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markets

Another Month of Positives

The major trends are favorable for investors, traders, and speculators.

It ended on a bit of a bummer, but June was a pretty good month. And wait till you see July’s recent track record.

Though it was down 0.41 percent on Friday – and that decline qualified it as the worst single day of the month – the S&P 500 finished June up 3.47 percent.

The index has been positive in five out of six months so far in 2024, and its 14.48 percent year-to-date gain bodes well for the balance of the year.

As Ryan Detrick of Carson Group illustrated on X last week, when the S&P 500 is up double-digits for the first half it’s never been lower for the full year.

So, based on history and data, we should not expect (but we should always be prepared for) a big selloff in the back half of the year.

In fact, the S&P is up an average of 7.7 percent in the second half following a double-digit first half, and it does better than that 83 percent of the time.

Here’s the bottom line: The S&P 500 is up an average of 25.1 percent for the full year when it posts a double-digit gain during the first half of the year.

Here’s something else: Over the last 20 years, July has been the best month for stocks.

The S&P 500 has been up nine years in a row and 11 of the past 12 years. Over the past 10 years July is the second-best month for the market, trailing November.

Over the past 20 years it’s been the best month, with an average gain of 2.3 percent.

When the S&P 500 posts a double-digit return in the first half of the year it posts an average return of 25.1 percent for the full year.

Underneath all that – and the immediate aftermath of the presidential debate – we learned from the Bureau of Economic Analysis on Friday that personal income was up 0.5 percent month over month and that consumer spending was up 0.2 percent.

That’s against flat prices month over month and a 0.1 percent rise in the core Personal Consumption Expenditures Price Index.

Both PCE and core PCE were up 2.6 percent year over year.

More and more incoming data suggest inflation is trending toward the Federal Reserve’s 2 percent target.

And more and more observers are wondering whether the Fed is waiting too long for confirmation.

The concern is that the labor market is already deteriorating, with the possibility that the unemployment rate will head substantially higher from here.

It’s important to appreciate the fact that we are still talking about a historically low 4 percent rate. But what’s the point of letting it rise much higher than that if it’s not necessary.

We’ll hear from Chair Jerome Powell on the Fed’s current disposition on Tuesday at 9:30 a.m. ET.

Initial jobless claims data will come out a day early, on Wednesday, owing to the Independence Day holiday in the US.

And, given the equities in play, we’re particularly intrigued by Friday’s release of employment data for June.

Catalysts for July upside for the S&P 500 include second-quarter earnings season as well as more data that gives our central bankers confidence to cut.

deep dive

Uncle Warren’s Big Giveaway

The Giving Pledge is a good thing.

Warren Buffett is the GOAT, it’s not even close, and it’s about more than his performance as an investor.

He’s pretty good there: Berkshire Hathaway $BRKA $BRKB, which he’s managed since 1965, has generated an average annual return of 19.8 percent through 2023.

That’s nearly double the S&P 500’s return for the comparable period. Hard to find anyone who’s been better for longer.

Among big-time investors, he’s a pretty decent guy too.

The founder and leader of The Giving Pledge, in 2006 Buffett committed to gradually give all of his Berkshire stock to philanthropic foundations.

Buffett converted 8,674 of his BRKA shares to donate more than 13 million BRKB shares, a gift with a total value of approximately $5.3 billion.

He gave 9.93 million to the Bill & Melinda Gates Foundation. The remaining shares were donated to the Susan Thompson Buffett Foundation and three charities led by his children Howard, Susan, and Peter Buffett.

Buffett has now donated about $57 billion of his Berkshire fortune.

Berkshire Hathaway $BRKA $BRKB has outperformed the S&P 500 with a return of nearly 600 percent versus nearly 400 percent for the index since 2004.

Buffett underscored his commitment during an interview with The Wall Street Journal where he shared a preview of his last will and testament.

He has already given away more than half of his stake but still owns approximately $130 billion worth of Berkshire stock.

Following his death, almost all of it will fund a new charitable trust to be overseen by his three children, Howard, Susie, and Peter. They will decide on a unanimous basis where to allocate the money.

Buffett put no conditions or restrictions on their decision-making. But he does have a general idea:

“It should be used to help the people that haven’t been as lucky as we have been,” he said. “There’s eight billion people in the world, and me and my kids, we’ve been in the luckiest 100th of 1% or something. There’s lots of ways to help people.”

Buffett said the Bill & Melinda Gates Foundation “has no money coming after” his death. Bill Gates was the first billionaire to join Buffett in The Giving Pledge. Elon Musk, Michael Bloomberg, and Sam Altman have also signed up.

“After my death,” Buffett said, “the disposition of my assets will be an open book – no ‘imaginative’ trusts or foreign entities to avoid public scrutiny but rather a simple will available for inspection at the Douglas County Courthouse.”

Pretty good stuff… great, even.

deep dive |
July 1, 2024

Uncle Warren’s Big Giveaway

FROM THE RESEARCH DESK

Get To Know These Names

There’s big upside potential here.

The biopharmaceutical industry is fascinating, complex, and potentially extremely lucrative.

The process of getting a new drug or therapy or treatment to market – from research to development to approval – is long and unpredictable.

You really have to know what you’re doing when you invest, trade, or speculate in these names. It’s perfect for “field bets” you can make using sector-focused ETFs.

But if you can identify specific winners and separate them from the field, well, you could be on to something.

Kyverna Therapeutics $KYTX is down more than 75 percent from its February 9, 2024, initial public offering price.

From the Research Desk, we hear JPMorgan Chase & Co has identified two biopharmaceuticals conducting clinical trials on meaningful new treatments and drugs that are poised for significant upside over the next 12 months.

Kyverna Therapeutics $KYTX, which made its initial public offering in February, develops treatments for autoimmune diseases.

Proceeds from the IPO will support clinical trials for treatments that have shown encouraging results so far. KYTX has $369 million in cash on its balance sheet.

JPMorgan analyst Brian Chen rates the stock a “buy” with a 12-month price target of $39. KYTX closed at $7.50 on Friday, so Chen sees upside of about 420 percent from here.

“We believe Kyverna, armed with compelling clinical evidence to-date, is at the forefront of deploying CAR-T cell therapies across multiple autoimmune indications,” Chen writes.

KYTX opened on the Nasdaq at $30.50 on February 9, so it’s come a long way down from the IPO.

But Wall Street remains bullish: All four analysts who cover it rate the stock a “buy,” with average 12-month upside in their eyes of 510 percent. So Chen is actually conservative with his target.

Structure Therapeutics $GPCR has two drugs for chronic metabolic diseases in human stage trials.

Structure Therapeutics $GPCR, meanwhile, makes oral drugs for chronic metabolic diseases. It’s got two drugs in the human trial stage.

JPMorgan sees a big opportunity for GPCR in obesity treatment should its products make it to market.

The stick is a “buy” with a 12-month price target of $65. GPCR closed at $39.27 on Friday; potential upside from here is more than 65 percent.

A total of 10 analysts rate it a “buy,” with average 12-month upside of 124 percent.

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