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Déjà Vu In The Stock Market 🤔
Did you know that the Dutch Tulip Mania of the 17th century is considered one of the first recorded financial bubbles?
Equity Eats
February 08, 2024
Déjà Vu In The Stock Market 🤔
Did you know that the Dutch Tulip Mania of the 17th century is considered one of the first recorded financial bubbles? Investors invested huge sums into tulip bulbs, driving prices to astronomical heights before the market collapsed.
This serves as a reminder of the market's repetitive nature and the importance of informed investing.
In this edition, we’ll be looking at the following:
Powell Indicates Three Interest Rate Cuts In 2024. FIrst, Fed Chair Jay Powell's recent hint at interest rate cuts in 2024. With an economy in good health, these anticipated cuts could mean a new phase of growth for the stock market ✂️
Small Cap Stocks To Perk Up. Next, we look into the potential of small cap stocks in anticipation of these rate cuts. This might just be the right opportunity for investors to catch the wave 🚀
China Hopes Never Die. Lastly, we’ll examine investors hoping for an opportunity in China’s market, despite its sharp downturn 💀
This newsletter bridges the lessons of history with modern market movements, showing you that the key to understanding the present is understanding the past.
Powell Indicates Three Interest Rate Cuts In 2024 ✂️
Fed Chair Jay Powell indicated on the news program 60 Minutes that “almost all” of the members of the Federal Open Market Committee think the US central bank will cut rates three times their current 23-year high of 5.25-5.5 per cent at some point over the course of this year 📊
Powell characterized the economy as being in sound health—
“...the labor market is strong, and inflation is coming down…”
“My colleagues and I are trying to pick the right point at which to begin to dial back our restrictive policy stance. That time is coming”
Sounds like a positive backdrop for continued stock market strength 💪
Small Cap Stocks To Perk Up 🚀
Small cap companies are well positioned to enter a bull market when the Fed begins cutting interest rates by mid-year.
Small companies have already refinanced debt and cut inventories and headcount 💸
In late 1994 when the Fed suggested their interest rate hiking cycle was over, small cap stocks gained 55% over the next 17 months.
The Fed is likely to start cutting interest rates in May or June, so get ready for the small caps 👀
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China Hopes Never Die 💀
The Chinese stock market is down more than 60% since early 2021, reflecting loss of more than $1.9 trillion in value over the period 📉
Just a few years ago, foreign investors feared missing out on China’s rapid economic growth.
Once again, investors are sniffing around, enticed by China’s low valuations.
But investors have short memories—ask them to find any totalitarian regime that has ever provided a sustainable path of economic growth and financial prosperity.
The answer is, there are none ❌
