“In my four decades in the investment management business, I have never met a wealthy person who got there by saving. They achieved wealth by saving to invest.”
- Nancy Tengler, CEO & Chief Investment Officer, Laffer Tengler Investments
Happy Thursday,
The S&P 500 ended January 2024 at 4,845, notching a solid gain of 1.5%. Meanwhile, at PointFour, our one-month performance was a gain of 1.8%. Our current 2024 year-end target for the S&P 500 is 5,000 – 5,200, which implies a soft landing for the economy in 2024.
No matter how you slice it, one thing is clear – the market rally that began in late October 2023 has not been supported by fundamental underpinnings. Momentum, yes. Technical charts, yes. Sentiment and emotion, yes. Fundamentals and valuations, not so much. And this is why we never wavered in our position that fundamentals and valuations matter, despite all the external pressure to do so.
Everyone loves a bullish narrative, meanwhile, the Conference Board’s leading economic index has fallen for eighteen consecutive months, including December 2023. We also take our queue from the bond markets where rates increased significantly in 2023/24 and remain high today (short duration T-Bills still yield ~5.3X% with no state income tax burden). As fixed rates have moved up, astute investors have moved some capital allocation in that direction to reduce equity market risk.
Here at PointFour Capital, we are adept at seeing the big picture since we have been at this for decades, thus we avoided the 20% meltdown in 2022 and beat the S&P 500 two-year (2022 & 2023) performance by 14%. In 2024, we seek to beat the S&P 500 performance while at the same time reducing overall risk by hedging our portfolio to protect against any potential market pullbacks in 2024.
We accomplished our 2023/24 performance by acknowledging early on what the market had been signaling for months - that the 10-year “growth at any cost” and low interest rate environment would end … and we would be returning to a more value-based investment thesis. We are here for the long term and making a profit and avoiding the latest fads means something to us. Our perspective is that we will mind our own business in 2024 and get ready to shift capital allocation as inflation gets closer to the Fed target rate of 2.0% and other opportunities present themselves.
We also continue to take advantage of opportunities in the commercial office real estate market. The meltdown in this segment has been occurring in slow motion as defaults increased in 2023 and early 2024, especially in the “B” and “C” class sub-segments. Our strategy is to take advantage of the dislocation of prices in this sub-segment.
Remember that every significant market shift usually involves an over-correction, so we look to take advantage of any short-term corrections and set ourselves up for a great 2024 and beyond!
Thanks again for your consideration, ideas, and trust. Have a great February 2024!
Best,
Vincent M. Oddo
Co-Founder & Managing Partner
PointFour Capital, LLC