To The Moon

The S&P 500 fell by 0.04% on Monday, following a minor sell-off of 1% last week. Although the S&P 500 is currently trading just 0.99% or 52 points below its all-time high at 5,254, some stocks have recently experienced notable corrections. Notable examples include Nvidia (-8% off ATH), AMD (-20% off ATH), SMCI (-22% off ATH), and Ulta Beauty (-20% off ATH).

Last week's weak performance in the S&P 500 was likely due to:

• Federal Reserve's Kashkari floating the idea of no rate cut this year.

• A strong non-farm payrolls report.

• The tax filing season.

We are not particularly worried because:

• Fed's Kashkari is not a member of the Fed's policy-setting committee, and therefore, his statements do not carry much weight.

• The strong non-farm payrolls suggest a stronger-than-expected US economy. Investors should focus on higher revenue/earnings growth resulting from the stronger economy rather than a delayed rate cut.

• Investors may be selling shares to raise cash to pay taxes due to the strong capital gains from the equity market last year, leading up to the April 15 tax filing deadline. Thus, we believe any sell-off, if present, is likely temporary and may cease after the April tax filing deadline.

Some immediate events that could change our bullish views include:

• A sharp spike in the VIX that could prompt funds to derisk.

• Lower-than-expected 1Q2024 earnings results.

• A more hawkish statement from the Fed that could lead market participants to trim their rate cut expectations.

All in all, we remain cautiously optimistic about the US equity market. A significant sell-off may potentially occur when the Fed cuts rates in the May/June FOMC meeting, as market participants may have already priced in the rate cut optimism by then.

The US bull market still has legs, and investors may want to seize opportunities to accumulate assets such as S&P 500 ETFs (SPY, VOO, and IVV), Nasdaq-100 ETF (QQQ), semiconductor ETFs ( $VanEck Semiconductor ETF(SMH)$ and SOXX), Magnificent Seven Stocks (AAPL, META, GOOGL, AMZN, $Tesla Motors(TSLA)$ , NVDA, and MSFT), and Russell 2000 ETF ( $iShares Russell 2000 ETF(IWM)$ ), among others.