Who knows where the Bitcoin price will be a year from now?
But we do know this… The price has almost doubled from its low on January 23.
And it’s up 71% since the start of the year.
As for stocks, Nvidia (NVDA) has year-to-date beaten Bitcoin. It’s up 75% from January 1.
But that’s the past. And only useful if you’re able to trade based on hindsight. We aren’t that fortunate.
We have to trade and invest based on what’s set to happen in the weeks, months, and years ahead.
So, in the spirit of attempting to predict the future, we’ll give our take on where the best opportunities could lie for the rest of 2024.
Details below. But first…
Market Data
The S&P 500 closed down 0.1% to end the day at 5,117.94… the NASDAQ fell 0.4% to close at 16,019.07.
In commodities, West Texas Intermediate crude oil trades at $78.09, up 20 cents…
Gold is $2,187 per troy ounce, up $3 from Friday…
And bitcoin is $72,096, up $2,816 since Friday.
And now, back to our story…
Investing for 2024
Where should you put your money for the rest of 2024?
In our view, it’s a pretty simple answer.
And it draws from the “10×10 Approach” to investing that we’ve hammered on about the past couple of weeks.
As a refresher, the 10×10 Approach simply involves dividing your investable assets into 10 categories. Within those 10 categories, you look for up to 10 separate investment ideas.
Now, your 10 categories can cover a wide range of ideas. On the conservative end, you may have 10 lifetime, large-cap, dividend-paying stocks that you plan to hold for… well… a lifetime.
Of course, that doesn’t mean you won’t change one or two of them from time to time. But the idea is that they’re long-term holds, helping generate stable income. That’s income you can reinvest while you don’t need the extra funds… and income you can use once you do need it.
Sticking to the income theme, you may also have another category of income investments that are slightly riskier and/or that offer a higher yield.
Perhaps that includes a handful of mid-cap dividend-paying stocks… or a small-cap dividend-payer. Or you may have a gold royalties play in there, or an MLP (master limited partnership), or BDC (business development company).
Elsewhere, you may fill one of your categories with large-cap tech stocks and another with large-cap non-tech stocks. Another category could be cryptos, fixed income, or anything else.
That includes the part of the market we’ll mostly focus on today – small-cap growth stocks.
When considering the past performance of small-cap stocks, the best place to begin is the Russell 2000 index.
There are some misconceptions among investors about what the Russell 2000 index measures. To put it simply, it comprises the smallest 2,000 stocks in the Russell 3000 index, which tracks the largest 3,000 stocks on the market.
Hopefully, that makes sense. So strictly speaking, it doesn’t contain the market’s smallest stocks. But it’s as close as you’ll get to a valid representative measure of small-company stocks.
So, how has the Russell 2000 performed in the past few years? Short answer: not great. Check out the five-year chart below:
Source: Bloomberg
Over that time, the index has gained just 33%.
Compare that to the performance of the S&P 500. It’s up 82% over the same period. And the Nasdaq is up 110%… and that’s even with the tech crush from late 2021 through to the end of 2022.
Source: Bloomberg
The way we figure it – and this is probably already starting to happen – is that growth investors will want to look further afield from the bigger tech and growth stocks.
While it’s true that Nvidia has nearly doubled this year and is up 490% since the start of 2023… fewer and fewer investors will believe those kinds of gains are sustainable.
And so they’ll look elsewhere. Of course, many folks likely thought the same thing about Nvidia this time last year!
Now, there’s no guarantee that you’ll see a move away from larger toward small-cap stocks. That’s why you allocate much smaller amounts to these speculations.
But that’s also the benefit of the 10×10 Approach. You can select 10 small-caps across a number of sectors (although we’d recommend at least one or two in AI – artificial intelligence), and if we get the kind of move we expect, you should also expect some of those small-caps to benefit from it.
We’ll continue on this theme through the rest of this week.
More Markets
Today’s top gaining ETFs…
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VanEck ChiNext ETF (CNXT) +6%
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KraneShares MSCI China Clean Technology ETF (KGRN) +4.8%
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Global X Lithium & Battery Tech ETF (LIT) +4.4%
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Invesco China Technology ETF (CQQQ) +3.3%
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KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA) +3%
Today’s biggest losing ETFs…
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WisdomTree Japan Hedged Equity Fund (DXJ) -2.8%
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iShares MSCI Japan Value ETF (EWJV) -2.7%
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Xtrackers MSCI Japan Hedged Equity ETF (DBJP) -2.5%
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WisdomTree Japan Hedged SmallCap Equity Fund (DXJS) -2.4%
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Invesco Dorsey Wright Healthcare Momentum ETF (PTH) -2.4%
Cheers,
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Kris Sayce
Editor, The Daily Cut