February 8, 2024

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Trendsters, are you ready to ditch the "buy low, sell high" mantra and dive into a world where dividends are making a comeback? Get your briefcases, because today's newsletter is packed with market insights, historical gems, and even a sprinkle of chart wisdom. Get ready as we explore:

The Dividend Awakening: Spoiler alert, it's not your grandpa's dividend strategy! We'll crack open the secrets of how one company is reshaping investor rewards.

Chart of the Day: Remember "buy low, sell high"? We'll unveil the truth behind this timeless (and often elusive) advice with a special chart education edition.

Market Moving News: Get the scoop on the hottest (and coolest) market movers, from Chipotle's sizzling earnings to Snap's not-so-snazzy woes.

Random Musings: Prepare to be amazed (and maybe a little amused) by financial trivia that'll make you the smartest person at the water cooler.

So, put down your crystal ball (we're focusing on facts, not fortune-telling!), and join us on this exciting journey through the market. You'll leave informed, entertained, and ready to navigate these trends like a true Trendster. Let's get started!

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Today's Market Mood: EXTREMELY BULLISH!

The Bear-Bull Meter

Keep holding onto something Trendsters, because the market's on a tear! Major indexes just hit record highs thanks to a winning combo of impressive earnings reports and bullish economic sentiment.

The S&P 500 and Dow Jones both closed at all-time highs, fueled by Ford's stellar earnings exceeding expectations and raising the profit bar for the rest of the season. Walt Disney, another Dow member, is set to take the stage after the bell tonight, so buckle up for potential post-earnings fireworks.

While optimism reigns supreme, let's remember not to get carried away by the excitement. Remember, those lowered earnings estimates before the season? They mean companies haven't exactly been blowing expectations out of the water.  They're simply exceeding slightly lower hurdles.

Here's the market pulse in a nutshell:

S&P 500: Up 0.8% to 4,995.06 (new record high!)

Dow Jones: Up 0.4% to 38,677.36 (new record high!)

Nasdaq: Up 1.0% to 15,756.64

10-year Treasury yield: Up slightly to 4.117%

VIX: Down to 12.83, indicating lower investor fear

So, where do we go from here? Strap in for a few potential scenarios:

Scenario 1: Earnings euphoria continues. Strong results keep rolling in, fueling further market gains. Keep an eye on Disney tonight and other key players reporting this week.

Scenario 2: Reality check sets in. Earnings season fizzles out, or companies miss expectations, triggering a pullback. Watch for profit-taking and increased volatility.

Scenario 3: Goldilocks zone. Earnings remain decent, not spectacular, but enough to sustain moderate market growth. This scenario might involve some sector rotation, with investors seeking value outside of overheated areas.

No matter the path, remember to stay diversified, manage your risk, and keep a level head. Don't chase hot trends blindly, and focus on companies with solid fundamentals and long-term potential. Remember, even rockets eventually have to land.

Keep reading for further analysis and insights!

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Did you hear about the stock market that broke its record high after Ford's earnings report? Seems the market forgot the old saying: "Never invest in a company run by a horse!"

Still, remember when companies used to lower their earnings expectations before the season, making it easier to beat them? Now, they're just exceeding slightly lower hurdles. So, it's like playing hopscotch with the bar set at your ankles.

Just a reminder, Trendsters, don't get too excited by the "new high" headlines. This market could still take a turn, like a used car with a fresh coat of paint.

Don't Chase the Unicorn - The Truth About "Buy Low, Sell High"

Ah, the age-old adage, "buy low, sell high." It's simple, elegant, and about as achievable as riding a unicorn across a rainbow.  Let's face it, pinpointing the absolute bottom (or top) is like nailing Jell-O to a wall.

Today's chart unveils the secret weapon in your "buy low" arsenal: historical price data.  It's like a time machine for your trades, showing you a stock's highest and lowest points over a specific period. Nifty, right?

Take a gander at our friend IBM. See that lofty peak it's nearing? That's a decade high, folks. Not exactly bargain-basement territory.  Why? Because once a stock reaches such heights, the potential for reward shrinks while risk balloons. Think of it like climbing Mount Everest - the higher you go, the thinner the air (and the profits).

Remember, those investors who snagged IBM at its 2020 lows might be eyeing the exit door soon.  Their selling could trigger a price dip, leaving you holding a not-so-magical beanstalk.

So, while "buy low, sell high" might be the investing mantra, let's add a crucial asterisk: buy low, considering historical context and potential risk-reward.  This chart is just the tip of the iceberg, Trendsters. Stay tuned for more market wisdom that'll help you navigate the markets like a seasoned explorer, not a unicorn chaser.

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Move over, buybacks, dividends might be making a comeback. Meta's token 50-cent payout may seem like a drop in the bucket, but it's a symbolic splash that could ripple across the market.

For decades, dividends have been overshadowed by the flashier buyback trend. Companies, especially tech giants like Meta, showered investors with stock repurchases, focusing on growth over income. But with interest rates rising and tech's shine fading, the tide may be turning.

Enter Meta's "coming of age" moment. This small payout signifies a potential shift towards "sensible rewards" for shareholders, a move welcomed by analysts. It's a reminder of a bygone era when dividends were king, offering a steady stream of income regardless of market fluctuations.

Sure, low interest rates made dividends less attractive, pushing many companies to prioritize buybacks. But as rates rise, bonds become more competitive, and investors crave income, dividends might regain their luster.

Think ignoring dividends paints an incomplete picture? Consider Italy's FTSE MIB. Its stonking 39% total return last year, fueled by a 4%+ dividend yield, puts the S&P 500's 26% to shame. This, as Hans-Jörg Naumer of Allianz Global Investors points out, plays into our emotional side. "An income stream helps to overcome that feeling of loss," he says.

The path won't be smooth. Last year's tech rally showed the allure of high-growth, low-dividend stocks remains strong. But it also served as a reminder that nothing lasts forever.

Meta's move, while small, is a signal. It suggests that even in the age of buybacks and tech titans, the humble dividend still holds a place in investor hearts (and wallets). While a return to the golden age of dividends is unlikely, Meta's example shows they're not relics of the past. They might just be the next big thing, offering a welcome dose of stability and income in a changing market landscape.

The dividend dance might be starting, and Meta could be the first to take a bow.

Hold onto your hats, Trendsters! The market's serving up a mixed platter of winners and losers today. Let's dissect the key movers and shakers:

Feasting:

Chipotle: (CMG) +7.2% - Surging store traffic and better-than-expected earnings fueled this spicy surge.

CVS: (CVS) +3.1% - Healthy quarterly numbers sent this pharmacy giant's stock soaring.

Fortinet: (FTNT) +3.7% - Cybersecurity firm Fortinet fended off hackers and analyst doubts with strong results.

New York Community Bancorp: (NYCB) +7% - This bank's stock rebounded after a Moody's downgrade, defying gravity (and maybe some common sense).

Roblox: (RBLX) +10% - The video game maker's earnings and revenue beat were music to investors' ears.

Sonos: (SONO) +17.1% - The speaker maker's earnings were a sweet symphony for its shareholders.

Fasting:

Snap: (SNAP) -35% - Ouch! Snap's disappointing revenue and guidance sent its stock plummeting faster than a dropped selfie stick.

Neutral Territory:

Yum! Brands: (YUM) +1.9% - The fast-food giant's results weren't finger lickin' good, but investors weren't hangry enough to sell.

Eyes on the Prize:

More earnings reports are on the menu today, including Archer Daniels Midland, Astrazeneca, and ConocoPhillips.

Honda Motor and Pepsico are up for grabs on Friday.

Volatility on the Side?

Brace yourselves for potential turbulence, especially in small-cap stocks, as the market navigates economic data and the Fed's next rate moves. Smaller companies tend to be more sensitive to these factors, so buckle up for a potentially bumpy ride.

Fed Talk: Hawkish or Dovish?

Fed leaders are still singing the same tune: inflation needs to cool down before they consider easing rates. Stay tuned for the January CPI report on February 13th for more clues about the Fed's monetary policy stance.

Remember, Trendsters, the market is a complex beast with many moving parts. Stay informed, diversify your portfolio, and don't get caught in the hype (or the fear).

Random Musings

Dividends vs. Buybacks: A Tale of Two Philosophies. Meta's tiny payout reignites the age-old debate. Are dividends a return to sensible stability, or just a drop in the bucket compared to the growth-focused allure of buybacks? Only time (and market performance) will tell which approach waltzes away with investor hearts.

Beware the Siren Song of "Easy Money." With tech's recent rebound, whispers of "buy the dip" might be tempting. But remember, even the sweetest melodies can lead to rocky shores. Do your due diligence, diversify, and don't chase fleeting trends.

The Power of Perception: When Earnings Aren't Everything. Sometimes, a company's "story" matters more than the numbers on the page. A positive outlook can fuel gains, while a whiff of doubt can send stocks plummeting. It's a reminder that the market is as much about psychology as it is hard data.

Volatility: The Spice of Market Life (but Use It Sparingly). A dash of volatility can keep things interesting, but too much can leave you with indigestion. Manage your risk wisely, especially in smaller-cap stocks that tend to be more sensitive to market swings.

The Long Game: Patience is a Virtue (and an Investment Strategy). Don't get caught up in the daily gyrations of the market. Remember, successful investing is often a marathon, not a sprint. Stay focused on your long-term goals and don't let short-term noise cloud your judgment.

On this day in history, February 8

February 8, 1910: The Boy Scouts of America is officially incorporated, bringing its brand of outdoor adventure and character-building to countless youngsters. Could there be a future "Investing Merit Badge" in the works?

February 8, 1968: The Black Power salute at the Olympics ignites controversy, but also sparks important conversations about race and equality. A reminder that sometimes, taking a stand can be more valuable than winning a medal.

February 8, 1974: Charles F. Richter invents the Richter magnitude scale, forever changing how we measure earthquakes. Just like financial tremors, understanding the scale of risk is crucial for making informed decisions.

February 8, 1990: Nelson Mandela is released from prison after 27 years, marking a monumental shift in South Africa's history. A reminder that even the darkest nights can eventually give way to a brighter dawn.

February 8, 2013: SpaceX launches its Falcon 9 rocket, marking the dawn of a new era in private space exploration. Just like innovative companies disrupt traditional industries, don't underestimate the potential of unconventional investments.

This week's market journey was like a vintage record player, spinning stories of old and new. Meta's tiny dividend harkens back to a simpler time, while smaller companies like Roblox remind us that innovation still spins the market forward. Remember, the key to navigating this financial time warp is not chasing fleeting trends, but investing in companies with staying power – the ones building sturdy oak trees, not fragile beanstalks. 

Before we say goodbye, we would like to leave you with a quotation that is applicable for today’s newsletter. Here it is:

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” - John D. Rockefeller

That’s all for today, Trendsters. Thank you for reading Traders on Trend, and we hope to see you again tomorrow. Until then, happy trading and stay safe!

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