A Bull Run for an Insane World

A crazy world... The bull market continues... How 2024 has been like 1998... It might not fall apart tomorrow... A rumor about Hershey... We've been down this road before... Two mistakes to avoid today...

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The 'world is going a little crazy right now'...

So says President-elect Donald Trump...

According to Trump, that was one theme of a "trilateral" discussion he had with French President Emmanuel Macron and Ukraine's Volodymyr Zelenskyy this weekend. They were among the world leaders gathered in Paris for a grand reopening event of the Notre Dame cathedral that burned in 2019.

As far as I (Corey McLaughlin) am concerned, the world has been "a little crazy" for... maybe forever. But certainly it feels like more so for at least four years, since the onset of the COVID-19 pandemic.

Consider the past week alone...

First, the president of South Korea declared martial law, a decision targeted at an opposition party that he claims was engaging in "anti state" conduct. As quick as possible, though, the country's legislators voted to lift the order...

South Korean President Yoon Suk Yeol survived an impeachment bid over the weekend, but he still faces the prospect of being removed. And his country's Justice Ministry has banned him from traveling overseas.

Meantime, as Trump was meeting with world leaders in Paris, rebels in the Middle Eastern country of Syria were in the process of taking down the country's leadership regime without much of a struggle at all. Ousted Syrian leader Bashar Assad has allegedly fled to Russia.

And here in the U.S., a man gunned down the CEO of UnitedHealthcare on a sidewalk outside the Midtown Manhattan Hilton hotel, less than two hours before a company investor day was supposed to begin inside.

Today, the 26-year-old suspect was apprehended after being spotted in a Pennsylvania McDonald's restaurant. Police said he had a gun and silencer, a fake ID, and a manifesto critical of the health insurance industry. The suspect is originally from Maryland and was the valedictorian at a private school in a part of Baltimore 10 minutes from where I'm writing today's edition.

The headlines are crazy, to say nothing of the stories behind them...

Perhaps counterintuitively, the market is a refuge...

As we reported last week, the S&P 500 Index and Nasdaq Composite Index have been hitting new all-time highs again. Today, this was not the case... All the major U.S. indexes were off from 0.5% to 0.8%. But zooming out, short-term and long-term technical trends are sturdy.

Here's a chart of the benchmark S&P 500, with its 50-day and 200-day moving averages...

After some cooling off in recent months, even some of the "Magnificent Seven" stocks, like Meta Platforms (META) and Amazon (AMZN), are hitting new all-time highs again. People are still jazzed up about what artificial intelligence might do for businesses' productivity, which has been a dominant storyline over the past two years.

Taking a look at market breadth... about 64% of stocks listed on the New York Stock Exchange are trading above their 200-day moving average. That means nearly two-thirds of these stocks, large and small, are in longer-term uptrends.

Longer-term bond yields have come down after their pre- and post-U.S. election rise.

Gold is holding steady above $2,600, below its all-time high, and bitcoin has leveled off near $100,000 over the past week. Even the CBOE Volatility Index, or VIX – considered by some as the market's "fear gauge" – is near yearly lows as of today, around 14.

All's well, right? As we write these words, sure. But as we'll explain today, stocks are in "expensive" territory now, too.

Enjoy the gains from this year... And if you're sitting on some big positions, it might not be a bad time to trim some gains, or raise some cash (like enough "insiders" and guys like Warren Buffett have been doing lately).

We're keeping our eyes wide open about the future...

For one thing, I'm concerned about a reacceleration of inflation in the short term. This week, we'll get another read on that story, with November's consumer price index ("CPI") report due out on Wednesday morning.

Last month, the market shrugged off a headline CPI reading in October of 2.6%... and "core" CPI growth of 0.3% from the month before and 3.3% year-over-year growth. That pace is well above the Federal Reserve's 2% goal (and most people's liking, I'd argue).

Another round of numbers like these may not be taken so lightly by the market – and shouldn't be. Alternatively, average inflation numbers could placate investors.

In any case, we don't need to think back very far to remember what a world with 40-year-high inflation looked like. It might be all fun and games for the market as prices shoot higher, but the downsides turn up eventually (such as higher interest rates).

And over the longer term, the continued devaluation of the U.S. dollar and other warts of our economy – such as the ever-rising U.S. federal debt and government spending – continue to have ongoing and unrealized consequences.

Yet, stripping the emotion and our logic out of things, it appears like "business as usual" in other notable places... like the Federal Reserve...

Those string-pullers at the Fed seem intent on lowering interest rates again next week come hell or high(er) inflation. That's despite a labor market and economy in general that could probably do without the artificial juice of "cheaper dollars."

Troubling as that may be for anyone interested in "sound currency," today's investors and traders can bank on that stance, and the lack of uncertainty is likely welcome... I suspect that this, more than any single headline or recent geopolitical event, is a catalyst for the market steadily churning higher to finish one of its best years of the last few decades.

But soon enough, the new year will be here... and so will more of the Fed's "data." And with a new president officially in office (who doesn't exactly love Fed Chair Jerome Powell)... that's a situation that could shake up the status quo, for better or worse.

On the geopolitical front, Zelenskyy, Trump, and Macron also evidently talked about bringing an end to the war in Ukraine next year... Recent reports said that Russian President Vladimir Putin is open to discussing an end, too.

Domestically, though, no one knows what Trump's policies or promises might ultimately look like during his second term as president. That ranges from tariffs to taxes to how much federal spending (if any) might be cut by Congress.

But the market seems unaffected for the most part thus far by those questions.

If this is like the dot-com bubble...

This year has been 1998.

We've written here before about the potential similarities between today's AI-featured bull market and the run-up of the dot-com bubble in the 1990s. Well, as lead editor Whitney Tilson and our Stansberry's Investment Advisory team pointed out to subscribers in their newest issue published on Friday, the comparisons are holding up.

The benchmark S&P 500 is up about 27% on the year through today. As our team wrote...

If these levels hold, then the S&P 500 will have posted back-to-back 25%-plus annual gains. That hasn't happened since 1997 and 1998, during the lead-up to the dot-com bubble.

Since a low in October 2022 at what proved to be the bottom of that year's bear market, the S&P 500 has gained just shy of 70%. It has been a good run.

Now, we remember this, too. It might not all fall apart tomorrow. If this year is akin to 1998, that means 2025 would be 1999... which delivered another 21% gain for the S&P 500 before the bull market topped in 2000.

The average return of 27 bull markets since 1928 is around 115%.

So, we're not saying it's time to go "all out" right now.

However, as Investment Advisory subscribers and Stansberry Alliance members can read in that issue, the overall market has gotten about as expensive as it was in 1998, too. This is according to our team's proprietary market-valuation indicator, updated each month.

I can't give away the details out of fairness to paying subscribers, but just know that stocks are indeed in "expensive" territory. Be sure to check out the issue for the full details... and subscribe to our flagship publication if you don't already. You can get started here.

That said, though, the markets are generally continuing to push higher in the final trading days of 2024.

One of our best-ever recommendations soared today...

Longtime readers know chocolate and snack maker Hershey (HSY) is one of our favorite companies here at Stansberry Research. It has a product folks always want (sugary candy) and powerful brand names – two hallmarks of a great investment.

Stansberry Research founder Porter Stansberry's initial recommendation of Hershey in the December 2007 issue of Stansberry's Investment Advisory is up more than 400%... And it can be found in our company's Top 10 Open Recommendations list at the end of every Digest.

The stock hasn't had a great year or two, hurt by concerns ranging from soaring cocoa prices to the impact of weight-loss drugs and increased competition. As our Investment Advisory team wrote just on Friday in a portfolio update...

Hershey had a disastrous second quarter this year, with revenues falling 17% year over year. But the company stabilized results in the third quarter and looks to be returning to growth.

Today, big news broke...

Hershey shares jumped more than 10% on a report that snack giant Mondelez (MDLZ) is looking into acquiring Hershey. Mondelez owns popular brands like Oreo and Cadbury, among others.

The initial report from Bloomberg was short on details, but it was enough to send the stock higher. In fact, Hershey's stock had its single best day since June 30, 2016... ironically, the day when Mondelez first approached Hershey for a merger.

We've been down this road before...

Mondelez's 2016 offer to buy Hershey came in at about $23 billion. But Hersey's board unanimously rejected the offer. And after two months of negotiations, Mondelez dropped its pursuit.

As the Stansberry's Investment Advisory team wrote in an update for the September 2016 issue...

Mondelez raised its offer, but once again, the Hershey Trust, which controls more than 80% of Hershey's common shareholder voting power, seems to have played a role in foiling the takeover attempt. The Trust has blocked attempts by other companies to buy Hershey in the past.

As mentioned, the Hershey Trust controls more than 80% of Hershey's voting shares. This voting power from the Hershey Trust is a big reason why Porter liked the company so much as a "forever" stock way back in 2007...

Founder Milton Hershey created the Trust to benefit the Milton Hershey School and educate disadvantaged children. The Trust has sole power to veto a deal like this and has used this power to shoot down past takeover attempts.

It's not the only one...

The Pennsylvania attorney general can also block a deal that would limit the Trust's influence in the new combined company. This time around, we reckon Mondelez will run into the same challenges.

In any case, though, we don't blame Mondelez for being interested in a company like Hershey. It has proven to be a capital-efficient, cash-producing giant that allows shareholders to compound wealth over the long run...

Buyout or not, it is one of the best recommendations in Stansberry Research history and the position remains in the Investment Advisory portfolio. After today's move, though, it trades above its recommended "buy up to" price. In other words, our team only recommends opening a Hershey position when shares are cheaper than they are today.

The idea of a buy-up-to price brings up a great, timeless point...

This goes especially if you're concerned about navigating what might look like a late-1990s bull market without an end in sight quite yet. As Whitney and our team write in this month's issue...

We're not going to sell everything just because it's richly valued... And we're not going to buy highfliers just because the trend is up.

There is an in between, where you are managing risk and reward prudently. That is to avoid that nagging sense of "FOMO," or fear of missing out, while protecting your hard-earned savings and investments as well.

To this point, in the latest issue of the Investment Advisory, our team ran through an in-depth review of its portfolio holdings. Among other topics, the team reviewed a number of recommendations that remain attractive buys today... and recommended taking profits or cutting losses on others. You should really check it out.

Existing subscribers can find the issue here... and if you don't have access to our flagship publication, get started today. You can find more information here... including how to claim a subscription for 70% off its regular price, backed by our 30-day money-back guarantee.

New 52-week highs (as of 12/6/24): Amazon (AMZN), AutoZone (AZO), Alpha Architect 1-3 Month Box Fund (BOXX), Ciena (CIEN), Costco Wholesale (COST), Fortinet (FTNT), Home Depot (HD), London Stock Exchange Group (LNSTY), Meta Platforms (META), Neuberger Berman Next Generation Connectivity Fund (NBXG), Palo Alto Networks (PANW), PayPal (PYPL), ProShares Ultra QQQ (QLD), Construction Partners (ROAD), ProShares Ultra S&P 500 (SSO), Twilio (TWLO), Veeva Systems (VEEV), and Vanguard S&P 500 Fund (VOO).

A quiet mailbag today. As always, send your comments and questions to feedback@stansberryresearch.com.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
December 9, 2024