Minerva Market View for Dec 1, 2023

November was the best month for the S&P and for our portfolio. Here's how we're positioning for December.

Dec 01, 2023

Good evening. The S&P 500’s return in November ranks among the top 10 monthly performances in recent history – and we’ve been riding it since it bottomed!

But here’s where it gets more interesting: if you were a buy-and-hold investor in the SPY 0.00%↑, you’ve essentially seen no returns apart from dividends in the last 2 years:

S&P unchanged in 2 years - goes to show the power of market timing and active trading vs passive buy-and-hold investing

And as they say, narratives follow price. Sure enough, we’re seeing analysts upgrading their economic and market forecasts for 2024 and there will be many more to come:

Bloomberg now expects Fed Funds Rate cuts of 1.25% next year.

Odds of a “breakout” rising: switch to stocks

There’s still time to get in on the rally though, as the first few days of December are expected to be slow from a seasonality perspective, and the rally can be expected to resume in the second half:

Bank of America's December seasonality: 1st 10 days of December a snoozer, but last 10 days a boozer of gains, up 1.75% on avg. and higher 83% of the time since 1931 in pre-election years!

Ryan Detrick has had one of the most prescient market forecasts this year and here’s what he expects:

There will also likely be some rotation from the mega-caps to small-caps and from the market-cap S&P SPY 0.00%↑ to the equal-weight S&P RSP 0.00%↑.

Read on for how we’re positioning.

Portfolio and Performance

We posted a decent return today, lagging the SPY 0.00%↑ but outperforming the index over a weekly/last 5-day basis with lower volatility. Winners include CCJ 0.00%↑ VRT 0.00%↑ CRS 0.00%↑ all gaining ~3% or more.

NVDA 0.00%↑ ARKK 0.00%↑ and ARKG 0.00%↑ detracted from performance today:

We trimmed VOO 0.00%↑ to reduce our net long position to 80% and added to VB 0.00%↑ and ARKG 0.00%↑ longs as well as the NVST 0.00%↑ short. We also got stopped out on OLLI 0.00%↑ and shorted UAL 0.00%↑ and ALGM 0.00%↑.

Among new positions, we opened LNG 0.00%↑ which is a bet on natural gas. It broke out from a long cup base on the daily and weekly charts today. It is at all-time highs although the PE is just 4 (EPS has grown much faster than price):