February 12, 2024, Newsletter

Dear Friends,

Tangents: Darwin Day.

February 12, 1979: Followers of Ayatollah Ruhollah Khomeini seized power in Iran, nine days after the religious leader returned to his home country following 15 years of exile. Go to article >>

Charles Darwin, b. 1809
Abraham Lincoln, b. 1809.
R. Buckminster Fuller, b.1985.

Where to see April’s total solar eclipse
Skywatchers are in for a treat this spring. The total solar eclipse passing over much of North America is less than two months away.

This is the new route on the world’s most famous train
The iconic Venice Simplon-Orient-Express will be heading to Italy’s Ligurian coast for the first time in its long and prestigious history — but it’ll cost you $8,500 one way.

18 – That’s how many years it took researchers to compile Charles Darwin’s library of books, pamphlets and journals cited and read by the influential naturalist. In honor of the 215th anniversary of Darwin’s birthday today, the research team behind the Darwin Online project released a catalog of the contents for free online, inviting the public to peruse what Darwin read. The author of numerous works, he is perhaps best known for his 1859 book, “On the Origin of Species,” which introduced the fundamental scientific concept of evolution to the world.

‘We are approaching the tipping point’: Marker for the collapse of key Atlantic current discovered
A vital Atlantic current that includes the Gulf Stream and keeps our climate in check may be giving off a warning sign of collapse. Read More.

Undeciphered script from Easter Island may predate European colonization
A wooden tablet inscribed with the undeciphered rongorongo script from Rapa Nui (also known as Easter Island) dates to the 15th century, long before Europeans arrived. This early date suggests that the Rapa Nui people invented their own script without European influence. Read More.

Stunning ‘Einstein engagement ring’ from the early universe is one of the oldest ever discovered
The Hubble Space Telescope has snapped a stunning photo of one of the most distant Einstein rings ever found. The luminous halo of light aligns perfectly with another galaxy, making it look like a
cosmic engagement ring. Read More.

‘Universal memory’ breakthrough brings the next generation of computers 1 step closer to major speed boost
Universal memory promises to replace both RAM and flash storage in computers with a better, faster and more energy-efficient alternative. Read More.

PHOTOS OF THE DAY

Norfolk, England
Thousands wading birds flock over the Wash as the tide recedes in an event known as the Snettisham Spectacular
Photograph: Dan Kitwood/Getty Images

Moscow, Russia
People walk through a decorated street
Photograph: Maxim Shemetov/Reuters

​​​​​​​Rio de Janeiro, Brazil
Members of the Porto da Pedra samba school perform during the first night of the carnival parade
Photograph: Mauro Pimentel/AFP/Getty Images
Market Closes for February 12^th, 2024

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1970: The New York Stock Exchange elected its first African-American member, Joseph L. Searles III.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite rose for the second day, climbing 0.3%, or 57.7 to 21,067.30 in Toronto.
The index advanced to the highest closing level since Feb. 2.
Enbridge Inc. contributed the most to the index gain, increasing 2.0%.
Canada Goose Holdings Inc. had the largest increase, rising 8.2%.
Today, 161 of 225 shares rose, while 59 fell; 8 of 11 sectors were higher, led by energy stocks.
Insights
* The index advanced 2.2% in the past 52 weeks. The MSCI AC Americas Index gained 22% in the same period
* The S&P/TSX Composite is 0.9% below its 52-week high on Jan. 31, 2024 and 12.7% above its low on Oct. 27, 2023
* The S&P/TSX Composite is up 0.9% in the past 5 days and rose 0.4% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 16.4 on a trailing basis and 16 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.2% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.33t
* 30-day price volatility fell to 8.00% compared with 8.07% in the previous session and the average of 9.71% over the past month
================================================================
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
================================================================
Energy | 43.4859| 1.2| 34/6
Financials | 33.0725| 0.5| 19/8
Materials | 18.1044| 0.9| 42/7
Consumer Discretionary | 8.2744| 1.1| 12/1
Utilities | 6.4676| 0.8| 12/3
Communication Services | 3.3306| 0.4| 3/2
Real Estate | 2.0010| 0.4| 16/5
Health Care | 0.8148| 1.3| 3/1
Consumer Staples | -1.3799| -0.2| 5/5
Industrials | -21.1048| -0.7| 13/13
Information Technology | -35.3658| -1.7| 2/8
================================================================
| | |Volume VS| YTD
|Index Points| | 20D AVG | Change
Top Contributors | Move |% Change | (%) | (%)
================================================================
Enbridge | 13.3800| 2.0| 66.2| -1.6
Fairfax Financial | 9.7320| 4.9| 43.7| 8.3
Bank of Montreal | 7.7120| 1.2| 0.6| -3.8
Canadian Pacific Kansas | -8.5350| -1.1| 60.5| 8.3
Constellation Software | -9.8100| -1.9| -13.5| 11.4
Shopify | -18.7100| -1.8| 57.8| 16.2
US
By Rita Nazareth
(Bloomberg) — Wall Street kicked off the week with small moves in stocks, bonds and the dollar ahead of inflation figures that will be key to determine the scope and timing of Federal Reserve rate cuts.
Less than 24 hours before the consumer price index, the S&P 500 struggled to gain traction.
While the data is expected to underscore further disinflation, traders remained unwilling to commit to big bets.
That sense of caution also prevailed after five straight weeks of gains that drove equities above overbought levels, triggering some calls for at least consolidation.
“Keeping the age-old adage in mind that ‘trees don’t grow to the sky,’ we think it’s important to keep the party hats in the box for now,” said John Stoltzfus at Oppenheimer Asset Management. “We remain positive on stocks, view bonds as complimentary to stocks for prudent diversification and look for a further broadening of the equity rally which emerged from the lows of late October.”
The S&P 500 lost steam after approaching 5,050.
The Nasdaq 100 underperformed, led by losses in Microsoft Corp., Apple Inc. and Tesla Inc.
Chip designer Arm Holdings Plc soared 29%.
Treasury 10-year yields were little changed at 4.17%.
Bitcoin hovered near $50,000.
“Most people will be fixated on this week’s inflation numbers, but there’s also a potential tug-of-war between how extended the current market rally may be versus the buzz surrounding the S&P 500 topping 5,000,” said Chris Larkin at E*TRADE from Morgan Stanley. “While it’s true the S&P has often pushed higher after crossing ‘round-number’ thresholds like this one, it hasn’t always done it after the type of rally that has unfolded since late October.”
The S&P 500 is approaching a technical roadblock after eclipsing 5,000 for the first time — triggering a contrarian sell signal for stocks on Friday, according to Piper Sandler’s Craig Johnson.
“The current state of the equity market can be summed up by the 1981 hit from 38 Special: “Hold on loosely, but don’t let go’,” Johnson wrote in a note to clients. “To be clear, we are not bearish on the stock market. However, as ‘bad breadth’ lingers, the market is ripe for a healthy correction, likely in the range of 5% to 10%.”
The gauge’s quick journey to 5,000 has already left the consensus Wall Street target for 2024 tracked by Bloomberg — 4,819.40 as of Friday — in the dust.
Because of the old adage that “large round numbers act like rusty doors and require several attempts before finally swinging open,” investors now wonder if it is time to take some profits ahead of a likely market drop from exhaustion after scaling such a prominent peak, according to Sam Stovall at CFRA.
If history is any guide, while short-term digestions of gains have indeed occurred, they have been fairly short in duration, he noted.
When looking at the S&P 500’s cumulative return in the 3-6, and 12-months after crossing above the 100, 500, 1,000, 2,000, 3,000, and 4,000 levels, the gauge posted average price gains of 4.7%, 9.8%, and 12.3%, and rose in price during 83% of all periodic observations, Stovall said.
“This run to 5,000 has been supported by the fundamentals, with a soft landing looking increasingly likely and earnings season nicely exceeding expectations after a messy start,” said Jeffrey Buchbinder at LPL Financial. “A market trading over 20 times earnings seems high, but it’s reasonable if the US economy avoids recession and earnings grow double-digits this year — which is not out of the question.”
The S&P 500 is currently trading around 20 times forward earnings — a level it has only hit in two other periods over the last 25 years: the dot-com bubble and the post-pandemic bull market, said Nicholas Colas at DataTrek Research.
“Valuations get to these levels when investors have high confidence in three factors: monetary/fiscal policy, the US/global banking system, and strong corporate earnings,” Colas added. “Even with 2022’s bear market, investors feel that the future is highly predictable. It will likely take an exogenous shock to change their minds.”
To Rob Swanke at Commonwealth Financial Network, some caution is warranted at the current valuation levels.
“I wouldn’t say we’re in bubble territory, but the market is pricing closer to perfection now and companies will have to continue to hit high earnings targets in 2024, something they didn’t have to do in 2023,” he added.
Last week’s news and data reinforced the four drivers of this bull market: Fed rate cuts by May, solid economic growth, continued disinflation and strong earnings, according to Tom Essaye at the Sevens Report.
“It’s important to acknowledge that this rally has been driven by actual good news and bullish expectations being reinforced by actual data,” Essaye said. “At the same time, the risks that kept investors worried in October (and even
throughout 2023) haven’t been vanquished — they simply haven’t shown up yet.”
The annual CPI is forecast to have dropped to 2.9% in January from 3.4% the prior month, according to consensus estimates of economists surveyed by Bloomberg.
That would be the first reading below 3% since March 2021.
A survey conducted by 22V Research showed 51% of investors polled think the market reaction to CPI on Tuesday will be “risk-on” — and only 19% said “risk-off”.
US consumer expectations for inflation over the medium term fell to the lowest level since at least 2013, a Fed Bank New York survey showed Monday.
Fed Governor Michelle Bowman reiterated the central bank’s benchmark lending rate is in a good place to keep downward pressure on inflation, and she doesn’t see a need to ease policy soon.
Fed Bank of Richmond President Thomas Barkin said while we’re closing in on the inflation target, we’re not there yet.
Traders started pricing in that the Fed will carry out just four — or five at the most — quarter-point rate cuts in 2024, only slightly more than the three penciled in by policymakers.
That’s a sharp shift from the end of last year, when futures traders were wagering on seven such moves.
“It’s important not to lose sight of the big picture, which is that continued disinflation should allow the central bank to start easing this year,” said Mark Haefele at UBS Global Wealth Management. “This is a significant change in the investment landscape, so we think it’s less important whether the Fed cuts three, four, or five times this year.”
Even if the Fed doesn’t scale back interest rates, the S&P 500 can still extend its climb this year, according to Bank of America Corp.’s Savita Subramanian.
“Recall that our constructive view on stocks is not because of what the Fed will do, but what the Fed has already done,” she  added, referring to the central bank taming inflation without a recession.

Corporate Highlights:
* The Federal Reserve slapped Citigroup Inc. with a series of demands to change the way it measures the risk of its trading partners, according to a Reuters report, the latest blow to Chief Executive Officer Jane Fraser’s turnaround effort.
* Diamondback Energy Inc. agreed to buy fellow Texas oil-and-gas producer Endeavor Energy Resources LP in a $26 billion cash-and-stock deal to create the largest operator focused on the prolific Permian Basin.
* Gilead Sciences Inc. agreed to purchase CymaBay Therapeutics Inc., a developer of an experimental liver disease drug, for $4.3 billion in equity value.
* Hewlett Packard Enterprise Co. is seeking as much as $4 billion from Autonomy Corp.’s former bosses following a London judge’s finding that they fraudulently boosted the value of the company before its sale.

Key Events this Week:
* Germany ZEW survey expectations, Tuesday
* US CPI, Tuesday
* Eurozone industrial production, GDP, Wednesday
* BOE Governor Andrew Bailey testifies to House of Lords economic affairs panel, Wednesday
* Chicago Fed President Austan Goolsbee speaks, Wednesday
* Fed Vice Chair for Supervision Michael Barr speaks, Wednesday
* Japan GDP, industrial production, Thursday
* US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories, Thursday
* ECB President Christine Lagarde speaks, Thursday
* Atlanta Fed President Raphael Bostic speaks, Thursday
* Fed Governor Christopher Waller speaks, Thursday
* ECB chief economist Philip Lane speaks, Thursday
* US housing starts, PPI, University of Michigan consumer sentiment, Friday
* San Francisco Fed President Mary Daly speaks, Friday
* Fed Vice Chair for Supervision Michael Barr speaks, Friday
* ECB executive board member Isabel Schnabel speaks, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 was little changed as of 4 p.m. New York time
* The Nasdaq 100 fell 0.4%
* The Dow Jones Industrial Average rose 0.3%
* The MSCI World index was little changed
Currencies
* The Bloomberg Dollar Spot Index was little changed
* The euro was little changed at $1.0774
* The British pound was unchanged at $1.2628
* The Japanese yen was little changed at 149.34 per dollar
Cryptocurrencies
* Bitcoin rose 4.2% to $50,156.96
* Ether rose 5.6% to $2,643.7
Bonds
* The yield on 10-year Treasuries was little changed at 4.17%
* Germany’s 10-year yield declined two basis points to 2.36%
* Britain’s 10-year yield declined three basis points to 4.06%
Commodities
* West Texas Intermediate crude rose 0.2% to $77.03 a barrel
* Spot gold fell 0.2% to $2,020.19 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alexandra Semenova, Michael Mackenzie, Liz Capo McCormick, Ye Xie and Denitsa Tsekova.

Have a lovely evening.

Be magnificent!
As ever,

Carolann
Last, but by no means least, courage – moral courage, the courage of one’s convictions, the courage to see things through.  The world is in a constant conspiracy against the brave.  It’s the age-old struggle – the roar of the crowd on one side and the voice of your conscience on the other. –General Douglas MacArthur, 1880-1964.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7

Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
Fax: 778.430.5828
www.carolannsteinhoff.com