Monday Morning Edge Report - December 4, 2023

November was the best month since July 2022`

Author

Mark Roussin
December 04, 2023

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Market Talk ⏪

The Monday Morning Edge Report is designed to help investors of all different levels breakdown important stories/topics within the stock market. In this weekly report we will help you understand what is going on to help give you, the investor, an edge in the market.

Last week we closed out the month of November in which the S&P 500 rose roughly 8%, making it the best month of the year and the best performing month since July of 2022. We now enter the final month of the year with the S&P 500 seeing strong momentum, but also trading at a higher than usual valuation, giving many investors, including myself, some short-term pause. I believe we need a small pullback before we climb higher, but lets see what this week has in store for us.

5 Stories Moving The Market:

  1. RIP Charlie Munger ⏩ This past week we lost an investing giant

  2. Bitcoin & Gold Surging ⏩ Both of these investments flying high

  3. ABBV makes an acquisition ⏩ ABBV buys ImmunoGen for $10.1 billion

  4. Inflation numbers continue to cool ⏩ Key PCE metric comes in as expected

  5. ISM Manufacturing weak ⏩ Signs of a slowing US economy

1. RIP Charlie Munger

This past week the investing world lost an investing giant with the passing of Charlie Munger, who was 99 just weeks shy of his 100th birthday. Mr. Munger was Warren Buffett’s sidekick for decades, living a very frugal life similar to that of Buffett. Charlie Munger lived in the same house for the past 70 years in California. One of my favorite Munger quotes was, “The first $100K is a B*tch”

There is a lot we can learn from investing and life from Charlier Munger and I hope that he may Rest In Peace.

Late Sunday night the price of Bitcoin surged past $40,000. The popular cryptocurrency is up 20% over the past month and up more than 50% over the past 6 months.

Gold on the other hand has not had the same run, but the commodity hit a low of $1,765 in October and has now surpassed $2,060 as of Sunday night, which equates to an increase of 17%.

With investors turning to both Gold and Bitcoin at the same time, this suggests concern around short-term returns for the stock market, suggesting some turmoil may be ahead for the market. Down in today’s “Poll” section, as I ask for you to give your end of year Bitcoin predictions.

If you have followed me for any amount of time, well then you know I have a great appreciation for AbbVie. ABBV shares have been one of my longest held position within my portfolio. The company is going through a transition in which it previously held the #1 selling drug in the world in Humira, but that lost patent protection at the start of 2023 here in the US. The company does have two up and coming drugs that are taking over the Humira torch for the company.

However, the company went outside to look for some growth by making a $10.1 billion acquisition of ImmunoGen. AbbVie believes the acquisition will diversify its oncology pipeline across solid tumors and hematologic malignancies, as the company has drugs used to help fight cancer. The company’s flagshp drug Elahere is a first-in-class antibody-drug conjugate (ADC) that was granted accelerated approval by the FDA in November 2022 for the treatment of platinum-resistant ovarian cancer.

The transaction is expected to close in mid-2024.

PCE has become the Fed’s favorite metric to track inflation. Last week, PCE grew 0.2% during the month of October and 3.5% from the same period a year ago. Headline PCE was flat on the month and rose 3% for the year. While inflation appears to be cooling, the labor force is beginning to show some cracks. Continuing unemployment claims surged to 1.93 million last week, the highest level since 2021.

5. ISM Manufacturing weak

Through all of the inflation and high interest rates, the labor force and economy have held it together rather well, which has many investors looking for the Fed to put together a soft landing. However, as inflation cools, we just saw the labor force starting to show cracks, but so is the manufacturing sector, which is usually an early sign when it comes to a potential recession.

According to the ISM report, factory employment declined further as hiring slowed and layoffs increased, more evidence that the economy was losing momentum. The ISM said that its manufacturing PMI was unchanged at 46.7 last month. It was the 13th consecutive month that the PMI stayed below 50, which indicates contraction in manufacturing. That is the longest such stretch since the period from August 2000 to January 2002. This could be a sign of a pending recession to come in early 2024.

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Earnings on Deck 💰

Earnings season is largely behind us, but there are still a few notable companies reporting this week, including Broadcom on Thursday.

Here are the companies reporting earnings this week:

Analyst Upgrades/Downgrades 📝

In this section we will highlight any recent notable analyst upgrades or downgrades.

  • Stifel initiates Boeing at buy

  • Cantor Fitzgerald initiates Novo Nordisk as a buy

  • Bank of America upgrades Norfolk Southern to buy from neutral

  • UBS upgrades Johnson & Johnson to buy from neutral

  • Piper Sandler downgrades Hershey to neutral from overweight

  • RBC upgrades Boeing to outperform from sector perform

  • Piper Sandler downgrades Shopify to underweight from neutral

  • Jefferies initiates Pulte Group as buy

  • RBC upgrades Mondelez to outperform from sector perform

Poll of the Week 📊

Economic Data This Week 📆

Monday

  • Factory Orders

Tuesday

  • S&P U.S. services PMI

  • ISM services

  • Job Openings

Wednesday

  • ADP employment

  • U.S. productivity (revision)

  • U.S. trade deficit

Thursday

  • Initial Jobless Claims

  • Wholesale inventories

  • Consumer credit

Friday

  • Consumer sentiment (prelim)

  • U.S. employment report

  • U.S. unemployment rate

  • U.S. hourly wages

  • Hourly wages year over year

Other Resources 📺

If you have not done so yet, check out my growing YouTube community of ~39,000 like-minded investors where I publish weekly videos focused on building wealth through investing.

Here is the latest video I released: Time To Load Up On SCHD

Here is another video I put out last week: 3 CHEAP Dividend Stocks To Buy In December 2023

Here are a few others of my latest videos:

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Have questions? You can email me directly at [email protected].

Happy Investing!

Mark

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