Market Rotation Appears in 2024
After a brutal bear market in 2022, tech stocks roared back in 2023 to have a dazzling recovery, led by the Nasdaq 100 ETF (QQQ), which rose 54.85%. Nevertheless, a primary complaint among investors was that participation was thin, primarily focused on mega-cap tech stocks within the “Magnificent 7,” such as Meta Platforms (META) and Nvidia (NVDA). The best evidence of the slim participation in U.S. markets can be seen in the underperformance of equal weight ETFs such as the Invesco S&P 500 Equal Weight ETF (RSP) and the Direxion Nasdaq 100 Equal Weight Index (QQQE).
Though technology stocks looked like they were picking up where they left off in 2023 by getting off to a hot start, they have taken it on the chin recently and are down nearly 5% for the month. Meanwhile, investors are finally getting some of the much-desired rotation they sought last year. For example, “old economy” sectors such as energy, utilities, industrials, and basic materials have gained the most in 2024 and have the smoothest and easiest uptrends to trade thus far.
Below are three ETFs to buy on pullbacks:
Gold ETF (GLD)
On March 4th, I wrote an article titled “Gold’s Time to Shine.” Since then, gold has been one of the most consistent and best performing assets to own. Below are two reasons to buy the dip in the GLD (Gold) ETF, including:
Rising Inflation, Slowing GDP Growth & Deficit Concerns
The latest GDP number missed Wall Street expectations, while inflation (as measured by CPI) has been coming in hotter-than-expected. In other words, if the recent trends in inflation and GDP growth persist, Jerome Powell and the U.S. Federal Reserve will face potential “Stagflation” concerns like the 1970s and be “caught between a rock and a hard place.”
Even U.S. Treasury Secretary Janet Yellen, who has had a laissez-faire attitude toward the budget deficit, voiced concerns yesterday, saying, “I am concerned about where we’re going with the U.S. deficit.”
Demand is Increasing
Gold demand has shot to its highest level since 2016, according to the World Gold Council.
What’s even more intriguing about the demand is that it is increasing from differing market segments, such as retail and central bank demand. For example, discount retail giant Costco (COST) is selling up to $200 million in gold bars a month! Meanwhile, “BRICS” nations and other central banks globally continue to ramp up demand in an effort to replace the dollar.
U.S. Oil Fund ETF (USO)
Geopolitical Escalations
Geopolitical escalations have a significant impact on oil. The war in Ukraine, the Houthi attacks on shipping boats in the Red Sea, and the newest escalation between Israel and Iran are creating major oil disruptions worldwide. With the U.S. and other countries continuing to fund these wars, oil prices should have a floor over the next year or so.
Strategic Petroleum Reserve is Cleaned Out
The Strategic Petroleum Reserve, or SPR, is meant to be the U.S. emergency oil reserve. However, despite rising global tensions, SPR oil reserves are near 40-year lows. In other words, the U.S. government will likely see any significant dips in oil as an opportunity to refill the depleted reserves.
Global X Uranium ETF (URA)
Supply & Demand
According to the American Nuclear Society,“A major factor behind the bullish outlook is that the demand for uranium in Western markets (excluding Russia)-currently at approximately 200 million pounds- is about 40 million pounds greater than the radioactive metal’s supply.”
AI Buildout Will Require Immense Energy Output
Within the decade, AI data center energy use will make up nearly 8% of all energy consumption in the United States. As a solution, many in the AI industry (including AI “golden boy” and Open AI chief) Sam Altman see nuclear power projects as a solution.
Bottom Line
For most of 2024, commodities have had cleaner uptrends than equities. Investors should use the pullbacks in these three commodities as opportunities into year-end.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
