical conflicts. Whether 2024 will be more of the same is difficult to predict. But unless job growth slows and unemployment rises, a recession will probably not happen.

The lesson, though, is to buy and hold. Trying to predict stock market returns based on economic predictions is a fool’s errand for the average investor. However, stock markets tend to rise over time. John Bogle gave a formula for expected returns, which is the sum of earnings growth, price-to-earnings ratio (P/E ratio) expansion or contraction, and dividend yield. Of these, one is known, the dividend yield, while earnings growth can be consistent over a several-year stretch. Only P/E ratio expansion or contraction is challenging to determine because stocks can stay over- or undervalued for years. As a result, I concentrate on dividend growth and income stocks.

If you are self-directed investors but need the guidance of a newsletter, I recommend the Sure Dividend Newsletter. They have a solid track record of picking dividend stocks. Click here to try Sure Dividend* (7-day free trial).

Stock Market Overview

After an excellent 2023, data from Stock Rover* showed a weak start for the year. The major indices and markets declined on fears that interest rates will remain elevated for an extended time. The Dow Jones Industrial Average (DJIA) finished first. It was followed by the S&P 500 Index, the Nasdaq Composite, and the Russell 2000.

Three of the 11 sectors gained this week. The Utilities, Healthcare, and Energy sectors were top performers. However, the Industrials, Consumer Cyclical, and Technology sectors were the worst performers.

Oil prices recovered this week, ending at ~$74. However, demand remains weak, supply is strong, and the quantity in storage is robust. The VIX gained ~8%+ to 13.4, which is still well below its long-term average. Gold fell to ~$2,052 per ounce.

Stock Market Returns This Week
Source: Stock Rover*

Since it is the first week of 2024, we have posted the 1-year returns instead of year-to-date.

YTD Stock Market Returns
Source: Stock Rover*

The dividend growth investing strategy started the year down but is still ahead of most indices. The table below shows their performance by category.

CategoryYTD Return (%)
Dividend Kings-1.39%
Dividend Aristocrats-0.83%
Dividend Champions-1.38%
Dividend Contenders-1.69%
Dividend Challengers-2.31%
Source: Stock Rover*

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Stock Market Valuation This Week

The S&P 500 Index trades at a price-to-earnings ratio of 25.95X, and the Schiller P/E Ratio is about 31.78X. These multiples are based on trailing twelve months (TTM) earnings.

The long-term means of these two ratios are approximately 16X and 17X, respectively. 

The market is still overvalued despite the recent correction and a bear market and rebound. Earnings multiples of more than 30X are overvalued based on historical data.

Resources

Curated Weekend Reading From Around The Web

Portfolio Management and Investing

Retirement

Financial Independence


Here are my recommendations:

Affiliates

  • Simply Investing Report & Analysis Platform or the Course can teach you how to invest in stocks. Try it free for 14 days. 
  • Sure Dividend Newsletter is an excellent resource for DIY dividend growth investors and retirees. Try it free for 7 days.
  • Stock Rover is the leading investment research platform with all the fundamental metrics, screens, and analysis tools you need. Try it free for 14 days.
  • Portfolio Insight is the newest and most complete portfolio management tool with built-in stock screeners. Try it free for 14 days.


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*This post contains affiliate links meaning that I earn a commission for any purchases that you make at the Affiliates website through these links. This will not incur additional costs for you. Please read my disclosure for more information.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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