‘Things have not been easy for us’: My sister is a hoarder and procrastinator. She is delaying probate of our parents’ estate. What can I do?

I am in my early 50s, divorced and working full time, and have been raising my only child, a teenage daughter, alone for the past 12 years. My daughter is estranged from her father, who pays child support. We live in Connecticut.

My parents are both deceased as of last year. I moved out of the family home 34 years ago. I have one sibling: a slightly older sister who never moved out of the family home, never went to college, never married, never had a driver’s license, and has no children. I don’t believe she has ever had to pay rent.  

My parents, my sister and I are civil servants with pensions. My sister has done quite well with a high-school degree, and is already eligible to retire. Her job gives her a lot of time off, including holidays and the entire summer. 

When our last parent became ill, she became their caretaker. There was plenty of money between pensions and retirement accounts that she was able to use for home healthcare, medical expenses, household expenses and eventually funeral expenses.

‘She never stopped working’

She never stopped working through all of this, and had power of attorney on all their accounts. She was evasive with me about the amount of money she was overseeing, and I never pushed the issue.  

My parents’ house has been paid off for several years now and both parents’ names are on the deed. They had no will, but named us both as equal beneficiaries on all accounts. Those funds have been distributed.

My sister has been avoiding the issue of probate for several months. She continues to be evasive about the continuing costs associated with the house, but assures me everything is being paid. She has a history of procrastination and has been hoarding for decades. As time goes on, there is noticeably less space to stand inside the house. 

Through probate, the house and our parents’ belongings are due to be split between the two of us. Since I can’t envision my sister ever finding the wherewithal to move out or prepare the house for sale, I would want her to buy out my half of the house so that my daughter and I can live a more secure life.

Finished paying off loans

We rent, and things have not been easy for us. I paid my own way through college and finished paying all my loans off three years ago. I plan to send my daughter to college in a few years and have a 529 plan for her that’s only worth about $15,000. I’ve been sacrificing a lot to put aside retirement money for a long time, but I will probably never feel confident that it’s enough. 

My sister has been busying herself with many activities that she claims are the reason we can’t get this probate process started now. People around me are urging me to be more assertive. I’ve called the appropriate town offices, and I have a certified copy of the deed to the house and some of the applications in hand, but I don’t feel qualified to do this correctly on my own.

I know there are mediators and lawyers that can help, but I don’t know the best way to take control of this situation without spending a ton of money. What do you suggest would be the fairest and fastest way to get this going when one person is passively resisting?

Feeling Stuck

Related: My mom had a trust, so why do we still need probate to settle her estate?

“The good news is that all of the lawyer’s fees will likely be paid out of your parents’ estate, so you will have no upfront legal costs.”


MarketWatch illustration

Dear Stuck,

It’s time to call a lawyer. Delaying this process could cost you dearly.

In Connecticut, you have up to 30 days to file for probate; after that, you could incur fines. “Probate fees are established by statute and are uniform throughout the state,” according to the Connecticut probate-court system. “Interest at the rate of 0.5% per month accrues on all unpaid fees on decedents’ estates beginning 30 days after the date of the invoice, or, if a Connecticut estate tax return has not been filed within the time required, beginning 30 days after the return was due.” You can access an online calculator to estimate probate-court fees here

The good news is that all of the lawyer’s fees will likely be paid out of your parents’ estate, so you will have no upfront legal costs. The executor should have been chosen by the person who wrote the will; if your sister is unable to take on these responsibilities, talk to a trust-and-estate attorney about petitioning the court to remove your sister as executor. It may be that you decide to keep your sister as executor but, after explaining to her the financial implications, you proceed with the help of your attorney.

Your sister has proven herself to be a hard worker, by your own account, but she needs help with this process, and she needs help with the other aspects of her life. Removing her as executor would be time consuming and onerous. Possible reasons for removing an executor include egregious behavior like stealing from or wasting the assets of the estate, or lack of cooperation with the administration of the estate. Removal of an executor can be a complicated and costly process, and one that risks squandering even more money from your parents’ estate.

Personal issues

The legal aspect to your story has, perhaps inevitably, become intertwined with your personal histories. You identify your sister in your letter primarily by what she does not have: a husband, children, a driver’s license, etc. But she has also proven herself to be capable and have many other positive qualities: She was a caregiver, and worked hard as a civil servant to build up a pension to enable her to retire. What she lacks now is support, which both you and an attorney can provide. The nature of that support is legal, practical and also emotional. Providing the latter may be the key to the rest. 

Hoarding disorder is recognized as a mental-health condition by the medical profession. An outsider may see dust and dirt, in addition to cramped and possibly dangerous living conditions, but they don’t always see what lies beneath: fear, pain and potentially other neuropsychiatric disorders, including obsessive-compulsive disorder. Your sister would, of course, need to be diagnosed by a medical professional. Procrastination is also positively correlated with anxiety. Again, outsiders may mistake this for being uninterested or lazy.

It may be that being frustrated with your sister is a familiar feeling, and one you are willing to endure. But just as your sister should not be allowed to let her very significant issues interfere with probating your parents’ estate, you also should not let your relationship with your sister stop you from taking action. First, you will have the legal process, which will unfold if you seek help from an attorney. After that, you will have the equally important task of encouraging your sister to seek the support of a therapist who may be able to help her move forward.

Your probate stalemate shows that no one problem exists in isolation. 

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as Twitter. 

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

I have $1.5 million in stocks and bonds. I asked my broker to convert my bonds to cash. He didn’t and my portfolio fell by $100,000. Can I sue?

‘She was very special to me’: My late 98-year-old cousin was targeted by grifters. They stole $800,000. Do I have any recourse?

‘It was a mistake’: My father set up a revocable trust, leaving everything to my stepmother. She’s cutting me out completely. What can I do?

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.



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#easy #sister #hoarder #procrastinator #delaying #probate #parents #estate

My estate is worth millions of dollars. How do I stop my daughters’ husbands from getting their hands on it?

My wife and I live in California, as do three of our four grown daughters. We are revisiting our family trust for the first time in many years, as we’re getting older and have gradually built an estate worth a couple of million dollars. We want to make sure that, in case our daughters get divorced, our hard-earned savings go to them and not their ex-husbands. 

We consulted with two estate attorneys and got different answers. The first said there’s nothing we can do to legally enforce that the inheritance stays separate; the most we could do is put in some wording along the lines of “It is our wish that the money stays separate.” The second attorney said that we can make our children sign a prenup as a condition of their inheritance. 

Furthermore, we have one daughter who has already been married for five years and has three children; another daughter who just got engaged; and two other children, who are single. Our married daughter does not have a prenuptial agreement. How do we protect our gift to her? A retroactive prenup? How should we proceed?

Father of Four Girls

Related: They’re threatening to go to a lawyer’: My in-laws gave us $300,000 and are on the deed to our home. Now they insist we give our niece $125,000.

“Don’t allow this money to become a cudgel with which to control your daughters’ lives.”


MarketWatch illustration

Dear Father,

Money should bring freedom and opportunity, not control and coercion. 

Your intentions tread a fine line between expectations and legality. There is only so much you can do to prevent your daughters from sharing their inheritance with their spouses, assuming they all marry and some of those marriages end in divorce. It is a credit to you that you have amassed a couple of million dollars, but don’t allow this money to become a cudgel with which to pull the purse strings in your daughters’ lives. 

One solution to your problem: You could set up a bloodline trust, a revocable trust that sets out how you should leave your assets to your direct beneficiaries — in this case, your daughters — and which becomes irrevocable upon your death. It can only be used for your daughters and their children, and because it becomes irrevocable upon your death, it cannot be accessed by creditors, should you have any. There are downsides. For example, such a trust could, unless otherwise specified, exclude stepchildren and adopted children.

First, the good news: Inheritance in California is considered separate property. Whether you leave your children real estate or brokerage or savings accounts, that money will remain nonmarital property unless your daughters use it to upgrade their family home or in some other way commingle those assets with their community property. So that pre-empts the need for your married daughter to ask her spouse to sign a postnuptial agreement.

On that subject, however, it’s not wise to use this inheritance to tell your daughters what they should do within their marriages. There should be a clear boundary between your relationship with your adult children and their relationships with their respective partners and spouses. It’s not a good idea to interfere in the latter. Doing so may cause discord in their relationships and also cause unnecessary hurt and tension in your own relationships with your daughters.

“California is one of a few states that strictly adheres to community-property laws, which declare that assets acquired during a marriage [are] community, also known as marital, property,” according to Myers Family Law in Roseville, Calif. “However, even California draws a line when it comes to personal inheritances, including inheritances that were received while married. Inheritances are treated as separate property, belonging to the individual who received the inheritance.”

Legal gymnastics

Requesting in your last will and testament that your daughters receive their share of your estate on the condition that they don’t share any of it with their husbands presents a lot of impractical and legal gymnastics. What they do with their inheritance is their business, unless you put those assets in a trust with strict instructions on how those assets should be used — for your grandchildren’s education, for example — or use the trust to provide an annual income.

There are so many variables beyond your control. What if you die before your wife, and she has different ideas about how your joint estate should be settled? What if your daughter’s husband is asked to sign a prenup, and replies, “No way — who does your father think he is?” The best course of action is to make your daughters aware of how to manage separate assets that are inherited, and how they could be accidentally commingled.

Think about the quality time you have left with your family. You don’t want Thanksgiving dinners to turn into a battle royale or, worse, a situation where your daughters and their partners gradually pull away and reevaluate their relationships with you. You have worked hard for your money, and you are attempting to protect your family fortune. But there are times in life when you can do too much, and hold your family too tight, even if that is not your intention. 

Ask yourself some soul-searching questions before you proceed. Do you really want to force your children to sign a prenup in order to receive their inheritance? Prenups can be challenged and changed at a later date. What is more important: the couple of million dollars you will leave behind, or the relationships you have with your daughters while you are still here? Don’t put a price on your daughters’ love for you — or on their love for their spouses.

Sorry for being preachy, but even Shakespeare wrote a play about estate planning. It was called “King Lear.”

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

‘I grew up pretty poor’: I got an annual bonus. After I pay off my credit cards, I’ll have $10,000. What should I do with it?

‘I received an insurance-claim check for $22,000’: Why on earth does it take five days for my check to clear?

‘I want to protect my family’: My wealthy father, 49, is marrying his third wife. How do I broach the subject of my inheritance?

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#estate #worth #millions #dollars #stop #daughters #husbands #hands

Former hedge fund star says this is what will trigger the next bear market.

Much of Wall Street expects easing inflation, but an overshoot could dash hopes of a May rate cut, curtailing the S&P 500’s
SPX
waltz with 5,000, warn some.

Read: Arm’s frenzied stock rally continues as AI chase trumps valuation.

What might take this market down eventually? Our call of the day from former hedge-fund manager Russell Clark points to Japan, an island nation whose central bank is one of the last holdouts of loose monetary policy.

Note, Clark bailed on his perma bear RC Global Fund back in 2021 after wrongly betting against stocks for much of a decade. But he’s got a whole theory on why Japan matters so much.

In his substack post, Clark argues that the real bear-market trigger will come when the Bank of Japan ends quantitative easing. For starters, he argues we’re in a “pro-labor world” where a few things should be playing out: higher wages and lower jobless levels and interest rates higher than expected. Lining up with his expectations, real assets started to surge in late 2023 when the Fed started to go dovish, and the yield curve began to steepen.

From that point, not everything has been matching up so easily. He thought higher short-term rates would siphon off money from speculative assets, but then money flowed into cryptos like Tether and the Nasdaq recovered completely from a 2022 rout.

“I have been toying with the idea that semiconductors are a the new oil – and hence have become a strategic asset. This explains the surge in the Nasdaq and the Nikkei to a degree, but does not really explain tether or bitcoin very well,” he said.

So back to Japan and his not so popular explanation for why financial/speculative assets continue to trade so well.

“The Fed had high interest rates all through the 1990s, and dot-com bubble developed anyway. But during that time, the Bank of Japan only finally raised interest rates in 1999 and then the bubble burst,” he said.

He notes that when Japan began to tighten rates in late 2006, “everything started to unwind,” adding that the BOJ’s brief attempts [to] raise rates in 1996 could be blamed for the Asian Financial Crisis.

In Clark’s view, markets seem to have moved more with the Japan’s bank balance sheet than the Fed’s. The BOJ “invented” quantitative easing in the early 2000s, and the subprime crisis started not long after it removed that liquidity from the market in 2006, he notes.

“For really old investors, loose Japanese monetary policy also explained the bubble economy of the 1980s. BOJ Balance Sheet and S&P 500 have decent correlation in my book,” he said, offering the below chart:


Capital Flows and Asset Markets, Russell Clark.

Clark says that also helps explains why higher bond yields haven’t really hurt assets. “As JGB 10 yields have risen, the BOJ has committed to unlimited purchases to keep it below 1%,” he notes.

The two big takeaways here? “BOJ is the only central bank that matters…and that we need to get bearish the U.S. when the BOJ raises interest rates. Given the moves in bond markets and food inflation, this is a matter of time,” said Clark who says in light of his plans for a new fund, “a bear market would be extremely useful for me.” He’s watching the BOJ closely.

The markets

Pre-data, stock futures
ES00,
-0.41%

NQ00,
-0.80%

are down, while Treasury yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
hold steady. Oil
CL.1,
+0.79%

and gold
GC00,
+0.46%

are both higher. The Nikkei 225 index
JP:NIK
tapped 38,000 for the first time since 1990.

Key asset performance

Last

5d

1m

YTD

1y

S&P 500

5,021.84

1.60%

4.98%

5.28%

21.38%

Nasdaq Composite

15,942.55

2.21%

6.48%

6.20%

34.06%

10 year Treasury

4.181

7.83

11.45

30.03

42.81

Gold

2,038.10

-0.17%

-0.75%

-1.63%

9.33%

Oil

77.14

5.96%

6.02%

8.15%

-2.55%

Data: MarketWatch. Treasury yields change expressed in basis points

The buzz

Due at 8:30 a.m., January headline consumer prices are expected to dip to 2.9% for January, down from 3.4% in December and the lowest since March 2021. Monthly inflation is seen at 0.3%.

Biogen
BIIB,
+1.56%

stock is down on disappointing results and a slow launch for its Alzheimer’s treatment. A miss is also hitting Krispy Kreme
DNUT,
+1.99%
,
Coca-Cola
KO,
+0.24%

is up on a revenue rise, with Hasbro
HAS,
+1.38%
,
Molson Coors
TAP,
+3.12%

and Marriott
MAR,
+0.74%

still to come, followed by Airbnb
ABNB,
+4.20%
,
Akamai
AKAM,
-0.13%

and MGM Resorts
MGM,
+0.60%

after the close. Hasbro stock is plunging on an earnings miss.

JetBlue
JBLU,
+2.19%

is surging after billionaire activist investor Carl Icahn disclosed a near 10% stake and said his firm is discussing possible board representation.

Tripadvisor stock
TRIP,
+3.04%

is up 10% after the travel-services platform said it was considering a possible sale.

In a first, Russia put Estonia’s prime minister on a “wanted” list. Meanwhile, the U.S. Senate approved aid for Ukraine, Israel and Taiwan.

Best of the web

Why chocolate lovers will pay more this Valentine’s Day than they have in years

A startup wants to harvest lithium from America’s biggest saltwater lake.

Online gambling transactions hit nearly 15,000 per second during the Super Bowl.

The chart

Deutsche Bank has taken a deep dive into the might of the Magnificent Seven, and why they will continue to matter for investors. One reason? Nearly 40% of the world still doesn’t have internet access as the bank’s chart shows:

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.

Ticker

Security name

TSLA,
-2.81%
Tesla

NVDA,
+0.16%
Nvidia

ARM,
+29.30%
Arm Holdings

PLTR,
+2.75%
Palantir Technologies

NIO,
+2.53%
Nio

AMC,
+4.11%
AMC Entertainment

AAPL,
-0.90%
Apple

AMZN,
-1.21%
Amazon.com

MARA,
+14.19%
Marathon Digital

TSM,
-1.99%
NIO

Random reads

Everyone wants this freak “It bag.”

Dumped over a text? Get your free dumplings.

Messi the dog steals Oscars’ limelight.

Love and millions of flowers stop in Miami.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Check out On Watch by MarketWatch, a weekly podcast about the financial news we’re all watching – and how that’s affecting the economy and your wallet.

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#hedge #fund #star #trigger #bear #market

My brothers are co-owners on $1.9 million of our mother’s bank and brokerage accounts. She now has Alzheimer’s. How can I rectify this?

I have three adult siblings living in different states, and we are disputing the circumstances surrounding the joint accounts shared with our 85-year-old mother, who has early stage Alzheimer’s. Our mom has a net worth of around $2 million, which is spread across several different bank and brokerage accounts. Late in life, she added a different sibling as a co-owner on each of her accounts to help manage her money.  

My brother “Joe” is listed as the sole co-owner on the bulk of our mother’s brokerage accounts, totaling $1.3 million, while my brother “Andy” is the sole co-owner of a $600,000 bank account and I am the sole co-owner of a $100,000 brokerage account. I think our mom simply forgot to add my sister, “Sue,” as a co-owner on any account. Her intention has always been for the four of us to equally inherit her assets.

I suggested to my three siblings that we should change all the accounts to sole ownership under our mother’s name with four equal beneficiaries. I thought this could avoid many possible complications with gift taxes and distribution at the time of our mother’s death, since as it stands, each co-owner would have to divide the money from their co-ownership account and send it to the other siblings.

Sue is named as power of attorney and could manage our mother’s individual accounts as needed. However, Joe is adamant that the current setup of co-ownership of accounts is the best way to help our mother, especially to protect her against financial fraud in case she needs to move to a nursing home. He insists there will be no gift taxes with the eventual distribution and that this setup is straightforward and easy to co-manage.

This situation is causing a lot of stress and distrust among my siblings, which I hate. I suggested we change things in order to make our mother’s financial situation as simple as possible, especially at the time of death, and not because I don’t trust Joe. Right now, no one is touching our mother’s accounts, and I am paying most of her expenses, as she lives with me.

Please advise.

Frustrated Sibling

Also read: My wife and I sold our home to her son at a $100,000 discount. He’s now selling at a $250,000 profit. Do I ask for a cut?

“Sue, as power of attorney, should be able to withdraw money from your mother’s other accounts and/or set up a bank account with those funds in your mom’s name,” the Moneyist writes.


MarketWatch illustration

Dear Frustrated,

Your brothers have every reason to act like white truffle butter wouldn’t melt in their mouths.

Between them, they have sewn up your mother’s largest bank accounts, and you are very likely dependent on the kindness of these brothers to either add you to the accounts as co-owners or distribute the funds between all four siblings after your mother passes away. 

I would not hold my breath for Joe or Andy to do either of these things. They can just as easily resist with politeness and smiles as with anger and resentment. I’m sorry to say that the most damaging actions — for you and your sister— have already been taken. 

We may never know the conversations that took place when your brothers were added as co-owners. But there is a very important difference between a “co-owner” and a “co-signer” on an account. The latter can withdraw money but does not own the money in the account.

If your mother was not of sound mind or her mental capacity was diminished when your brothers were added to these accounts, or if she had intended to add them as co-signers, there may be a case where you can contest your brothers’ ownership of these accounts.

The legal framework around such cases vary depending on the state, but it’s usually up to the estate of the original owner of the account to prove that there was elder abuse and/or undue influence taking place. As always, you should consult an attorney who specializes in elder law.

Limitations to power-of-attorney duties 

Sue, as power of attorney, should be able to withdraw money from your mother’s other accounts and/or set up a bank account with those funds in your mom’s name. She should preserve these funds for additional medical bills and long-term care as her condition progresses.

But the bottom line is that without the cooperation of your two brothers after your mother dies, failing any legal case to reverse matters, you will remain with the sole ownership of the $100,000 brokerage account, and the four of you will inherit whatever else is left in the estate. 

It’s virtually impossible to say without more information, but Sue, as power of attorney, is unlikely to have the ability to change the ownership of these accounts unless that is specified in the terms of her POA contract. That would also depend on the laws of your state.

“The power of attorney permits the agent to access their parent’s bank accounts, make deposits and write checks,” Jupiter, Fla.-based Welch Law says in this POA overview. “However, it doesn’t create any ownership interest in the bank accounts. It allows access and signing authority.”

The law firm continues: “If the person’s parent wants to add them to the account, they become a joint owner of the account. When this happens, the person has the same authority as the parent, accessing the account and making deposits and withdrawals.”

But those with power of attorney cannot self-deal when it comes to their parent’s finances. “As a POA, they are a fiduciary, which means they have a legally enforceable responsibility to put their parent’s benefits above their own,” Welch Law adds.

You should not have to pay for your mother’s care out of your own bank account. Your sister, as power of attorney, should be managing that. Talk to your siblings about your mother’s Alzheimer’s and how the four of you plan to manage her care in the months and years ahead.

Will your brothers fulfill their promise and make you and your sister whole? Only time will tell.

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as Twitter.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

‘I don’t like the idea of dying alone’: I’m 54, twice divorced and have $2.3 million. My girlfriend wants to get married. How do I protect myself?

‘If I say the sky is blue, she’ll tell me it’s green’: My daughter, 19, will inherit $800,000. How can she invest in her future?

‘They have no running water’: Our neighbors constantly hit us up for money. My husband gave them $400. Is it selfish to say no?



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#brothers #coowners #million #mothers #bank #brokerage #accounts #Alzheimers #rectify

Stock-market rally faces Fed, tech earnings and jobs data in make-or-break week

Stock-market investors may take their cues from a series of important events in the week ahead, including the Federal Reserve’s monetary-policy meeting, a closely-watched December employment report and an onslaught of earnings from megacap technology names, which all promise insight into the state of the economy and interest-rate outlook. 

The benchmark S&P 500 index
SPX
Thursday closed at a record high for five straight trading days, the longest streak of its kind since November 2021. The index finished slightly lower on Friday, but clinched weekly gains of 1.1%, while the Nasdaq Composite
COMP
advanced 1% and the blue-chip Dow Jones Industrial Average
DJIA
gained 0.7% for the week, according to Dow Jones Market Data.

“What we’re seeing is the market participants are still playing catch-up from 2023, putting money on the sidelines to work,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management.

“Wall Street is still back at it trying to eke out gains as quickly as possible, so it’s very short-term oriented until we get big market-moving events,” he said, adding that one of the events could well be “a disappointing Fed speech.”

Fed’s Powell has good reasons to push back on rate cuts

Expectations that the Fed would begin easing monetary policy as early as March after its fastest tightening cycle in four decades have helped fuel a rally in U.S. stock- and bond-markets. Investors now mostly expect five or six quarter-point rate cuts by December, bringing the fed-funds rate down to around 4-4.25% from the current range of 5.25-5.5%, according to the CME FedWatch Tool. 

See: Economic growth underlined by fourth-quarter GDP reinforces Fed’s cautious approach to rate cuts

While no interest-rate change is expected for the central bank’s first policy meeting this year, some market analysts think comments from Fed Chair Jerome Powell during his news conference on Wednesday are likely to shift the market’s expectations and push back against forecasts of a March cut. 

Thierry Wizman, global FX and interest rates strategist at Macquarie, said a stock-market rally, “too-dovish” signals from the Fed’s December meeting, a still-resilient labor market and escalating Middle East conflicts may indicate that Powell has to keep the “[monetary] tightening bias” next week. 

The rally in the stock market could “conceivably backfire” by virtue of a loosening of financial conditions, while the labor market has not weakened to the extent that the Fed officials would have hoped, Wizman told MarketWatch in a phone interview on Friday.

Further complicating things, fears that inflation could spike again in light of the conflict in the Middle East and Red Sea could reinforce Fed’s cautious approach to rate cuts, he said. 

See: Oil traders aren’t panicking over Middle East shipping attacks. Here’s why.

Meanwhile, a shift to “neutral bias” doesn’t automatically mean that the Fed will cut the policy rate soon since the Fed still needs to go to “easing bias” before actually trimming rates, Wizman said. “I think the market gets too dovish and does not realize the Fed has very, very good reasons to push this [the first rate cut] out to June.” 

Markets are ‘laser-focused’ on January employment report

Labor-market data could also sway U.S. financial markets in the week ahead, serving as the “big swing factor” for the economy, said Patrick Ryan, head of multi-asset solutions at Madison Investments. 

Investors have been looking for clear signs of a slowing labor market that could prompt the central bank to start cutting rates as early as March. That bet may be tested as soon as Friday with the release of nonfarm payroll data for January.

Economists polled by The Wall Street Journal estimate that U.S. employers added 180,000 jobs in January, down from a surprisingly strong 216,000 in the final month of 2023. The unemployment rate is expected to tick up to 3.8% from 3.7% in the prior month, keeping it near a half century low. Wage gains are forecast to cool a bit to 0.3% in January after a solid 0.4% gain in December. 

“That’s going to have everyone laser-focused,” Ryan told MarketWatch via phone on Thursday. “Anything that shows you real weakness in the labor market is going to question if the equity market is willing to trade at 20 plus times (earnings) this year.” The S&P 500 is trading at 20.2 times earnings as of Friday afternoon, according to FactSet data. 

Six of ‘Magnificent 7’ may continue to drive S&P 500 earnings higher

This coming week is also packed with earnings from some of the big tech names that have fueled the stock-market rally since last year. 

Five of the so-called Magnificent 7 technology companies will provide earnings starting from next Tuesday when Alphabet Inc.
GOOG,
+0.10%

and Microsoft Corp.
MSFT,
-0.23%

take center stage, followed by results from Apple Inc.
AAPL,
-0.90%
,
Amazon.com
AMZN,
+0.87%

and Meta Platforms
META,
+0.24%

on Thursday. 

Of the remaining two members of the “Magnificent 7,” Tesla Inc.
TSLA,
+0.34%

has reported earlier this week with its results “massively disappointing” Wall Street, while Nvidia Corp.’s
NVDA,
-0.95%

results will be coming out at the end of February.

See: Here’s why Nvidia, Microsoft and other ‘Magnificent Seven’ stocks are back on top in 2024

A number of the companies in the “Magnificent 7” have seen their stock prices hit record-high levels in recent weeks, which could help to drive the value of the S&P 500 higher, said John Butters, senior earnings analyst at FactSet Research. He also said these stocks are projected to drive earnings higher for the benchmark index in the fourth quarter of 2023.

In One Chart: Tech leads stock market’s January rally by wide margin. Watch out for February.

In aggregate, Nvidia, Alphabet, Amazon.com, Apple, Meta Platforms, and Microsoft are expected to report year-over-year earnings growth of 53.7% for the fourth quarter of last year, while excluding these six companies, the blended earnings decline for the remaining 494 companies in the S&P 500 would be 10.5%, Butters wrote in a Friday client note.

“Overall, the blended earnings decline for the entire S&P 500 for Q4 2023 is 1.4%,” he said. 

Check out! On Watch by MarketWatch, a weekly podcast about the financial news we’re all watching — and how that’s affecting the economy and your wallet. MarketWatch’s Jeremy Owens trains his eye on what’s driving markets and offers insights that will help you make more informed money decisions. Subscribe on Spotify and Apple.  

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#Stockmarket #rally #faces #Fed #tech #earnings #jobs #data #makeorbreak #week

My Tinder match asked if I ‘rent or own’ my apartment. Is it gauche to ask financial questions before a first date?

I met a guy on Tinder
MTCH,
+0.75%

and had an introductory telephone conversation, which I always think is a good idea before making the effort to meet in person. During our 15-minute telephone conversation, he told me about his divorce, his job and his hobbies. He described himself as easygoing and outdoorsy, and someone who likes to socialize and play sports. 

He talked a lot about his children, for five minutes or longer. He said he owned a small house. He asked what I did for a living, when my last relationship was, what neighborhood I lived in and — this stuck in my craw — whether I rented or owned my apartment and if it was a studio, one- or two-bedroom apartment. I felt uncomfortable, but I answered.

I live in New York City, and I happen to own my apartment, but I felt like he was sizing me up and trying to get a picture of my finances before he decided to meet me. He also asked how long I’ve been in my apartment, probably to assess how much equity I had in it. I replied, “a while,” as I already felt like he was getting too into my finances for a first conversation.

Once he was satisfied with my answers to these questions, he suggested we meet. I am busy this weekend, so he suggested driving into the city during the week. Based on his job and profession, I can reasonably estimate that I earn about twice his salary, though this does not mean anything to me, and I could care less. But given his money-related questions, I find that ironic.

I asked some friends. Some did a spit take, while others felt such questions were fair game. What do you think?

Irritated Even Before Our First Date

Related: I want my father to quitclaim his home so I can refinance it — and take out a $200,000 annuity for my sister and me. Is this wise?

“Based on his questions, it’s important to him that you have the same level of financial security that he does. If it were not an issue for him, he would not have asked.”


MarketWatch illustration

Dear Irritated,

He is not your real-estate agent or financial adviser, so I agree that it’s strange for a virtual stranger to quiz you on your living arrangements.

Based on his questions, it’s important to him that you have the same level of financial security that he does. If it were not an issue for him, he would not have asked. It’s as simple as that. Similarly, if he were wealthy beyond his wildest dreams, he may care less than someone who has climbed partly up the property ladder. But do I think it’s a bit much to ask in a first conversation? Yes.

Don’t give the Greek chorus too much importance. Whether or not other people are comfortable with such questions in a first call is immaterial; if you are not comfortable, you have your answer. You, after all, are the person who will have to date him, and expect him to show a semblance of emotional intelligence and sensitivity. It’s imperative to be able to read the room.

Let there be no mistake: If he is asking a question about your real-estate holdings or finances, he’s interested in them as a way of assessing (or judging) your suitability as a partner. Maybe he romanticizes his relationship prospects based on first impressions, and wonders whether he could combine assets and live in splendor. But words and questions have meaning.

Social acceptability vs. social mobility 

In America, it may be seen as more acceptable than in some European countries to ask what you do for a living, and even whether you rent or own in a big city like New York. The U.S. is a country of immigrants, and has more immigrants than any other population in the world, according to the Pew Research Center

The idea is to strive, work hard, and do better than the previous generation, although a majority of Americans reportedly doubt the attainability of generation-to-generation upward mobility, and millions of people are reassessing their relationship to work-life balance in the wake of the pandemic.

Wealth and looks play a role in whether someone swipes left or right, but the former appears to become more important when a connection is made with a partner who is deemed attractive. “When long-term interest is considered, the physical attractiveness of the model appeared to serve as an initial hurdle that had to be cleared prior to any other factors being considered by the participants,” according to this 2020 study.

People do swipe right based on economic factors. It would be foolhardy or idealistic to suggest that they don’t. If, however, a man poses in sunglasses with two thumbs up next to a Lamborghini, listing bitcoin
BTCUSD,
+1.57%

trading as one of his pastimes, chances are he doesn’t own that Lamborghini and, in my estimation, may have “Tinder Swindler”-level intentions.

And if a potential partner is both attractive and wealthy? That seems to be an appealing combination. Female online daters are 10 times more likely to click on profiles with men who have higher incomes, at least according to this study published in the Journal of Economic Behavior and Organization, while male online daters are equally likely to click on women’s profiles, regardless of income. 

I don’t put too much stock in studies that say men are looking for attractive partners, while women are more interested in men who look wealthy. You could probably do an analysis of any online dating site and gather a sample that would give you conclusions that say pretty much anything you want them to say. It all depends on the individual: Someone who knows the exact size of their backyard and strives to keep up with the Joneses is more likely to ask whether you rent or own.

In other words, this fellow who grilled you over your own socioeconomic circumstances may still be a perfect match — for someone else.

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as Twitter.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

I want my son to inherit my $1.2 million house. Should I leave it to my second husband in my will? He promised to pass it on.

My adult sons live rent-free in my house, while I pay for 50% of utilities in my second husband’s condo

My brother lives in our parents’ home, which we’ll inherit 50/50. I want to keep it in the family for my children. How do I protect my interests?



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#Tinder #match #asked #rent #apartment #gauche #financial #questions #date

‘I can’t afford to keep paying for two households’: My adult sons live rent-free in my house, while I pay for 50% of utilities in my second husband’s condo

In 2007, my now ex-husband and I bought a home, where we lived as a family with our two boys for just a few years before we divorced in 2009. I refinanced the house in my name, and have paid the mortgage and utilities as a single parent ever since. 

In 2016, I met and started dating a man. We lived apart, only about 10 to 15 minutes from each other. In 2021, after I battled cancer, he proposed and I accepted. Since we only lived a few minutes apart, I stayed at my husband’s two-bedroom condo Thursday through Sunday, and spent Sunday through Thursday at my house, where I worked from home. I did this for years. 

My oldest son moved back in with me in 2021. He graduated high school in 2017 and I gave him a gap year living at my house to decide on his next move, after which he moved out and started his career. He lived on his own for a year, then lived with my parents for a year. He met a girl; they signed a lease and then the pandemic hit. After their lease was up, they broke up, and he decided to go back to college full time. I agreed that he could live in my home while he attended college. His tuition is covered by grants and a 529 fund his grandmother set up.

In 2022, my then boyfriend and I married. However, we still didn’t move in together full time, as I still had my house, and my youngest son had not yet graduated high school. I wanted to be home with him. 

Helping to support two households

My youngest son, 19, graduated high school in 2023. Later that summer, I moved out of my house to stay with my husband full time. I pay 50% of the expenses living with my husband and 100% of the expenses for my house, where the boys live. 

I kept both households going so my youngest could have a gap year of his own, and to cushion my oldest, whom I really didn’t think would go to college, while he attended to his studies. They are young and finding their way, and I wanted to give them the support I felt like they needed. But here we are in 2024, and I can’t afford to keep both households running without impacting my ability to save for retirement.

Here’s my dilemma: I don’t know how to get my boys out of my house so I can clean it up, stage it and list it for sale. We live in an area where the average two-bedroom apartment rents for $1,800 a month. My youngest works full time following his passion for BMWs and makes about $2,400 a month. My oldest, 25, works part time in retail and makes about $1,000 a month while he attends college. They both work within 3 miles of my home. They simply can’t afford to move out, and I can’t afford to keep paying for two households.

To complicate matters, I have about $100,000 in equity in the house, and I’d like to use it to pay off some small debts and buy a car, as well as put the rest in retirement.  But my mother, who has had a long and successful career in real estate, thinks I should wait it out and let my equity continue to build, giving the boys some cushion while they are still finding their way. 

Do I shop around and find them an apartment, help them set up utilities and help them with movers? Do we build a project plan with a deadline, or just keep looking for places in the hope that we eventually find one we like? Do I subsidize their monthly expenses and give them each $400 a month for utilities, if they cover their rent? 

I know this is probably easy for other people, but I am at a loss as to how and when to do this. We all feel stuck, scared and anxious. Any advice is appreciated.

Wife & Mother

Related: My cousin left his estate to 6 relatives, but only one cousin, worth $30 million, received the inheritance — due to an ‘unexpected surprise’

“On the subject of mothers, listen to your own. If you can rent out your home, pay the mortgage and wait for the value to increase, do that.”


MarketWatch illustration

Dear Wife & Mother,

The longer you support your two adult sons, the longer they will lean on you and need you as their personal ATM. You’ve brought them over the finish line, and then some. You raised them, educated them, and fed and clothed and housed them. Now you are paying for their electricity and other bills. It’s time for your sons to stand on their own two feet and, as my Irish mother would say, cut their cloth according to its measure.

On the subject of mothers, listen to your own. If you can rent out your home, pay the mortgage and wait for the value to increase, do that. Your mother works in real estate and knows what she’s talking about. Real estate, in an ideal world, is a long-term game. It’s time for your sons to downsize to a small apartment, and experience the joys of paying their own way and standing on their own two feet. You need to cut the cord.

Act with integrity and intention. The best way to make a big move — and this is probably as big a move emotionally as it is financially — is to prepare. Sit down with your sons and an independent financial adviser, and do a forensic accounting of their income and expenditure and where they spend their money. I can almost guarantee you that their subsidized lifestyle lends itself to spending money in areas where they could easily cut back.

There is an underlying feeling of guilt in your letter. Have you done enough? Yes. Should you do more? No, you have done plenty, and you’re now putting your sons before your own financial peace of mind and retirement. Does it make you a bad person, or an unfeeling one, if you decide to cut them off? Of course not. Quite the contrary: You can lead by example by showing them what it means to make tough decisions and stick to them.

When you have accounted for your sons’ income and expenditure, look at rentals in your neighborhood or adjoining neighborhoods, if need be. The aim is for them to start taking responsibility for themselves. They don’t need a two-bedroom apartment. They can live in a one-bedroom condo and take turns sleeping on the sofa bed. This is a rite of passage, and it teaches young people the value of money and what it means to take accountability for oneself.

The share of adult children in the U.S. living with their parents has steadily risen since the 1960s. In 2020, during the pandemic, one-third of children ages 18 to 34 lived with their parents as non-caregivers. Men and 18- to 24-year-olds, respectively, were more likely to live at home than women and 25- to 34-year-olds, according to a study distributed by the National Bureau of Economic Research. Parents get support at home; kids get to experience a low-cost lifestyle.

But while the NBER found social benefits to living with adult children and that it does not necessarily delay, retirement, the benefits of providing your children with a head start by giving them somewhere to live start to decline when your ability to save for retirement is impeded, and you’re burning money supporting two households. This is also money you can put towards vacations and new cars, and building a future with your husband. You deserve to enjoy life and put yourself first for a change. Tell your sons, “You’re ready. I’m ready. I love you. Let’s do this.””

You can email The Moneyist with any financial and ethical questions at [email protected], and follow Quentin Fottrell on X, the platform formerly known as Twitter.

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

‘She’s obsessed’: My mom moved into my house and refuses to move out. She has paid for repairs and appliances. What should I do?

My parents want to pay off my $200,000 mortgage, and move into my rental. They say I’ll owe my sister $100,000. Is this fair?

‘I hate the 9-to-5 grind’: I want more time with my newborn son. Should I give up my job and dip into my six-figure trust fund?



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#afford #paying #households #adult #sons #live #rentfree #house #pay #utilities #husbands #condo

Why investors should be wary of New Year ‘head fakes’ for this hot asset class

The first trading day of the New Year looks set to challenge the Santa Rally theory, with Dow futures down over 200 points as bond yields surge. An Apple downgrade may not have helped investor confidence.

This week will bring the minutes of the Federal Reserve’s last meeting and important December jobs data.

“Data that comes in too hot will kill the idea of rate cuts starting as soon as March, and data that comes in too cold will kill the idea of a soft landing. It means Goldilocks must return from her Christmas trip to Aruba and appear this week,” says Michael Kramer, founder of Mott Capital Management.

Read: A stock investor’s guide to the first trading days of 2024

Onto our call of the day from MacroTourist blogger Kevin Muir, who sees a rally in small-cap stocks as one big theme for the coming year, though investors should beware of getting in too soon.

In a post, Muir draws on a 2021 observation from Raoul Paul, co-founder and CEO of Real Vision financial media platform, who posted on Twitter now X, at the time about the perils of piling into “head fakes” or new ideas in January.

Paul noted how hedge funds and asset managers start the new year with a clean investment slate, but then two weeks later start moving into so-called consensus Wall Street year-ahead trades. And once the rest of the investment world gets in, the trend reverses or corrects, and those managers get back to flat or have to start over.

Muir says given the Fed’s pivot away from monetary tightening at the end of 2023, small-caps will end up as stock leaders this year. A bull on that asset class, he flagged his readers to buy in early November and December.

After a tough year, the Russell 2000
RUT
rallied late in 2023 as it became clearer that Fed interest rate increases, particularly hard on smaller companies, were drawing to a close.

As per this Russell 2000 chart, Muir says he did get the timing right on that bullish call:

However, Muir says he’s concerned that the rally was mainly from “hedge fund covering,” and not a solid signal that the bear market for those stocks has ended.

One reason, he notes was that the stocks blasting higher at the end of 2023 were the most heavily shorted — he offers the Goldman Sach’s most-shorted index chart here:

MacroTourist

The chart is evidence of how hedge funds that got caught out when the Fed surprisingly guided toward interest rate cuts at the December meeting. Within a few hours of the Fed announcement, the Most-Short index had rallied 15%. But along with that, the ARKK Innovation ETF
ARKK
also shot higher, a red flag for Muir.

That short index is tightly correlated to ARKK and the Russell 2000 small-cap index, he said.

So says it’s possible the small-cap push was “just a hedge fund short-covering rally that will sag back down now that the buying has flamed out.” And based on Raoul Paul’s theory, it makes sense that hedge funds and other investors may be piling into the asset class.

Muir says he stands by his view that small-caps are cheap and deserving of gains. “However, if this small-cap rally is for real, then it can’t be led by crap. We can’t have the GS Rolling Most-Short leading the charge. We need quality small-cap stocks to rally,” he said.

So the correlation between broader small-cap indexes and the most-shorted index (also tightly correlated with ARKK) will have to break down.

“As a proxy for this index, and a hedge against my small-cap long position, I am shorting ARKK. So far, the short covering drove all these smaller capitalized stocks higher, but my bet is that an actual small-cap bull market will see much better differentiation, and that new small-cap leadership will emerge (and it won’t be ARKK),” he says.

The markets

U.S. stock index futures
ES00,
-0.67%

YM00,
-0.26%

NQ00,
-1.19%

are falling sharply as Treasury yields
BX:TMUBMUSD10Y

BX:TMUBMUSD02Y
climb. Gold
GC00,
+0.32%

is up, and oil
CL.1,
+0.14%

is up 2% after Iran sent warships to the Red Sea after the U.S. Navy sank some Houthi militia-backed boats. The Hang Seng
HK:HSI
fell 1.5% after weak China factory activity.

Key asset performance

Last

5d

1m

YTD

1y

S&P 500

4,769.83

0.32%

3.81%

24.23%

24.23%

Nasdaq Composite

15,011.35

0.12%

4.94%

43.42%

43.42%

10 year Treasury

3.933

3.28

-24.22

5.23

18.77

Gold

2,082.50

0.87%

1.67%

0.52%

13.79%

Oil

72.78

-0.97%

-0.70%

2.03%

-9.60%

Data: MarketWatch. Treasury yields change expressed in basis points.

The buzz

U.S. nonfarm payroll data for December is due Friday, with the Institute for Supply Management’s manufacturing report and minutes of the Dec. 12-13 Fed meeting both on Wednesday. Construction spending is due at 10 a.m. on Tuesday.

Read: Health of U.S. labor market looms large on markets’ radar this coming week

Apple
AAPL,
-2.97%

is down 2% in premarket after Barclays’ analysts cut the iPhone maker to underweight from equal weight, on signs of weak iPhone 15 and other hardware sales.

Voyager Therapeutics stock
VYGR,
+29.74%

is up 32% after the biotech announced a licensing deal with Novartis unit Novartis Pharma
NOVN,
+0.99%
.

Joyy
YY,
-14.65%

is off 11% after Baidu
BIDU,
-3.40%

cancelled a $3.6 billion offer for the Singapore-based live-streaming platform.

Bitcoin
BTCUSD,
+4.23%

is at $45,447, a high not seen since April 2022, on ETF approval hopes.

Tesla
TSLA,
-0.55%

said it delivered 484,507 EVs in the fourth quarter, producing 494,989. Deliveries grew 83% to 1.81 million for 2023 as a whole. Tesla shares are slipping. Meanwhile, China’s BYD
002594,
-2.73%

sold 3.02 million electric vehicles in 2023, eclipsing Tesla a second-straight year.

Japan’s western coast was hit by several heavy earthquakes on New Year’s Day, leaving at least 30 people dead and more quakes could come. A collision between a Japan coast guard plane and a Japan Airlines flight that caught fire on the runway on Tuesday resulted in the deaths of five people.

Best of the web

This year, resolve to pack a ‘go bag’ to be ready for the next disaster: Here’s what to put in it

Why Suze Orman never goes out to dinner

Topless massages, cage fights and private flights: CEO mishaps of 2023

The chart

More on small-cap caution from Chris Kimble at See It Market. He points out that investors may be getting greedy as some big resistance levels approach for the Russell 2000:


See It Market

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

Ticker

Security name

TSLA,
-0.55%
Tesla

MARA,
+7.47%
Marathon Digital Holdings

NIO,
-5.79%
Nio

NVDA,
-3.27%
Nvidia

GME,
-1.14%
GameStop

AAPL,
-2.97%
Apple

AMC,
AMC Entertainment

COIN,
-2.62%
Coinbase GLobal

MULN,
-4.69%
Mullen Automotive

RIOT,
+5.69%
Riot Platforms

Random reads

New Year’s Eve in a Japanese cat bar.

Woman sues Hershey for $5 million over a faceless Reeses pumpkin.

Viral Burger King worker buys first home after crowdsourcing.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

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#investors #wary #Year #fakes #hot #asset #class

The Magnificent 7 dominated 2023. Will the rest of the stock market soar in 2024?

2023 will go down in history for the start of a new bull market, albeit a strange one.

Despite some year-end catch-up by the rest of the S&P 500 index, megacap technology stocks, characterized by the so-called Magnificent Seven, have dominated gains for the large-cap benchmark
SPX,
which is up 23.8% for the year through Friday’s close.

That’s the result of “extreme speculation,” according to Richard Bernstein, CEO and chief investment officer of eponymously named Richard Bernstein Advisors. And it sets the stage for investors to take advantage of “once-in-a-generation” investment opportunities, he argued, in a phone interview with MarketWatch.

MarketWatch’s Philip van Doorn last week noted that, weighting the Magnificent Seven — Apple Inc.
AAPL,
-0.55%

 , Microsoft Corp.
MSFT,
+0.28%
,
 Amazon.com Inc.
AMZN,
-0.27%
,
 Nvidia Corp.
NVDA,
-0.33%
,
 Alphabet Inc.
GOOG,
+0.65%

GOOGL,
+0.76%
,
 Tesla Inc.
TSLA,
-0.77%
,
 and Meta Platforms Inc. 
META,
-0.20%

— by their market capitalizations at the end of last year, the group had contributed 58% of this year’s roughly 26% total return for the S&P 500, and that’s down from a breathtaking 67% at the end of November.

The chart below shows that the percentage of stocks in the S&P 500 that have outperformed the index in the year to date remains well below the median of 49% stretching back to 1990:


Richard Bernstein Advisors

Meanwhile, the tech-heavy Nasdaq Composite
COMP
has soared more than 40% this year, while the more cyclically weighted Dow Jones Industrial Average
DJIA,
which hit a string of records this month, is up 12.8%.

The narrowness of the rally gave some technical analysts pause over the course of the year. They warned that that it was uncharacteristic of early bull markets, which typically see broader leadership amid growing confidence in the economic outlook.

Bernstein, previously chief investment strategist at Merrill Lynch, sees parallels with the late-1990s tech bubble, which holds lessons for investors now.

The market performance indicates investors have convinced themselves there are only “seven growth stories,” he said. It’s the sort of myopia that’s characteristic of bubbles.

The consequences can be dire. In the 1990s, investors focused on the economy-changing potential of the Internet. And while those technological advances were indeed economy-changing, an investor who bought the tech-heavy Nasdaq at the peak of the bubble had to wait 14 years to get back to break-even, Bernstein noted.

Today, investors are focused on the economy-changing potential of artificial intelligence, while looking past other important developments, including reshoring of supply chains.

“I don’t think anyone is arguing AI won’t be an economy-changing technology,” he said, “ the question is, what’s the investing opportunity.”

For his part, Bernstein argues that small-cap stocks; cyclicals, or equities more sensitive to the economic cycle; industrials; and non-U.S. stocks are all among assets poised to play catch-up.

“I don’t think one has to be overly sexy on this one…it may not make a huge difference as to how you decide to execute and invest” in those areas, he said. “There’s a bazillion different ways to play this.”

Those areas are showing signs of life in December. The Russell 2000
RUT,
the small-cap benchmark, has surged more than 12% in December versus a 4.1% advance for the S&P 500. The Russell still lags behind by a wide margin year to date, up 15.5%, or more than 8 percentage points behind the S&P 500.

Meanwhile, an equal-weighted version of the S&P 500
XX:SP500EW,
which incorporates the performance of each member stock equally instead of granting a heavier weight to more valuable companies, has also played catchup, rising 6.2% in December. It’s now up 11% in 2023, still lagging behind the cap-weighted S&P 500 by more than 8 percentage points.

Bernstein sees early signs of broadening out, but expects it to be an “iterative process.” What investors should be aiming for, he said, is “maximum diversification,” in direct contrast to 2023’s historically narrow market, which reflects investors rejecting the benefits of diversification and taking more concentrated positions in fewer stocks.

To be sure, while the Magnificent Seven-dominated stock-market rally has attracted plenty of attention, it doesn’t mean those individual stocks have been the sole winners in 2023.

“I will say, ‘magnificent’ is in the eye of the beholder,” said Kevin Gordon, senior investment strategist at Charles Schwab, in a phone interview.

The seven stocks that account for such a large share of the S&P 500’s gains do so mostly due to their extremely “mega” market caps rather than outsize price gains. And that’s just, by definition, how market-cap-weighted indexes work, analysts note.

That doesn’t mean the megacap stocks are necessarily the best performers over 2023. While Nvidia, up 243%, and Meta, up 194%, top the list of year-to-date price gainers in the S&P 500, Apple Inc.
AAPL,
-0.55%

is only the 59th best performing stock, with a 49% gain. Combine that with a $3 trillion market cap, however, and Apple proves one of the biggest movers of the overall index.

What was bizarre about the 2023 rally wasn’t so much the megacap tech performance, Gordon said, but the fact that the rest of the market languished to such a degree until recently.

Clarity around the economic outlook and interest rates help clear the way for the rest of the market to play catch-up, he said. Fears of a hard economic landing have faded, while the Federal Reserve has signaled its likely finished raising rates and is on track to deliver rate cuts in 2024.

For stock pickers that didn’t latch on to the few winners, 2023 was brutal. Passive investors who just bought S&P 500-tracking ETFs should feel good.

So why not just chase the index? Bernstein argues that could spell trouble if the megacap names are due to falter. That could make for a mirror image of this year where gains for a wider array of individual stocks is offset by sluggish megacap performance.

Gordon, however, played down the prospect of “binary outcomes” in which investors sell megacaps and buy the rest of the market.

If troubled segments of the economy, such as the housing sector, recover in 2024, investors “could definitely see a scenario where the rest of the market catches up but it doesn’t have to be at the expense of highfliers,” he said.

Source link

#Magnificent #dominated #rest #stock #market #soar