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Show Notes
Callie Cox is an investment analyst at eToro U.S. where she teaches customers about the power of capital markets in their wallets and in their lives. Having worked in financial research for her entire career, Callie is passionate about helping people of all skill levels learn how to think about investing. In addition to being featured across all of the major media outlets, Callie regularly shares engaging content about markets and the economy from her LinkedIn and X (formerly Twitter) accounts.
In this episode, we’ll explore the surprising rally in the fourth quarter of 2023, delve into the intricacies of market valuations, and unravel what 2024 might hold for investors. Callie also sheds light on the Big Tech, the new Bitcoin ETFs, and the latest results from eToro’s Investor Behavior Study.
Here are my notes from our conversation.
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Reflecting on the Fourth Quarter 2023 Rally (1:30)
Our conversation starts by reflecting on the market rally in the fourth quarter of 2023 that started near the end of October.
Fed Chairman Powell hinted that the Fed was nearing the end of rate hikes while also using encouraging language when talking about inflation. This caused the market to price in rate cuts in 2024 and prompted a quick shift in market sentiment. The result was a ~15% fourth quarter rally in the S&P 500.
But not all stocks had a good year in 2023.
As Callie wrote in a piece for The Financial Times, 72% of the individual stocks within the S&P 500 underperformed the index, with one-third of all S&P 500 stocks in 2023 finishing in the red.
As a result, investors with notable positions in individual stocks may have felt disconnected from the positive market headlines.
Market Leadership and Trends (9:30)
When discussing potential shifts in market leadership, Callie notes that momentum can be misleading and that market leadership often shifts between bull markets. While Big Tech led the last bull market, it may not lead the next one. It’s common for investor preferences to evolve, and different sectors gain prominence.
Callie highlights manufacturing and industrials, spurred by reshoring and technology advances, as interesting areas to watch.
The Surge in Money Market Fund Flows (15:10)
Despite a strong stock market, there has been a surge into money market funds, which reflects the current high-rate environment. As Callie explains, investors see the value in earning higher interest on savings, especially amidst economic uncertainty.
This dynamic is unique compared to previous bull markets where cash levels typically declined early on.
The Case For Optimism in 2024 (19:20)
As Callie notes–and I agree–it’s hard to be anything other than long-term optimistic on the stock market when you look at history. As Callie notes, the stock market is a reflection of human progress, resiliency, and ingenuity in overcoming challenges.
We also spoke about the potential of AI in shaping future market trends.
Callie points out that AI has begun to significantly impact sales in certain companies and foresees its broader application across various industries beyond just big tech and semiconductors.
Additionally, she notes the remarkable increase in factory construction spending, indicative of a resurgence in manufacturing, driven by reshoring and new policy initiatives.
Callie believes these undercurrents, particularly the integration of AI and the revival of manufacturing, are likely to be key drivers in the market going forward.
Insights from eToro’s Retail Investor Survey (22:50)
Callie delves into the findings of eToro’s retail investor survey, revealing global investor behaviors and sentiments.
She starts by expressing her admiration for the resilience of everyday investors, who have remained consistently invested through both bear and bull markets. Although a bit surprised by the trend, Callie attributes it partly to the strength of the job market, which provides financial stability and enables investment.
Callie also suggests that the rise in accessibility and discussion around investing, particularly since COVID, has fostered a generation of investors who are more strategic and less reactionary in their investment approach, even amidst high rates and inflation.
We also discussed the economic maturation of millennials who are now in a position to invest more significantly. They’ve experienced enough significant economic upheavals to have shaped their investment perspectives, making them more resilient and savvy in their strategies.
Potential Impact of a Bitcoin ETF (29:15)
Regarding the potential approval of a Bitcoin ETF, it’s important for investors to understand their goals and risk tolerance.
Callie discusses the implications of a potential Bitcoin ETF approval, emphasizing the importance for investors to stay focused on their goals and risk tolerance in the crypto market.
Callie elaborates on the evolving landscape of crypto investment, but you can listen to more in-depth coverage of this topic in EP.135: Bitcoin ETFs Are Here, Should You Invest?
Resources:
- Find Callie online: LinkedIn, Twitter (X),
- EP.135: Bitcoin ETFs Are Here, Should You Invest?
The Long Term Investor is edited by the team at The Podcast Consultant
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