Weekly Recap

As we turn the page on 2023, the S&P 500 sets its sights on new all-time highs, while the QQQs have already blazed that trail with fresh record peaks. This shortened holiday week saw muted trading, but behind the scenes, banks and hedge funds were busy leaking their top picks for 2024.

The headlines were dominated by the "Magnificent 7" mega-caps - AMZN, GOOGL, META, and MSFT - fueled by optimism around AI monetization and continued technological advancements. MSFT received a further boost with a hefty $450 price target upgrade from Wedbush on Friday.

Adding to the tech buzz, Amazon's announcement of introducing ads to Prime Video starting January 29th grabbed attention. While offering an ad-free option for an additional $2.99, this move is seen as a potential margin booster, solidifying my long-term bullish stance on the company. However, the true question is which streaming platform is worth having?



On a different note, a fascinating legal battle is brewing with The New York Times suing Microsoft and OpenAI for copyright infringement. The Times alleges that "millions of articles published by The Times were used to train automated chatbots that now compete with the news outlet." This raises crucial questions about how data is used in training large language models and the challenges of attribution and compensation. The lawsuit is sure to be closely watched, with implications for the entire AI landscape.

While the holiday season frenzy distracts the market, a brewing geopolitical storm in the Red Sea threatens to disrupt global trade, a risk potentially overlooked by the media's festive focus.

Roughly 20% of the world's supply chain traverses the Red Sea, now transformed into a warzone by Houthi drone attacks targeting not just Israeli but all ships in the region. Fueled by their perceived injustice towards Gaza under Israeli blockade, the Houthis seek vengeance and disrupt vital trade routes.

This forced detour around Africa adds thousands of miles to journeys for cargo shipments, increasing vulnerability to piracy and unforeseen complications. Inflationary pressures in Europe and Asia, particularly for oil, are inevitable, and it wouldn't be surprising if the ripple effects reach the US shores soon.

Israeli Prime Minister Netanyahu, though facing internal disapproval, enjoys public support for his tough stance against Hamas. His recent declaration of no more ceasefires underscores their stance to eradicate the group.

With US warships joining a growing international naval presence, tensions in the region are at a boiling point. While a resolution in the Red Sea and the broader Middle East is desperately needed, it's unlikely to materialize overnight.

This simmering conflict, with its potential to disrupt global trade and exacerbate inflation, is why I believe volatility may reassert itself as a key theme in 2024.

Heading into next week, I'm cautiously pessimistic about the market. While the Santa Claus rally pushed the market higher in the final weeks of 2023, I anticipate a reality check in January, likely in the first few weeks. The rapid upward climb in the past couple of months seems unsustainable from a fundamental standpoint, and a slight pullback is overdue.

Momentum could stall, and catalysts might run dry until earnings season for the holiday season kicks off later in the month. Additionally, the ongoing geopolitical tensions may reaccelerate inflationary pressures, both of which have been hot topics this year, could serve as a reality check, leading to uncertainty and potentially significant volatility in 2024.

I'll also be watching closely to see which sectors lead the market in early 2024. Will we see a rotation towards interest-rate sensitive equities, or will tech and the "Big 7" maintain their dominance? This will be a key question to answer as we navigate the potential volatility ahead.

Charles Schwab (SCHWB) - Despite a 28% rally in the past three months, SCHW remains down 16% year-to-date. However, the early 2023 fears that triggered the decline seem to be fading. The stock appears attractively priced based on forward earnings, and the chart suggests further bullish momentum. The 50-day SMA crossing above the 200-day and a tightening bullish pennant pattern point towards a potential squeeze towards the low $70s in early January, with $68.80 acting as support.

• To learn More about my Price targets and thoughts on SCHW, check out my recent article on Seeking Alpha

Merck & CO. (MRK) - We have seen the past 5 days led by REITS (XLRE) and Healthcare/biotech (XLV). MRK is a favorite of mine in the industry, which broke out in 2022 and stalled in 2023. A strong 3.5% move so far this week to $108 puts the stock at a 3 month high. Street average price targets sit around $125, a completely reasonable estimate for 2024. I believe MRK could significantly outperform in a strong healthcare year.

Advanced Micro devices (AMD) - AMD capped off a stellar 2023 with strength, but Thursday's struggle above $150 and close below $149 indicates it may not be ready to top that level yet. While a pullback to the low $140s seems likely (fundamentally), my long-term faith in AMD remains unshaken. Their new AI chip holds immense potential, and reaching new ATHs might just require waiting for further earnings results.

"While a recession was the consensus view last year, with the benefit of hindsight, it was likely premature to expect one. History shows that, since the late 1950s, it has taken an average of 23 months from the initial rate hike of a persistent hiking cycle to the beginning of an economic downturn. While it may feel like the Fed has been hiking for an eternity, the first hike of this cycle came only around 20 months ago, meaning we are still short of the historical average." - Source 5

Cracks are beginning to appear in the market. Rising unemployment, falling oil and dollar prices, and tumbling airline fares all suggest that consumer resilience may soon reach its breaking point. For a full recovery, some degree of hardship is likely inevitable, with one sector needing to give before another can truly thrive. While a soft landing remains a possibility, recessionary fears will likely persist until we see a definitive shift towards rate cuts.

This weekend, I'm thrilled to be attending my first-ever NHL game, cheering on the Dallas Stars as they battle rookie phenom Connor Bedard and the Blackhawks! I can't wait for the action-packed showdown and hope for a high-scoring affair. Even the steep prices and hefty fees plaguing live sports can't dampen my excitement.

Colleague and Friend Peter Costa, Wall Streets Finest, shares my frustration, and is curious to see if regulations may be on the horizon to curb these hidden and inflated costs. For the uninitiated, my initial $200 ticket search ballooned to $290 by checkout - a 30%+ markup!

While the cost stings, I prioritize experiences over possessions, and live events, especially sporting ones, hold a special place in my heart. This might be my first Stars game, but it certainly won't be my last. Witnessing some Luka magic with the Mavs is also high on my bucket list!

To read more of Jake's Analysis on Seeking Alpha where he shares his thoughts, opinions, stock ratings, and price targets on different stocks and ETFs, use the link below!