Ruceto Market Recap: Week Ending 2/9/24 – S&P Crosses 5,000

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The S&P 500 reached a fresh all time high on Friday, and achieved its first ever close above 5,000. Tech stocks led the charge, and the Nasdaq ended the week only 0.4% below its November 2021 peak. Highlighting the Nasdaq’s bull run is Nvidia (up 9% on the week and about 45% YTD). Nvidia’s market cap is now larger than the S&P 500’s entire energy sector and around the same size as the combined market cap of all Chinese companies listed on the Hong Kong Stock Exchange. Buying the stock would have yielded solid returns but an alternative to further leverage the trade while limiting losses could have been to purchase short term call options as well. Short-term call options that are set to expire a few weeks out could serve as a way to ride the momentum while limiting losses to the price of the options. For example, a call option for NVDA expiring February 16, 2024 would have cost around $1.00 per contract as of January 31, 2024. As of February 12, 2024, it is trading around $16.00 per contract, yielding a return of 16x within 12 days. Again, hindsight is 20/20 and timing the purchase of options such that it yields a 16x return is difficult if not near impossible so this should be seen as a high risk speculative trade. 

On the topic of interest rates, recent changes to rate cut expectations have not yet weighed down on US equity prices. The below (per Jim Bianco, of Bianco Research) shows that the market is now pricing in 4 rate cuts from the Federal Reserve in 2024, which is fewer than previously expected at any other point YTD.

So why have stocks not been negatively impacted by the change in Fed Funds expectations as illustrated above? Jim Bianco’s view is that it’s because bond yields have not broken out yet. Per Jim Bianco, “It is about the competition for stocks. High yields suck money away from stocks. As long as yields stay down, the stock market can rally in a form of TINA (There Is No Alternative). But the stock rally ends when/if yields move up and provide an alternative. If yields move up enough, stocks reverse. I believe yields will break out higher in the next few weeks. If so, we will find out if my premise is correct that low yields are supporting stocks.” Substantial money market rates attracted a record $6 trillion of cash to the sidelines, so if the “TINA” narrative holds for equities and yields don’t break out, there may still be a lot of dry powder to fuel rebounds from potential future pullbacks.

Bitcoin closed above $47k on Friday, with a fully diluted market cap that is just under $1 trillion. Standard Chartered Head of Crypto Research Geoff Kendrick told The Block that the Bitcoin rally was driven by fund flows into the new Bitcoin ETFs even as GBTC continues to sell. K33 Research analyst Vetle Lunde posted data demonstrating that the 9 new Bitcoin ETFs (BlackRock, Fidelity, Bitwise, Ark 21Shares, InvescoIVZ, VanEck, Valkyrie, Franklin Templeton and WisdomTree) amassed over 200k BTC, and that since launching, “the total net inflow to U.S. spot ETFs sits at a massive 51,134 BTC.”

Additionally, certain alt-coins have been performing extremely well. Back in March 2023 we discussed bear markets as a good time to look for projects with high potential. Solana, a popular alt-coin, has increased by more than 5-fold within the past year. 

With Bitcoin ETFs’ success in bringing attention to crypto, now may still be a good time to look for high potential projects in the alt-coin space. Happy hunting! 

Week at a glance:

Disclaimer: The content presented is for informational purposes only and does not constitute financial, investment, tax, legal, or professional advice. Nothing contained in this report is a direct or indirect recommendation or suggestion to buy, sell, make, or hold any investment, loan, commodity, security, or token, or to undertake any investment or trading strategy with respect to any investment, loan, commodity, security, token, or any issuer. Ruceto does not guarantee the accuracy, completeness, sequence, or timeliness of any of this content. Please see our Terms of Service for more information.

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