Stock Portfolio Update: Rising Rates Weigh on Markets
By: Christopher Mistal
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April 11, 2024
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As of today’s close, only NASDAQ is positive this April with a paltry 0.38% advance. The second best is S&P 500, down the least, off 1.05%. DJIA and Russell 2000 are struggling the most, down 3.39% and 3.86% respectively. This poor April performance is well below average and even weaker than past election year Aprils. Inflation remains a top concern for the market and this week’s readings did not support the argument for rate cuts sooner rather than later.
 
[Election Years & 2024 April Seasonal Pattern Chart]
 
Past election-year Aprils have gotten off to tepid starts and managed to recover with modest gains so it would not be completely out of the question to see a repeat of that this year. However, given the recent choppiness of trading and the surge in longer-term Treasury bond yields, an April letdown is appearing increasingly likely. With our Seasonal MACD Sell signal for DJIA and S&P 500 already triggered, we have already taken some profits and begun moving to a more cautious stance.
 
Stock Portfolio Updates
 
Over the past four weeks through yesterday’s close (April 10), S&P 500 slipped 0.1% lower while Russell 2000 shed 2.1%. Over the same period the entire stock portfolio declined 3.3% excluding dividends, any interest on cash and any trading fees. Declines occurred across all three market cap ranges with Mid-caps logging the largest retreat, down 9.5%. Large caps fared best, slipping a modest 0.1% lower.
 
Over 80% of the entire portfolio’s decline was due to Super Micro Computer (SMCI). In last month’s update, SMCI was at its all-time closing high and was the second largest holding in the entire portfolio after cash. SMCI has cooled since then and was just over $900 per share at yesterday’s close compared to nearly $1200 last update. Even though we have already sold half of the original position in SMCI, we are going to take some additional profits off the table and bring SMCI’s weighting in the portfolio down. Sell half of the remaining position in SMCI. For tracking purposes, we will use SMCI’s average price on April 12 for this transaction. SMCI will still be overweight in the portfolio relative to other positions, but this is consistent with our outlook for AI.
 
Mama’s Creations (MAMA) was another drag on overall performance. MAMA has been trending higher since late 2022. The current pullback has not damaged this bullish trend. MAMA’s chart is a series of higher highs and higher lows. Technically, a healthy pattern that usually results in higher prices until support is broken. MAMA is also a member of the consumer defensive sector which has historically held up well during the “Worst Months” of the year, May through October. MAMA is on Hold.
 
Further damage was done to the portfolio on April 2, when the government announced payments for Medicare Advantage insurers were going to be less than widely expected. The news sent UnitedHealth (UNH) shares tumbling below their stop loss. UNH was closed out the following day for a 13% loss. UNH declined again today and remains below the price it was stopped out at.
 
Two stocks of concern are Frontdoor (FTDR) and Grand Canyon Ed (LOPE). After modest gains late last year, both have struggled in 2024. FTDR is likely being dragged down by the tepid housing sector where affordability remains a major issue while LOPE has struggled to move beyond FTC and Department of Education lawsuits and investigations. FTDR and LOPE are on Hold.
 
There were also some positives in the portfolio. Large caps Reliance Steel & Aluminum (RS), Emcor Group (EME), and nVent Electric (NVT) all moved nicely higher over the last four weeks. The average gain for these three positions is now 60.3% with RS best at 67.5%. RS and EME are benefiting from infrastructure spending while NVT appears to be tapping into AI buildup and rollout. RS, EME and NVT are on Hold.
 
All remaining positions not mentioned above are on Hold. Please see table below for updated stop losses.
 
[Almanac Investor Stock Portfolio – April 10, 2024 Closes]