Afry Harvy
U.S. stock markets ended the year strong after the Fed held interest rates steady, prompting revised expectations and signaling lower interest rates in 2024.
Domestic stock markets changed little during the recent period between Index selection dates (December 14, 2023, to January 10, 2024, the "Period"). U.S. domestic markets ended 2023 on a high note, as stocks rallied following the Federal Reserve's (Fed) decision during its December 13th Federal Open Market Committee (FOMC) meeting to maintain its target interest rate at 5.50%, marking the third consecutive meeting without a rate change. Fed Chair Jerome Powell, in his post-meeting remarks, cited the central bank's successful effort in controlling inflation, noting "real progress in core inflation" had been achieved following a period of aggressive rate hikes over the last 18 months.
Several market analysts drew parallels between the Federal Reserve's unforeseen dovish turn and President George W. Bush's famous "Mission Accomplished" declaration, noting the potential similarity in their premature sense of achievement. Powell's remarks caught the market off guard, leading to a swift shift in the prevailing 'higher for longer' interest rate outlook. This change in sentiment triggered a notable increase in prices and a corresponding decline in yields, particularly in the two-year and longer segments of the yield curve. Some market participants speculated that the Fed's actions might be politically influenced, aiming to avoid a recession ahead of the 2024 Presidential election.
The accompanying table presents the Federal Reserve's dot plot of projected midpoint levels for the Fed Funds Target Rate at the end of 2024, as outlined after the September 2023 and December 2023 meetings. The Fed dot plot depicts each Fed official's projection of the appropriate midpoint of the Fed Target Rate at the end of a calendar year. The table reveals a decrease in the median projected midpoint levels of the Fed Funds Target Rate for 2024, from 5.125% to 4.625%. This change suggests a consensus among most FOMC members aligning with Chairman Powell's perspective on future inflation. The latest dot plot reveals that the committee is now leaning towards more substantial rate reductions in 2024, a shift from their more conservative forecasts made in September 2023.
FED DOT Plot - 2024 Year-End Projected Levels
The BUZZ NextGen AI US Sentiment Leaders Index (the "BUZZ Index") returned 11.75% during the month of December compared to a return of 4.54% for the S&P 500 Index during the same period. The BUZZ Index finished ahead of the S&P 500 on the year with returns of 54.95% and 26.29%, respectively, as of the end of December.
'Magnificent 7' Stocks Pace Advancing Stocks within the BUZZ Index
Five of seven 'Magnificent Seven' stocks were featured in the Top 10 contributors (NVIDIA (NVDA), Meta (META), Alphabet (GOOGL), Microsoft (MSFT), & Amazon (AMZN)) to BUZZ Index performance during the recent Period, with shares of NVDA featured as the top contributor BUZZ Index returns. At the recent Consumer Electronics Show ("CES") trade show, NVDA introduced three cutting-edge desktop graphics chips that enhance AI capabilities on personal computers without relying on internet-based services. This strategic move pits Nvidia against competitors Intel and AMD, who have been advocating for AI PCs that promise enhanced security and responsiveness through on-device AI processing. In 2023, Nvidia's market cap surpassed $1 trillion, joining the ranks of tech giants like Apple, Microsoft, Amazon, and Alphabet. Continuing this upward trajectory, Nvidia's stock reached a new all-time high on January 8th, 2024, coinciding with their CES trade show announcement.
| Top BUZZ Index Contributors: December 14, 2023 - January 10, 2024 | |||
| Company | Ticker | Average Weight (%) | Return Contribution (%) |
| NVIDIA Corp | NVDA | 2.94 | 0.37 |
| Meta Platforms Inc | META | 2.83 | 0.30 |
| Moderna Inc | MRNA | 1.23 | 0.29 |
| Advanced Micro Devices Inc | AMD | 3.07 | 0.23 |
| Alphabet Inc | GOOGL | 2.56 | 0.20 |
| Celsius Holdings Inc | CELH | 0.95 | 0.16 |
| Enphase Energy Inc | ENPH | 1.20 | 0.16 |
| Pfizer Inc | PFE | 2.10 | 0.15 |
| Microsoft Corp | MSFT | 2.92 | 0.13 |
| Amazon.com Inc | AMZN | 2.96 | 0.11 |
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.
Electric vehicle ("EV") manufacturers Lucid Group Inc (LCID), Rivian Automotive Inc (RIVN), and Tesla Inc (TSLA) were all featured among the top detractors to performance during the recent Period with shares of the three widely followed EV manufacturers down 33.7%, 15.0%, and 6.8% respectively. The downturn in EV stock performance may be linked to a variety of reasons. A significant recent factor is Tesla's recall of approximately 1.6 million vehicles across its Models S, X, 3, and Y in China, addressing potential crash risks in their autonomous driving systems. Furthermore, Tesla has accelerated a series of price reductions to boost demand, a strategy that has prompted other EV manufacturers to follow suit. These ongoing price cuts began in 2023 and are a strategic response to the economic pressure exerted by rising interest rates, a challenge affecting the entire EV sector. Amidst these developments, investors are increasingly focusing on company margins and profitability, prioritizing these financial metrics over future growth projections.
| Bottom BUZZ Index Contributors: December 14, 2023 - January 10, 2024 | |||
| Company | Ticker | Average Weight (%) | Return Contribution (%) |
| Lucid Group Inc | LCID | 2.41 | -1.02 |
| SoFi Technologies Inc | SOFI | 3.08 | -0.31 |
| Rivian Automotive Inc | RIVN | 2.36 | -0.30 |
| GameStop Corp | GME | 2.13 | -0.22 |
| Palantir Technologies Inc | PLTR | 2.69 | -0.21 |
| Paramount Global | PARA | 1.32 | -0.21 |
| Tesla Inc | TSLA | 2.96 | -0.20 |
| Apple Inc | AAPL | 2.81 | -0.17 |
| Boeing Co/The | BA | 1.34 | -0.17 |
| Roku Inc | ROKU | 0.89 | -0.17 |
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.
Sentiment Stock Highlight - Rocket Companies Inc.
Rocket Companies, Inc. (RKT), the fintech mortgage company, has seen a surge in positive investor sentiment in recent weeks. The parent company of Rocket Mortgage, formerly known as Quicken Loans, RKT has established itself in recent years as one of the premier providers of mortgages and loans for retail clients. Its fully online approach to the mortgage process and its philosophy of 'digital convenience' propelled the company's growth over the past decade and helped it become the largest provider of Federal Housing Administration ("FHA") loans and residential mortgages in the US. Since going public in August 2020, shares of RKT have been under pressure amid the rising interest rate environment, declining 60% from its IPO price by mid-2022. However, the recent dovish pivot by the Federal Reserve, notably in its latest dot plot projections, has the markets expecting lower rates in 2024. RKT jumped 55% in December after the Fed's meeting. This month, RKT is a notable re-entry into the BUZZ Index, achieving its highest weighting in over two years at 1.85%.
Rocket Companies Stock Price | December 2021 - January 2024
Source: BUZZ Holdings ULC, Bloomberg. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.
BUZZ Index January 2024 Rebalance Highlights
Crypto-Related Stocks
Crypto-related stocks have surged in recent months, with MicroStrategy (MSTR), Coinbase (COIN), and Marathon Digital (MARA) up 57%, 125%, and 165%, respectively, before pulling back to start this year. Current investor sentiment indicates the potential for a fresh wave of positive momentum within the industry. This optimism is reflected in both MARA and MSTR, which each climbed to a peak of 3% weighting in the BUZZ Index this month.
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