Outlook & Ideas
4th Quarter 2024
The third quarter produced another record high for the DJIA (42,313) and the S & 500 stock index (5,738). Evidence of a “soft landing” (falling inflation and continued economic and earnings growth) encouraged investors to buy stocks and bonds – the 10 year Treasury bond yield falling to 3.75% (bond yields fall when their prices rise). The Federal Reserve has signaled that interest rates will continue to fall as long as inflation remains subdued. Thus, the outlook for stock prices remains favorable.
But – investors have priced in much of the “hoped for” future. The price/earnings ratio of the stock market is at least 10% higher than the historical average, and we still have much uncertainty e.g.,
the upcoming election, international wars and threats, and the unknown about when and how much interest rates will decline, and if earnings growth will continue next year.
Much of the 20% growth in the S & P 500 (20%) this year is the result of seven large growth stocks. Without them that index would show growth of about 12% year- to- date, nearly identical to that of
the DJIA.
We have been fairly cautious for the last few quarters, and we remain so now. A sharp 10-20% selloff could come at any time. It is always good to have a healthy cash position on hand to profit when
lower prices occur. There are always opportunities regardless of stock price levels – especially in
dividend paying stocks. We still like drug company Pfizer (PFE, $29) with a bond- like yield of 5.8%.
Truist Financial (TFC, $42.50), a past pick has risen nicely and still yields 4.90%. Money manager T.
Rowe Price (TROW, $109) yields 4.50% and should benefit in a falling rate environment. In the
technology sector, consider Alphabet (GOOGL, $164) trading at a price to earnings valuation (21) of
the average stock. It pays a tiny dividend (.50% yield) – but is way above the average stock in
potential appreciation.
Market volatility should continue, which should make professionally researched stock selection imperative. If you are unwilling to closely monitor your portfolio that is more than $250,000, consider using our popular managed account service. The fee is quite competitive, and accounts
are managed by advisors with over 90 years in combined market experience. For more information, please contact Bob Mann or Charles Harris.
And contact one of our friendly and experienced advisors for more information about any of the above securities or for a portfolio check-up. For investors with portfolios of $400,000 or more, you might generate several thousand dollars of additional income a month through covered call option selling.
Contact Bob Mann for more information, including all risks.
Prices and yields as of September 27th, 2024. The above information is believed to be reliable but is not guaranteed to be accurate. Investors should check every investment for suitability for his or her needs. Stock and option investing is risky, and you could lose money. The author and/or his clients maintain positions in all the above-mentioned securities. First Georgetown Securities, Inc. will furnish available information supporting the above recommendations on request.
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