In a recent research report, “5 Stocks to Own for the 2024 Elections and Beyond”, companies were profiled that could benefit from several macro global equity market and economic themes. From expected extreme near-term spikes in U.S. stock market volatility to global trade and worldwide megatrends such as the tech revolution, market and economic developments are unfolding. The five companies noted are potentially positioned to gain. One of them is Uber. As a holding in Blackhawk Asset Management’s Strategic Growth portfolio (BAMSG), Uber has added value by outperforming the market so far this year with a 26.4% gain (through October 9).
The image above from my phone sums up Uber’s potential long-term growth. The company’s services cover the bases: “Go anywhere.” “Get anything delivered.” And, “Get anything done.” Uber stock would have likely been a market-beater since its public issuance, but the unfortunate timing of its IPO prevented that. With an ill-fated market debut date of May 10, 2019 at $45, Uber stock was crushed by Covid-19. The stock fell to below $14 in early March of 2020. From its stock price recovery starting March 13, 2020, Uber has more than doubled the return of the SP 500 by soaring 244.56% vs 113.65% for the index, through yesterday.
$163 billion and growing…
With its market capitalization recently breaching $160 billion, Uber’s growth story may be far from over. The company consistently delivers solid mid-teen top-line sales growth and has shown explosive earnings gains. Margins are improving and free cash flow is increasing. Beyond solid fundamentals, the company is expanding geographically and experiencing strong international traction. Whether ride-hailing or delivery, Uber has managed to disrupt established markets, and with 85% of its major markets being already profitable, it’s hard to question the company’s strategic vision. That vision is clear when it comes to the future of autonomous vehicles and robotaxis. Strengthened by its market penetration, strategic advantages, and platform presence, the company is working to benefit from the technological shift. Uber and Waymo (owned by Google) announced an expansion of their existing partnership to make the Waymo Driver available to more people via Uber. Then there’s deliveries. Uber Eats is the most popular food delivery service internationally, with 88 million users currently. In 2023, Uber Eats generated $12.1 billion in revenue, which is an 11% increase from the previous year. In Q1 2024, Uber Eats saw $17.7 billion in gross bookings, which is an 18% increase from the previous year.
As the company is well positioned to benefit from the ongoing macroeconomic and monetary shifts moving toward the elections and beyond, Uber is worthy of the list of stocks to hold for the long-term.
TAKING PERSPECTIVE
Proper Perspective: In our hectic and often hard to comprehend world, it is very easy to lose perspective. You may agree it is sometimes difficult to see the big picture. The media often doesn’t help with this, but unfortunately instead encourages us to see things in a most negative light. Here is hopefully a pause to gain positive perspective.
Famous Quote on This Day:
“People crushed by law, have no hopes but from power.”
~~Edmund Burke, 1777
What Happened On This Day October 10, 1845 – The U.S. Naval School (later renamed United States Naval Academy) opens in Annapolis, Maryland.
MARKET ANALYSIS
INDICATORS OF INTEREST:
Market’s Current Signal: Market in confirmed uptrend. Analysis of the stock market over 130 years of history shows we can view it in terms of three stages – market in uptrend, uptrend under pressure and market correction. I analogize this to a traffic signal’s changing colors from green to yellow and then to red. It is still green. Since the 1880’s, this perspective has led to investment out-performance relative to market indexes. This is due to trend analysis which determines risk reducing, return enhancing market entry and exit points.
The Stock Market Trend: Market in confirmed uptrend. After a market peak July 16 with the SP500 at 5,670, a market correction ensued with a 10% fall to 5,120 on August 5. The market’s trend turned bullish Tuesday, August 13. The fourth day of a new rally attempt confirmed the rally with a follow-through day. As of yesterday’s closing price the SP500 of 5,792 it is back above the July high and closed at a new all-time record high. Th SP500 set its 44th record closing high of the year yesterday marking a significant milestone in 2024’s stock market performance. With 56 trading days remaining in the year, this places 2024 in the 11th position for the highest number of record closes in a single year since 1954 as the graph below shows.
Here are key market levels as of Monday, October 7.
Recapping Last Week
In a word, resilient. The U.S. equity indices clawed back earlier losses, and interest rates jumped after Friday’s much stronger-than-expected jobs report calmed recession fears. The S&P500 and Nasdaq Composite indices ended slightly positive for the week, while the Russell 2000 slipped 0.5%. S&P500 sector returns were mixed; however, energy stocks soared nearly 7% as crude oil prices surged 8.5%, driven higher by the likelihood of a wider Middle East conflict. After Iran’s missile attack on Israel on Tuesday, discussions of a retaliatory strike on Iran’s oil facilities came to the fore. The 10-year U.S. Treasury note yield rallied back near 4% after September’s non-farm payrolls came in well above expectations at +254k. The unemployment rate ticked down to 4.1%, and wage growth topped estimates. Private payrolls also advanced more than forecast, according to ADP. Although a slower pace of interest rate cuts may be a likely result of the report, investors were reassured that the U.S. economy remains on solid footing, supported by a stable labor market. In a speech on Monday, Fed Chair Powell reiterated his comments from the recent FOMC meeting, saying the committee is not in a hurry to cut rates quickly and will let the data guide its decisions. Weekly jobless claims remained low, but the data may be distorted in coming weeks by the effects of Hurricane Helene and the strike at Boeing. However, the major strike of U.S. dockworkers at East and Gulf coast ports was suspended after just three days, with the parties reaching a tentative agreement on wages. In other economic news, U.S. manufacturing and services PMIs held their recent trends, but employment slipped in both sectors, contrasting with the government numbers.
Internationally, Eurozone CPI fell below 2% annualized for the first time in three years as services inflation finally showed signs of easing. On Monday, European Central Bank President Lagarde sent the clearest signal yet that another rate cut is likely later this month. China’s equity markets held the prior week’s huge gains after factory activity contracted less than feared in September. Finally, the Japanese yen plunged after new Prime Minister Ishiba made dovish comments regarding potential interest rate hikes—a drastic change in tone from his campaign messaging. The flip-flop may be politically motivated, as a general election has been called for October 27 to decide control of the parliament’s lower house. Market pricing has shifted to less than a 50% chance of a hike by year-end. However, if the yen does not stabilize or strengthen, the Bank of Japan may be forced to raise rates soon to support its currency.
Current View
The stock market is looking firm despite geopolitical threats, election uncertainty, softening manufacturing activity, the eve of earnings season and a lurch in benchmark yields. Yesterday the stock market climbed for the third time in the past four sessions — each time closing at session highs — as the S&P 500 made a record high and indexes continued making steadfast progress.
The 10-year Treasury yield Wednesday added three basis points to 4.065% for a sixth straight day of gains and a third straight session above the 4.0% level. The 32-basis-point jump over the past six sessions is the largest since February.
Today stocks got off to a weak start as investors confronted data that showed inflation in September came in a bit hotter than predicted. That, plus a bigger-than-expected rise in initial weekly jobless claims, emboldened the bears initially. But selling has slowed and the market indices have reversed higher…. Resilient.
Industry Group Strength: BULLISH. As of yesterday, 156 out the 197 groups I monitor are up year-to-date. 41 are down.
New Highs vs. New Lows: BULLISH. As of now, there were 301 new 52-week highs and 95 new 52-week lows.
Dow Dividend Yield: BEARISH. The current yield for the Dow Jones Industrial Average is 1.85%. The 10-year Treasury now 4.08%. The benchmark interest rate is up from 3.81% two weeks ago.
Volatility Index: NEUTRAL. Volatility has been volatile. The “VIX” is near 21. It is up from 17 two weeks ago. The index is also known as the “Fear Index.” It is considered a contrarian indicator and therefore viewed as bullish as it rises indicating investors are becoming more fearful. The VIX:
Fear / Greed Index: BEARISH. Investors are driven by two emotions: fear and greed. Too much fear can create a condition of oversold/ undervalued stock prices. Too much greed can result in overbought/overvalued stock prices. The AAII Investor Sentiment Index is now neutral. BE FEARFUL WHEN OTHERS ARE GREEDY. At 72, the Fear & Greed Index is up from 71 two weeks ago.
CLICK VIDEO FOR MORE ON THE “FEAR & GREED INDEX”
How CNNMoney’s Fear & Greed Index works
Bull / Bear Barometer: NEUTRAL. This secondary market indicator should also be viewed with a contrarian perspective. As of yesterday, according to the latest survey of stock market newsletter writers by Investor’s Intelligence (see below), bullish sentiment is 53.2%, up from 43.5% two weeks ago. The bear sentiment is now 22.6%, near the same two weeks ago. This reflects a decrease in bullish and bearish sentiment over the last two weeks. Consider this a contrarian indicator because the crowd is often wrong at market tops and bottoms. In other words, extreme bullishness has been seen near several market tops in the past, while extreme bearishness has been seen at market bottoms.
Put / Call Ratio: BEARISH. The ratio of put-to-call options is 0.77. Up from 0.52 two weeks ago. The put-call ratio tracks the mood of what options investors are doing, not just saying. They typically buy puts if they think a stock will decline and calls if they think it will rise. If they’re buying lots of puts, they see the market declining. And if they’re loading up on calls, they’re generally bullish. Historically, market bottoms occurred when the reading spikes to 1.2 or more. Market tops are often made when the reading is 0.6 or less. Note how reliable this is with respect to the February record low coinciding with the market high. Keep in mind this is also a contrarian indicator.
ECONOMIC UPDATES
Global Economic Indicators & Analysis:
POSITIVE INDICATORS
Jobless Claims Surge: The number of Americans who applied for unemployment benefits surged by 33,000 to 258,000 in the week that ended Oct. 5, the Labor Department said today. This is the highest level of initial claims since early August 2023. Economists polled by the Wall Street Journal had estimated new claims would rise by 5,000 to 230,000.
U.S. Trade Deficit Drops: The trade deficit fell by 2.5% in June and receded from a 19-month high, owing to higher exports of aircraft and U.S.-produced oil and gas. The deficit dropped to $73.1 billion in June from $75.0 billion in May, government data showed Tuesday. The four-week moving average of claims rose by 6,750 to 231,000. The number of people already collecting jobless benefits in the week that ended Sept. 28 rose by 42,000 to 1.86 million.
WEAK INDICATORS
CPI Up: The Consumer Price Index inflation gauge that omits food and energy rose 0.3% in September for the second month in a row, the government reported today. Wall Street analysts had forecast a smaller 0.2% reading in the “core” component of the consumer price index.The increase in the core rate in the past year, meanwhile, edged up to 3.3% from 3.2% in the prior month. It was the first increase in a year and a half. That’s a sign inflation is still sticky in some major parts of the economy. The overall increase in the consumer price index, meanwhile, rose 0.2% last month. That was also a tick higher than expected. The yearly rate of inflation slowed to 2.4% from 2.5% and touched the lowest level since February 2021.
Small Businesses Uncertain: According to the National Federation of Independent Business Tuesday, small-business optimism index was relatively muted in September, inching up 0.3 points to 91.5. The index is seasonally adjusted, and is benchmarked at 100 to 1986 readings. The reading on uncertainty shot up 11 points to 103, which is the highest reading ever recorded, the trade group said. It said the election will trigger adjustments to plans once the results are known.
Call me if you have any questions. I am always happy to help!
For my Market Monthly podcast, click on the link below. I provide a review of global stock market highlights over the past month and preview of the month ahead. Forward insights and perspectives are based on current financial market and economic trends with an emphasis on relevant developments in various areas from Fed policy to company earnings announcements.
Blackhawk Wealth Advisors is the parent corporation of Equity Research & Portfolio Evaluation and Blackhawk Asset Management. It’s Chief Investment Officer is John J. Gardner. John is a Certified Financial Planner (CFP®) and Certified Portfolio Manager (CPM®). As an AIF®, John is also an Accredited Investment Fiduciary.
Blackhawk Wealth Advisors employs a collaborative, multi-generational model by using tax efficient and risk mitigation strategies to maintain your current lifestyle while meeting your long term needs and goals. BWA brings together all aspects of your financial life with the expertise of ERPE and BAM.
Blackhawk Asset Management
At BAM, we take the research we obtain from ERPE and utilize it to manage our clients’ assets. Our founder, John Gardner, CFP®, CPM®, offers high net worth investors experienced investment portfolio management based on a disciplined methodology. John is one of the nation's approximately 400 Certified Portfolio Managers and has managed billions of dollars in equity portfolios over his professional career since 1984. He has created four effective, proprietary portfolios: Thematic Growth, Strategic Income, Diversified Value, and Global Opportunity, which have helped clients prosper.
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Equity Research & Portfolio Evaluation
Equity Research & Portfolio Evaluation (ERPE) utilizes its propietary approach in analyzing investments. Its proven success researching equities is based on a blend of fundamental and technical analysis. ERPE's time-tested Top 10 Tenets guide the investment process to achieve Portfolio Optimization: This is through minimizing risk without sacrificing return.
