Monday Takeaways: January Starts With a Bang

Shah Gilani|January 8, 2024

One of the first things I was given when I started my trading career in Chicago back in 1982 was the Stock Trader’s Almanac.

This book, published annually, was chock-full of investing insights and strategies… along with classic market truisms such as “Sell in May and go away.”

But the adage that is jumping out to me right now is “As January goes… so goes the market.”

The year is off to a bumpy start… and the rest of this month will be key to determining how the year will shape up.

But that’s not all I’m watching right now.

See what will move the markets this week in my Monday Takeaways video.

Click on the image below to watch it.

TRANSCRIPT

Hey everybody. Shah Gilani here with your Monday Takeaways this January 8, 2024.

And the first thing, of course, is a look back to just the beginning of this year. 2024 has been a rough start for stocks, led primarily by the sell-off in tech stocks. Yes, including, of course, Apple, which I will get to.

So what does that mean for us right now? It’s a question of whether the November-December tremendous rally that we saw at the end of 2023… Was that short covering? Was that FOMO? What was that? And are investors/traders questioning what actually happened at the end of 2023 right now? Are they realigning their positions based on the fact that markets ran up far too fast? And was that a multiple expansion rally? It certainly wasn’t an earnings-based rally because we haven’t seen earnings come out yet. So we don’t know whether that was enthusiasm for what expected earnings are going to be for the fourth quarter.

No, it didn’t look like that. There was very little talk of earnings. So it looks like January’s going to be rough. The takeaway here… I’m an old school guy. I’ve been in the market trading professionally for over 40 years now, and one of the first things I was handed when I started in Chicago in 1982 was the Trader’s Almanac as a gift. Of course, if you don’t know what that is, go look it up. Get yourself a copy if they still even make it. I haven’t seen one in a while. I haven’t looked, but this went on for years. The Trader’s Almanac was a compilation of not only just sayings, old Wall Street sayings, but what was likely to happen in the coming year. So it was a great little book. And one of the key things I took away as far as old namesakes, as far as old adages, was “As January goes, so goes the market.”

Now, that was certainly true in 2023 because January was stellar, and the market wasn’t so stellar all year. It bounced around quite a bit until it got its footing at the end of July and then even probably saw some hiccups until the November takeoff. Well, at the end of the year, we had the S&P north of 20%. We had the Nasdaq north of 40%. We had the Nasdaq-100 north of 50%. So as January goes, so goes the market. I’m sticking with that takeaway. Keep an eye this whole month on what’s going on and, of course, how we end. But the machinations, the up and downs that we’re going to see probably not only this week but certainly all month, are going to be important more so in terms of what comes to the fore and how we end the month. So the takeaway here: As January goes, so goes the market. I’m sticking with that. So keep that in mind as you’re going through this very rough start to January.

Next up, I want to talk about Apple. Talk about taking it on the chin. Talk about hitting the new highs and then all of a sudden getting slapped down. So Apple had really no great news in 2023 but certainly got caught up in the “Magnificent Seven” rush to the moon. And Apple, yeah, made a new all-time high. And for me, I started knocking Apple. I was wrong in terms of the stock performance, but to me it was like, “Where are the sales? What’s justifying this tremendous rally in Apple, to take it to north of a $3 trillion valuation?” So Apple’s on the hot seat now. Two analysts coming out with downgrades last week… Ed Barkley’s coming out with a downgrade… and then I think it was Piper Sandler came out with a downgrade.

So Apple is taking it on the chin. And this morning, Monday morning, the premarket… it’s up a tiny bit, maybe a quarter of a percent. But it was down Friday about almost a half of a percent, shy of a half of a percent. But the performance has been frightening. Now, Apple being a benchmark, being a bellwether, is a stock that people look to as to if you don’t think “As January goes, so goes the market.” How about “As Apple goes, so goes the market?” When I started out in 1982 on the floor of the Chicago Board Options Exchange, the saying was “As GM goes, so goes the market.” Well, for years now, it’s been “As Apple goes, so goes the market.” Is that going to still be the case? Is it a bellwether, or is it facing some kind of boondoggle?

So here’s your takeaway on that: Watch Apple. Apple’s important in January. Apple’s important today, the rest of this week and all of January. If Apple can gather itself, then okay. If Apple takes it on the chin… and I think it’s going to get beaten up, and if you want to know why, then read my Friday Total Wealth because I’m going to explain why I think Apple… why I was right about Apple… wrong about the price, but I think that’s going to catch up, and I think Apple’s going to pay the price for its lack of sales and especially what’s going on in China, which I’m about to get to. So the takeaway on Apple is, keep a close eye on Apple, people. It’s important for the market right now because investors are looking for something that they can hang their hats on, that they believe in, that they trust, that has taken them through thick and thin for more than a decade. And if it fails, then January is probably not going to be so great, and the rest of the year is going to be super bumpy.

Next up, of course, is China. The reason that Apple’s sales have been… and actually, they missed all four quarters on sales in 2023… the reason has primarily been China. And what’s going on in China? Well, you’ll read more about that in another upcoming Total Wealth because there’s nothing great going on in China. Things are going to get dicier in China and dicier between the U.S. and China. But as far as Apple goes, there’s been a lot of pushback in China against Apple sales. Why? We’ll call it the U.S.-China digital cold war. And with the U.S. pushing against Huawei ­– the Chinese equivalent, if you will, of Apple in terms of smartphones – Apple sales have been doing pretty good. But now China has been pushing back. Huawei has come up with a new chip that’s not a Nvidia chip. It’s their own design from a Chinese chip maker, and it’s brought their phones pretty close to what the iPhone 15 can do, and sales are up about 24%.

They take about 24% of the market share, from 11% only a couple of years ago. So guess what? That’s pressure on Apple’s Chinese revenue. Not so good. So China is now pushing back on the U.S. Things are going to get heated in China. So the takeaway here is, keep an eye on what’s happening between the U.S. and China in terms of rhetoric, because if we see that rhetoric start to heat up – and I think we will – that’s going to be a problem for some of the big tech names. So China’s going to be really important. You want to watch all the developments in China and how they affect U.S. equity investors. The stock market in China is like a three-year low. It’s just gotten beaten up. I’m expecting the Chinese government to do something to stimulate the economy, something to maybe stem the slide in stocks, and they haven’t done anything yet.

So I’m hopeful, sure. A lot of people are hopeful that they will do something because certainly I’m looking at Chinese stocks. You should be looking at Chinese stocks for some bottom somewhere. Of course, I’m not inclined to bottom-fish. I want to in Chinese stocks, but I haven’t done it yet. So I’ll let you know when I’m going to. Last but not least, we got some data this week, and the data I’m focused on is Thursday’s CPI, consumer price index, release at 8:30 a.m. on Thursday the 11th. I think we’re looking for about… the consensus is a little muddled… is really between 3.8 and 4.1 on headline and also on course. So we have a range. Sometimes I pick a single number based on the consensus that I do for different places that I look, but I’m going to go with the range for both of them here.

So 3.8 to 4.1. I think below 4 handle is going to be positive for the market. Above a 4 handle is going to shake the market up a little bit. So keep an eye on CPI on Thursday. We’re looking for a below-4 handle. If we get something like 3.8 on core, great. If we get 3.6, really good for the market. I think that’s maybe something that the market can grab and rally or try and rally on. A lot of stuff is kind of on sale now relative to 2023 highs. So will investors pick up if we get a better-than-expected CPI? If we don’t, if we’re north of four – we’ve got a 4 handle on both CPI core and headline – then I think we’re going to see some more selling. Here’s your takeaway on that. Friday, last but not least, we got PPI… so the wholesale inflation numbers in terms of producer price index.

Again, estimates are a little all over the place, so we’re just going to keep an eye on what the actual numbers are when they come out and how the market reacts… what the commentary is, what the narratives are around PPI. CPI is more important, but PPI is certainly going to be important… and maybe more important than usual. If CPI is bad, then people might be looking for PPI for some hope. So CPI first on Thursday, PPI on Friday. Those are the data points as far as the economy that I’m certainly geared into this week. That’s it for this Monday. Hope you all have a great week, and be careful out there. Cheers, everybody.